Thread by @lex_node

I've been thinking about this crypto crash & starting to realize it exposes a deeper issue:

blockchain's fundamental value is 'social scalability' (Szabo)

yet crypto constantly trades counter to the related fundamentals, driving futile boom/bust cycles;

here's what I mean:

when crypto clashes significantly enough with traditional institutions / govts (China ban, Tesla dump, Tether and Binance investigations), this is taken as a 'bear' signal, panic ensues and prices drop

when crypto is embraced by the mainstream (Elon/Saylor, 'enterprise blockchain' announcements by mainstream corps, regulatory safe harbors created, etc.), this is taken as a 'bull' signal, comfort sets in and prices rise

here's the catch:

if the most powerful governments and institutions could be trusted to allow & facilitate everything possible with blockchains, it would be silly to use blockchains--you could have a much more efficient, KYC-less Paypal & do any transaction you wanted

in that 'validly trusted' scenario, blockchain would just represent an especially inefficient combo of database and networking technologies & should have no significant value

on the other hand, if mainstream society would otherwise censor, suppress and exploit many types of people and transactions, then blockchain is quite valuable, because it represents a trust-minned, socially scaled transaction infrastructure for those people & transactions

so, when mainstream institutions / govt push back hard on blockchain, this is actually validating its use case and value--and yet the markets plunge.

This makes me think that until crypto trades with its fundamentals, the market will be immature, precarious and, yes, still subject to almost complete collapse at any time--

without an understanding of the fundamentals, people will just keep pumping and dumping crypto based on fallacious narratives and tulip-manias, leading to an endless boom-and-bust cycle with negative externalities similar to gambling; this is bad.

I don't know if price ever can/will track fundamentals...maybe the grip of mainstream society is too strong & thus a truly autonomous P2P economy can never emerge. Maybe crypto only gets valuable when people misallocate value to it based on fallacies and market manipulation.

I think the only ways to correct this trend would be:

-->more people start placing a higher value on their autonomy (currently it is very hard to even get normies to opt out of Facebook data collection); or

-->tech improvements deliver vastly more social scalability than now

I'm torn as to what factor to blame more: Is the problem that people don't value social scalability enough, or that blockchain still has too may trust holes (USDT, USDC, etc.) & thus hasn't delivered enough social scalability to constitute a robust freedom-enhancing alternative?

The latter issue is a potentially solvable problem, as the tech improves more and more. The former--human nature's apathy, complacence, susceptibility to religious and political indoctrination--might not be solvable.

Bull case or bear case? You choose--or I guess we all do. 🤣