Does Cryptocurrency Crash Challenge Blockchain as a Whole?
It seems to me that blockchains have two forms of use. On the one hand, what I would call a crypto-casino, that is, all this speculative movement that exists around cryptocurrencies and led to the collapse that we continue to see before our eyes. Much of its cast has little to do with the world of technology. The exchanges I’ve had with some of them are often very sectarian about “sovereign 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, on the other hand, there is another form represented by the world of innovators who sometimes develop fungible or non-fungible crypto-assets, and especially those who sometimes deal with complex issues of smart contracts, which, in my opinion, is the most interesting. These smart contracts allow many things to be taken into account, such as tracking CO2 emissions, certification of spare parts, NFTs, etc. It is an exciting universe.
What are the problems of these universes?
The problems are not only very numerous, but also very difficult to solve. The first is processing speed and power consumption (which are related factors). If there are really interesting leads – for example, Ethereum is really exciting – to solve this problem, I doubt that it will disappear for many years. Basically, with bitcoin, you are limited to 3 to 6 transactions per second with a crazy cost of energy and carbon, around a hundred euros per transaction. In comparison, a network like Mastercard could theoretically do up to 100,000 transactions per second (in fact, they do between 1,500 and 5,000) at an energy cost that is hard to estimate, but probably much lower in euro cents.
Another issue is compatibility between crypto assets. If you have to systematically trade through players like Coinbase on Binance, you lose a lot of interest in a system with transaction costs and data centralization. Compared to web 1.0, in the late 90s there were a whole bunch of standards that contradicted each other, and some sites were only compatible with certain types of browsers. It took a huge standardization effort to ensure overall compatibility.
Finally, no offense to ultras, the issue of regulation remains. The amount of fraud in this universe is still far beyond what is acceptable. Not to mention lost documents. A few days ago, I spoke with Changpeng Zhao, the founder of Binance. He told me that he estimated at a few percent (from 3 to 5%, maybe more …) the number of people who find themselves in such a situation. This is also his first challenge. Solutions such as Ledger may partially solve this problem, but the user experience remains truly out of the ordinary.
Web3 – fad or sustainable trend?
Not a trend, but simply, it will take a long time. The Internet was born in 1989, and the standards that underlie it were only truly stabilized in the mid-2000s. The reason I believe this is because the main economic and social brakes on a more inclusive society are rent situations, bureaucracy, etc. . However, these technologies are inherently capable of answering most of these problems. just everything remains to be written: technology, but also regulation. Perhaps we imagine a road of several decades.
Gilles Babinet is a digital entrepreneur. He is a Digital Fellow at the Institut Montaigne and is currently working on issues related to digital technologies and CO2 emissions.
Find his new book, Digitally Redesigning Public Policy, released November 15, 2020.