Crypto Crash, Blockchain’s Swan Song?

Is the cryptocurrency crash challenging blockchains in general?

There are two uses for blockchains, it seems to me. On the one hand, what I would call cryptocasinos, that is, all this speculative movement that exists around cryptocurrencies, and which led to the crash that we continue to see unfold before our eyes. A significant part of its cast has little to do with the world of technology. Exchanges that I had with some, they often have a very sectarian approach, with the theme “government currencies are worth nothing” or even “it doesn’t matter if blockchains consume energy because it’s not carbon(!) and the service provided . is huge”, etc.

And there is, on the other hand, another form represented by the world of innovators, who sometimes develop fungible or non-fungible cryptoassets, and especially who are on sometimes complex smart contract issues, which, in my opinion, represent the most interesting. These smart contracts make it possible to consider a wide range of things, such as creating traceability of CO2 emissions, certifying spare parts, NFTs, etc. It’s an exciting universe.

What are the challenges in these universes?

The challenges are not only very numerous, but they are also very difficult to solve. The first is processing speed and power consumption (which are related factors). If there are really interesting leads – that Ethereum, for example, is really exciting – to solve this problem, I doubt it will go away for many years. Basically, with Bitcoin you are limited to between 3 and 6 transactions per second with an insane energy and carbon cost, around a hundred euros per transaction. transaction. In comparison, a network like Mastercard can theoretically go up to 100,000 transactions per second (in reality they do more like 1,500 to 5,000) at an energy cost that is hard to estimate, but probably much lower in Eurocents.

Another challenge is interoperability between cryptoassets. If you have to systematically go through trading players like Coinbase on Binance, you lose a large part of the interest of the system, with transaction costs and centralization of data. If we compare to web 1.0, in the late 90s there were a whole lot of standards that collided and certain websites were only compatible with certain types of browsers. It required a huge standardization effort to ensure overall compatibility.

Finally, no offense to ultras, there remains the challenge of regulation. The amount of fraud in this universe is still far beyond what is acceptable. Not to mention lost credentials. I chatted a few days ago with Changpeng Zhao, the founder of Binance. He told me that he estimated at a few percent (3 to 5%, maybe more…) the number of people who found themselves in this situation. This is also his first challenge. Solutions like Ledger can partially solve this, but the user experience remains really prohibitive.

Is web3 a fad or a lasting trend?

Not a trend, but it will simply take a long time. The web was born in 1989, and the standards underlying it were not really stabilized until mid-2000. The reason I believe it is that the most important economic and social obstacles to a more inclusive society are rent situations, bureaucracy, etc. . However, these technologies are inherently able to respond to a large part of these challenges. simply everything remains to be written: the technology, but also the regulation. It may be a path of several decades that presents itself to us.

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Gilles Babinet is an entrepreneur in the digital field. He is a contributor to the Institut Montaigne on digital issues and currently works on topics related to digital technology and CO2 emissions.

Find his new book on “Recasting Public Policies with Digital”, published on November 15, 2020.