Blockchain technology is arguably one of the most revolutionary technologies of this century. That might sound like a bold claim, but the value and use cases of blockchain are unprecedented. Blockchain technology opens up new avenues for trading, commerce, and for asset ownership. It has the potential to usher in a new era of freedom. It also introduces a groundbreaking method for creating trustless agreements within decentralized networks that are resistant to manipulation. In a world where trust is often broken, blockchains provide a transparent, tamper-proof system where the rules are clear and accessible to everyone.
However, we must accept an undeniable truth: the industry needs to be better at communicating the value it delivers. With numerous frauds, scams, and collapsing projects, blockchain technology and cryptocurrencies are often seen as quick ways to make (or lose) money by scamming others. In this article, we will review how the industry ended up in such a bad spot and then discover the true value and some uses of blockchain beyond scams and fads.
The first question we must ask ourselves is why everyone hates crypto right now. Let’s get started with some history.
It’s 2021, and everyone’s buzzing about NFTs (non-fungible tokens). As the pandemic kept us indoors, new trends emerged. NFTs took the spotlight with so much media coverage that everyone, from artists to investors, jumped on the bandwagon. NFTs seemed to be the next big deal in the tech industry. But beneath the hype, the reality was far less rosy. NFTs quickly became a symbol of speculation and overvaluation, raising questions about their worth and long-term viability.
The trend led to hundreds of mems suddenly being sold for thousands of dollars. Celebrities launched collections, earned large sums of money, and changed their profile pictures to NFTs. And games like Axie Infinity grew so much that people in developing countries started generating income to help their families.
As surreal as it might seem, everyone jumped on the hype train. If you weren’t trading NFTs, you were relegated to the #BeHappyStayingPoor group. The HODL movement was almost a religion, and everyone saw NFTs as a way to make money.
However, the euphoria did not last. Almost all NFT projects lost value, many more than 90% and many meme coins with no real value plummeted.
To make matters worse, NFTs weren’t the only casualties. The collapse of FTX, a major crypto exchange, from allegations of fraud and mismanagement, caused significant financial losses for many investors, shook confidence, and had cascading effects throughout the entire industry. And they were not alone. The squid-game-inspired project, Luna/Terra, and several other high-profile scams collapsed, which led to even more skepticism and financial ruin for many involved.
Interestingly enough, this wasn’t the first time the industry faced such a reckoning. The ICO bubble of 2017-2018, where countless projects raised millions only to fade into obscurity or fail outright, left a trail of disillusionment, with even high-profile projects like EOS falling short of expectations.
Crypto and Blockchain went from being a vibrant promise of digital ownership and a new Web (or Web 3.0) to being seen as a quick way to lose money.
With all that said, is blockchain really just a way for people to make quick money through scams and speculation? If we remove the media sensationalism and bad actors, the real question is: What is the actual value of the blockchain?
Smart contracts are digital agreements that cannot be altered due to the fundamental nature of blockchains. They are immutable. They operate on decentralized networks (the Blockchain) and self-execute when pre-established conditions are met.
The pinky swear illustrates the blockchain's entire value. In our world, almost everything is based on agreements: contracts with your internet provider, promises made by insurers, and commitments made when purchasing products and services. These agreements are not always honored, however. Companies and individuals are clever and often seek ways to evade their promises, leading to complications and disappointments.
People build agreements on trust. They trust the other party will deliver the product or services as expected. They trust the product or service will work as expected. They trust the product or service will be of the quality advertised. However, trust is complicated because one party's interest might not align with the other’s. This misalignment can lead to broken promises and unmet expectations.
This is where blockchain and smart contracts come in.
Imagine selling the deed to your house. In a regular agreement, you need the intervention of third parties (escrow companies, title companies, assessors) to ensure all the paperwork is in order. These intermediaries are necessary because, without them, you would otherwise need to blindly trust the other party to pay the agreed amount under the terms and conditions discussed.
This process is time-consuming and costly, involving lawyers, notaries, and real estate agents who all take a cut while adding complexity to the transaction. Additionally, intermediaries can sometimes be manipulated to act in ways that do not benefit you, further complicating and potentially jeopardizing the agreement.
Now, imagine using blockchain and smart contracts for the same transaction. The smart contract is coded to execute automatically once the agreed conditions are met. The smart contract transfers the deeds to the buyer as soon as the payment is made in cryptocurrency. There are no intermediaries, no delays, and the transaction is transparent and secure. The terms of the agreement are immutable and publicly verifiable, ensuring that both parties fulfill their obligations without the need for blind trust or the risk of manipulation.
Additionally, this takes many fraud-related problems off the table such as false claims of real estate ownership, fake deeds, and corrupt officials willing to forge documents. Since the transaction is conducted on the blockchain, the ownership records are immutable and publicly verifiable on-chain. The entire process is also cheaper as you avoid payments required for all the third parties involved.
Smart contracts' transparency increases confidence in the system because all parties can see and verify the terms of the agreement. Suppose you have a contract with your internet provider stipulating a flat rate for a certain speed. The smart contract can ensure that if the provider fails to meet this promise, the agreed penalties are automatically applied without the need for legal proceedings.
Note: this would technically require off-chain computation and an Oracle to ensure the process is held fairly.
In the insurance sector, smart contracts can automate compensation payments. For instance, if you have travel insurance that compensates you for flight delays, the smart contract can be programmed to automatically check the flight status and, in case of a delay, transfer the compensation to your account without the need for complicated claims. This simplifies the process and ensures that you receive what was promised without delays or disputes.
Blockchain technology can address trust and transparency issues in finance. Take the example of Robinhood during the GameStop trading frenzy. Robinhood restricted trading on certain stocks, causing an uproar among users who felt their ability to trade freely was being unfairly hindered. Decentralized finance (DeFi) platforms built on blockchain technology eliminate this kind of centralized control, allowing users to trade assets freely without the risk of a single entity imposing restrictions. Smart contracts can ensure that all trading rules are transparent and automatically enforced, providing a fairer and more open financial system.
Blockchain is helping us create a better world with minimized trust agreements. You can safely and easily interact with others without needing to trust them blindly because the laws and rules for that agreement are written in code and will execute when specific conditions are met.
This is just a small glimpse into the true value of blockchains and cryptocurrencies. Many aspects and applications of smart contracts and blockchain are yet to be explored.
Thanks to smart contracts, we are moving from a world based on trust to a world based on mathematics, where agreements are written in stone—in this case, in code—and executed on a decentralized blockchain network.
Of course, this also means that more responsibility falls on the users' shoulders since the blockchain is immutable and there’s no “undo” button. Once a transaction is executed, it’s final. Every action a user takes needs to be spot-on because mistakes can’t be reversed. Additionally, the burden of security—whether it’s safeguarding account access or securing assets—rests entirely with the user.
Opportunities are endless, and the future is bright. The industry and infrastructure still need building, and thousands of new use cases for blockchain have yet to be explored. Numerous resources are available to become a blockchain developer, and the demand for these professionals continues to grow. Web3 companies are constantly hiring and the salaries are excellent, averaging $125,000 annually. If you want to become a blockchain developer, now is the perfect time to start.
A great option for learning how to be a blockchain developer is to join Cyfrin Updraft, where courses take you from zero to expert blockchain developer at your own pace.
Blockchains help transform the world from one based on trust to one based on trust-minimized. We can interact safely and effectively by eliminating the need to blindly accept that others will deliver.
If you found value in this article, share it with others. Change the perspective of those who think blockchain and cryptocurrencies are just for scams and thefts. Blockchain has the potential to transform how we make agreements, and you can be part of this revolution.
