I'm not sure why, but there are a large number of bitcoiners out there who also seem to think that the rest of the crypto space still has a place in the real world economy.
You probably can think of a few.
They have a crystallized view of Bitcoin's future, but vaguely weave in the rest of crypto into some abstract category of relevance. Crypto is just "here to stay" without explaining how.
Crypto as an "asset" class represents many things, but I think we can simply let crypto’s kingpin Vitalik Buterin spell out why crypto can't function in reality without even realizing it.
This is an old gem of a clip. Watch it.
While his comments pertain to proof-of-stake protocols, other proof-of-work coins suffer the same inevitable fate as PoS crypto.
The problem? Well, let’s read his exact words:
“Proof of work is based on the laws of physics, so you have to work with the world as it is. You have to work with electricity as it is, hardware as it is, what computers are, as it is…Whereas because proof of stake is virtualized in this way, it’s basically letting us create a simulated universe that has its own laws of physics. And that just gives us as protocol developers a lot more freedom to optimize the system around actually having all of the different security properties that we want…”
He implies that the restraints of working with the world "as it is" is a negative thing.
Lack of restraint is exactly why PoS crypto is just fiat 2.0.
Other PoW coins fall into the same boat because they simply can't gain enough market share from Bitcoin and can't guarantee BTC's perfect tokenomics.
Now replace “proof of work” and “proof of stake” with “Reality” and “Minecraft” and imagine a video game developer speaking.
“Reality is based on the laws of physics, so you have to work with the world as it is. You have to work with electricity as it is, hardware as it is, what computers are, as it is…Whereas because Minecraft is virtualized in this way, it’s basically letting us create a simulated universe that has its own laws of physics. And that just gives us as protocol developers a lot more freedom to optimize the system around actually having all of the different security properties that we want…”
Crypto is a lot like Minecraft — a simulation of reality. Because it’s built on its own properties, not those of the reality we all live in, crypto “works” in its own world, but not in the real world.
In crypto, you can:
- Print more cryptocurrencies out of thin air via staking/yield farming
- Play soul-sucking blockchain games and explore soulless metaverses
- Trade shitcoins and NFTs for other shitcoins and NFTs
- Speculate on fiat fluff technologies
- Straight up gamble
You’re free to have all the crazy fun playing with ponzinomics that crypto created in its simulated universe. Go for it.
But somehow, whether cluelessly or nefariously, Vitalik doesn’t stop to think about this statement for a moment.
With a system admittedly simulating its own laws of physics, how can one see this system functioning in the real world that requires restraint?
It doesn’t. Which is why after 14 years, only one continuously proves itself worthwhile.