Author: Nic Carter , Partner at Castle Island Ventures; Translated by: Jinse Finance
No one can serve two masters; for he will either hate the one and love the other, or be loyal to the one and despise the other. You cannot serve both God and Mammon.
Matthew 6:24
Ken Chang recently published an article titled " I Wasted 8 Years in the Crypto Industry ," in which he lamented the industry's seemingly inherent capitalist destruction and financial nihilism.
People in the crypto community love to mock these kinds of "angry exit" articles, gleefully recalling the dramatic exits of some historical figures, such as... Mike Hearn or Jeff Garzik (and pointing out how much Bitcoin subsequently rose).
But most of Ken's article is correct. He said:
Cryptocurrencies claimed they would help decentralize the financial system, a claim I completely believed. In reality, however, it's nothing more than a super-system of speculation and gambling, a mere replica of the existing economy. Reality slapped me hard in the face. I wasn't building a new financial system; I was building a casino. A casino that doesn't call itself a casino, but the largest, 24/7 online multiplayer casino ever conceived in our generation.
Ken points out that VCs have already poured billions of dollars into supporting new L1 tokens, and we don't actually need that many. This is true, even if he slightly distorts the incentive mechanism (VCs are simply a conduit for capital—generally, they'll do whatever LPs are willing to tolerate). Ken condemns the proliferation of decentralized exchanges (DEXs), prediction markets, meme token issuance platforms, and so on. Indeed, while you can theoretically argue for the validity of these concepts (except for meme token issuance platforms, which are fundamentally flawed), it's undeniable that they proliferate simply because market incentives drive them to do so, and VCs are willing to fund them.
Ken says he entered the crypto industry with passionate and idealistic motivations. These motivations are familiar to anyone involved in crypto: he sympathized with Ayn Rand-style libertarianism. However, instead of practicing libertarianism, he created a casino. Specifically, his most notable achievement was his involvement in the Ribbon Finance project, which developed a protocol that allowed users to deposit assets into a vault and earn profits by systematically selling options.
I don't want to be too harsh, but it's true. I also had some deep reflections. When the conflict between principles and work became unbearable, Ken eventually realized pessimistically that cryptocurrency was nothing more than a casino, not a revolution.
What struck me most about Ken's article was that it reminded me of an article Mike Hearn wrote nearly a decade ago. Hearn wrote:
Why did Bitcoin fail? The reason lies in the failure of the community. Bitcoin was originally intended to be a completely new, decentralized form of currency, eliminating the drawbacks of "systemically important institutions" and "too big to fail." Instead, it has become worse: a system entirely controlled by a few. Even more worrying is that the Bitcoin network is on the verge of technological collapse. The mechanisms that should have prevented this have failed, therefore, there is almost no reason to believe that Bitcoin can be better than the existing financial system.
While the details differ, the underlying argument remains the same. Bitcoin/cryptocurrency was initially envisioned as decentralized, a cypherpunk practice, but ultimately it became a casino, a centralized entity. Both sides agree that it is ultimately no better than the existing financial system.
Hearn and Ken's argument boils down to this: cryptocurrencies were initially intended for a specific purpose, but ultimately became something else entirely. Thus, we end up debating the ultimate goal or purpose of cryptocurrencies. But what exactly is the ultimate goal of cryptocurrencies?
Five Goals of Cryptocurrency
In my view, this can be roughly divided into five camps. These are not mutually exclusive. For example, I personally agree most with the first and fifth camps, although I have sympathy for all camps. But I am not overly biased towards any one camp, not even the hardcore supporters of Bitcoin.
1. Restore a sound monetary system
This was the initial dream, shared by most (but not all) early Bitcoin holders. Their idea was that, over time, Bitcoin would pose a competing threat to the monetary privileges of many countries, and might even replace them, bringing us back to a system similar to a new gold standard. This group generally viewed everything happening in the cryptocurrency industry as a distraction, a scam to ride the Bitcoin wave. Undoubtedly, Bitcoin's achievements at the sovereign currency level are limited, but as an important monetary asset, it has achieved remarkable success in just 15 years. Bitcoin holders holding this view remain in a state of disillusionment coupled with hope, albeit perhaps unrealistically, that a super-Bitcoinization is imminent.
2. Encode the business logic into smart contracts
This is precisely the argument championed by Vitalik Buterin and most Ethereum supporters: if we can digitize currency, we can also express various transactions and contracts in code, thereby making the world more efficient and fairer. To Bitcoin proponents, this is utter heresy. But in certain respects, this viewpoint has undoubtedly succeeded, especially when considering contracts that are easily expressed mathematically, such as derivatives.
3. Make digital assets a reality
This is my best summary of the "Web 3" or "Read Write Own" concept. It's not entirely without merit; it argues that digital assets should exist as tangibly as physical assets. However, the practice of this concept—such as NFTs and Web 3 social platforms—is either entirely flawed or, to put it more mildly, ahead of its time. Despite billions of dollars being invested, few people today defend this concept. Nevertheless, I still believe it has its merits. I think most of our online predicaments stem from the fact that we don't actually own our own namespaces and have no effective control over who we interact with and who sees our content. I believe that eventually we will regain control of our online assets, and this will likely be related to blockchain technology. But currently, the time is not yet ripe for this.
4. Improve the efficiency of the capital market
This is the least ideologically driven of the five categories. You won't see many people particularly interested in securities settlement, COBOL, SWIFT, or wire transfer windows. But for better or worse, it does provide momentum for an important branch of the cryptocurrency industry. The idea is that the Western financial system is built on outdated technology that is extremely difficult to update and in dire need of upgrading due to path dependence (you certainly don't want to easily replace the core infrastructure that supports trillions of dollars in settlements every day). This update must come from outside the system and requires a completely new architecture. Much of the value here lies in efficiency gains and potentially some consumer surplus, so it's not that exciting.
5. Expand global financial services coverage
Finally, there are those with good intentions who see cryptocurrency as a technology for inclusion, believing it will enable countries in the Global South to access low-cost financial infrastructure, and in some cases, for the first time. This means giving them the opportunity to self-custody crypto assets, or more commonly, stablecoins; access to tokenized stocks or money market funds; bank cards linked to their crypto wallets or exchange accounts; and equal footing in the realm of internet finance. This is indeed a reality, and its apparent success has rekindled the confidence of many theorists whose enthusiasm had waned.
Pragmatic optimism
So, is it the idealists or the cynics who are right? Or is there actually a third, unknown truth?
I could have gone on and on about how bubbles are always accompanied by major technological changes, and how bubbles actually promote the construction of useful infrastructure, with cryptocurrencies being particularly speculative because they are a financial technology, but that's mostly just wishful thinking.
My real answer is: pragmatic optimism is the right attitude, and you must maintain this attitude whenever you feel pessimistic about the cryptocurrency market. Speculation, frenzy, and arbitrage should be understood as unavoidable, albeit unpleasant, externalities in the process of building useful infrastructure. It incurs very real human costs, and I don't want to downplay them. The normalization of Memecoins, mindless gambling, and financial nihilism, especially among young people, is frustrating and harmful to society. But this is an unavoidable (albeit negative) side effect of building permissionless capital markets. I believe that permissionless capital markets wouldn't exist without blockchain. You have to accept that this is an inevitable consequence of how blockchain works. You are not obligated to participate in it.
In conclusion, cryptocurrencies have an ultimate goal, and there's absolutely nothing wrong with being idealistic about it. It's this very force that motivates thousands of people to dedicate their lives to this industry.
It might not be as exciting as you imagine.
The world may not see widespread Bitcoin circulation. NFTs haven't fundamentally changed digital ownership. Capital markets are converging on blockchain, but very slowly. Aside from the US dollar, we haven't tokenized much. And no authoritarian regime has been overthrown by ordinary citizens' crypto wallets. Smart contracts primarily deal with derivatives and have few other uses. Currently, applications with real product-market value (PMF) are limited to Bitcoin, stablecoins, DEXs, and prediction markets. Indeed, much of the value created may be captured by large corporations or ultimately returned to consumers in the form of efficiency gains and cost savings.
Therefore, the challenge lies in maintaining an optimism based on realistic possibilities, rather than indulging in blind fantasy. If you believe in an Ayn Rand-style libertarian utopia, the gap between your expectations and reality regarding cryptocurrencies will eventually disappear. As for the casino-like operating model, unrestricted token issuance, and rampant speculation, these should be seen as unsightly warts on the industry's belly, but difficult to remove. If you believe that the costs of blockchain technology outweigh its benefits, then you have every reason to be disappointed. But from my perspective, things are actually better than ever. We have more evidence than ever before that we are on the right track. Remember the ultimate goal.
