It's darkest just before dawn. Or is it?
In the wake of the crypto crash, caution is at high tide on cryptocurrency, NFTs, and other "web3" products. But on Tuesday, a major firm in the "web3" space released its first State of Crypto report, a document that tries to summarize the industry in a good light despite the serious crash that saw $1 trillion in cryptocurrency lost in only six months.
But, while the report does foresee better days for crypto in the future, the industry is still in for some "dark days".
Are crypto, NFTs, and web3 in their 'early days'?
The company, a16z, begins by drawing an analogy between markets and seasons. "Markets are seasonal; crypto is no exception. Summers give way to the chill of winter, and winter thaws in the heat of summer," according to the report. "Advances made by builders during dark days eventually re-trigger optimism when the dust settles. With the recent market downturn, we may be entering such a period now."
Cryptocurrency industries often use this line of reasoning to project better days in the future. Coinbase expressed similar sentiments of a need for long-term investments in a letter to shareholders, according to a VICE report. "We tend to be able to acquire great talent during those periods and others pivot, they get distracted, they get discouraged. And so we tend to do our best work in a down period," said Brian Armstrong, Coinbase's chief executive officer, in a call with shareholders.
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The a16z report emphasizes that crypto is still in its "early days", which ostensibly explains why crypto offers few practical applications, services, and products for the public. "Analogizing to the early commercial internet, that puts us somewhere circa 1995 in terms of development," explains a16z in the report.
"The internet reached 1 billion users by 2005 — incidentally, right around the time web2 started taking shape amid the founding of future giants such as Facebook and YouTube," continued the report, hinting at a possible future for cryptocurrency, web3, and perhaps even NFTs.
Crypto platforms with 'safeguards' might be on the table
This comparison has been argued repeatedly, but it's also seen heavy skepticism. A web3 critic named Molly White argued that crypto exchanges have existed since 2010 — which casts doubt on the crypto investor's position that web3 and related technologies are still in their "early days". After all, NFTs and stablecoins have existed since 2014, with Ethereum's smart contracts following in 2015, and DAOs in 2016. These years may not feel that far in the past culturally, but in terms of innovative technologies taking off, it surpasses some key goalposts where the salad days of the internet saw rapid and lasting growth (remember the dot-com bubble?).
"How many people must be scammed for all they’re worth while technologists talk about just beginning to think about building safeguards into their platforms?" wrote White in her personal blog. "How long must the laymen, who are so eagerly hustled into blockchain-based projects that promise to make them millionaires, be scolded as though it is their fault when they are scammed as if they should be capable of auditing smart contracts themselves?"
It's true that many who seek to earn riches quickly could be least likely to come out on top before and after a period of rapid crypto growth. Most public high schools don't teach investment strategies, and in a massively indebted society, an atmosphere of quick growth compounded with the air of inevitability that has surrounded crypto and other web3 products could prove too tempting a lure for many who, it turns out, can't afford to lose.
But that doesn't mean it's over for those who can.