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1. Who to blame?
Well FTX definitely has done some undeniably wrong things to many people that didn’t deserve anything like that, but that’s not the whole truth. FTX isn’t the evil behind it, the true evil is hidden in every one of us, it’s the desire to make a living and, why not, to become rich. SPECULATION that’s who is to blame. We all need to blame speculation for all of this chaos. In some sense it is even good that something like FTX happened to the crypto industry, now all the speculators will hopefully calm down and not swing the boat from side to side.
Now just think about it, if you used FTX or even Binance, did you notice how 98% of it is filled with trading terminology and trading tools? Those websites were made for traders from day 0. Just try typing Bitcoin into YouTube search and find out that almost all you see is speculative information about price, will it go up or down, or just news on Bitcoin which is used by traders to “predict” what the market is going to do. in my opinion healthy amount of speculation is great, but what we see here is pure evil, too much speculation can’t bring anything good with it.
Also another problem is that FTX and other exchanges like that are centralized and in control of a single entity. It is because of current decentralized technology limitations. More on this topic later.
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2. Why is speculation bad and what means value, value creation and value exchange medium?
When a carpenter makes a bridge to cross the river in 3 minutes instead of walking for 3 hours to feed the village, he/she creates value for that village. In ideal terms the village people need to pay the carpenter for his/her work because he/she created a bridge from wood which helps the village to feed their families with higher efficiency. That right there is a clear example of value and value creation. Now let’s understand what is a value exchange medium. Let’s get back to the village again, how the villagers can reward the carpenter for making their lives so much easier? Let’s say the village has a lot of almond trees, they can give the carpenter 2 tones of almonds. That’s a possible solution, the problem with that is carpenter and his/her family might die from stomach sickness after several weeks. Here is another solution, they heard that the nearby village has some yellow shiny round metals that they use to exchange various goods with other villagers from other villages nearby, they called it money, and their village they named – Market. It turned out that money is a great TOOL (see how I highlighted the word tool, because money is nothing more than a tool for value exchange) that allows everyone to exchange their harvest with someone who has something they need. Someone makes great chairs while someone else has a lot of almonds, they all can exchange their goods with money (a medium) and later exchange that money with other goods in the market, isn’t that great? Now carpenter is happy to be paid in that money thing and later he/she can exchange it with anything their family needs in right quantities.
3. Fast forward to current money
Money is widespread in our current world, and there are many variations of money, it appeared that the village named Market wasn’t the only one that invented money, there were other villages too, with their own money. Now to exchange your goods in one village you need one type of money and for other village you need another type of money. That is not a problem because what matters is the underlying value, money is just the tool that helps to efficiently and conveniently exchange goods and services. That statement couldn’t be more wrong, people are using different types of moneys to speculate and create fake value from thin air, the money they created is mostly fake, one could argue that it caries value with it, but I would give an argument that when you speculate there is always someone who wins and someone who loses. If it was creating value it wouldn’t have been a zero sum game, it would’ve been a positive sum game, where someone’s gain doesn’t sacrifice someone else’s gain. As I said nothing good ever happened from speculation, you can trace back to famous times of market collapses when speculation dominated people’s minds, remember when speculating, there is always someone who loses, and that someone is, the general public.
4. Bitcoin was created.
The main philosophy behind Bitcoin (in the beginning at least) was to strip away the control over other individuals’ resources from handpicked institutions.
In my opinion the deflationary nature of Bitcoin was the main motivation that it began to gain popularity among speculators, but that’s just my opinion.
After Bitcoin release, people began contemplating on the efficiency of it’s system and many went to improve upon the idea of digital money. They created their own currencies and soon more people became rich from speculating those new types of currencies. Then, more people created new currencies, many of which didn’t even provide any improvements, in the hopes to find fools to sell that rubbish to.
Some predict the underlying fundamental value of Bitcoin to be much lower than it is today, but those are just assumptions. To correctly determine that number we need to know exactly how many people use Bitcoin to exchange value with each other and in what volumes. We currently don’t own such data.
5. The answer.
There is hope. Many people currently use cryptocurrencies to accept payments and that’s great news. Bitcoin overcame many issues of current form of money with decentralization. Anyone can send money to anyone in any part of the world as long as they have internet connection. No hustles, no middlemen, no problems to be precise. This means – no singular or handpicked institution is in power of letting you exchange the value you created (if we put aside criminal activities, it’s all sunshine and rainbows). Of course decentralization doesn’t solve the problem of speculation, but speculation is a kind of beast that is much harder and painful to defeat. Speculation is solvable with time when more and more people start using it as a value exchange medium.
6. What to do now?
— Decentralize. Don’t forget about core principles and philosophy of cryptocurrencies. Let’s work towards building a more decentralized future, don’t let some self proclaimed “genius”-es control your resources.
— We need new methods and techniques in place to be able to handle decentralized transactions of digital money. Also worth to mention, decentralization doesn’t mean that people working on those types of problems are doing charity work, they create value and thus there is always a way to make a living out of it or even become rich. It’s just that revenue from providing value is the right way, and not creating some sh*t coin owning 80% of it, raising money with the other 20% and hoping that one day the price of that coin will “skyrocket” or “go to the moon”.
— Decentralized approaches are rarely scalable, but that doesn’t mean we need to go full centralized, there is always a middle, where we can have best from both.
— We need to promote the fundamental ideas of cryptocurrencies and money in general.
— More products and tools designed for value exchange markets and not for speculation, more tools making it efficient, more people working on problems faced by value market participants etc.
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