Don't be discouraged by cryptocurrency, be a pragmatic optimist.

Author: Nic Carter, Co-founder of Castle Island Ventures

Translation: Felix, PANews

Aevo co-founder Ken Chan recently published an article lamenting that he has wasted 8 years of his life in the crypto industry. Ken Chan believes that the crypto industry has deviated from its original intention of "decentralized finance" and has evolved into the largest and most widespread system of speculation and gambling in human history. This pessimistic view has sparked heated discussions in the crypto community. Nic Carter, co-founder of Castle Island Ventures, also contributed to the topic, and below is the full content.

No one can serve two masters: either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and Mammon (note: the embodiment of wealth in religious legend). — Matthew 6:24

Ken Chang recently published an article titled "I Wasted 8 Years of My Life in Cryptocurrency," in which he laments that the industry seems inherently characterized by capital waste and financial nihilism.

People in the crypto circle love to mock these types of "angry exit" articles, reminiscing about how historical figures like Mike Hearn and Jeff Garzik made grand exits, only to smugly point out how much Bitcoin has risen since their departure.

However, much of what Ken says is correct. He states:

"Cryptocurrency claims to decentralize the financial system, and I fully believed it at the time, but the reality is that it is just a super speculative and gambling system, merely a reflection of the current economy. The truth hit me like a damn truck: I was not building a new financial system; I built a casino. A casino that refuses to admit it is a casino, yet it is the largest, always-on, multi-participant casino created by our generation."

Ken points out that venture capitalists have burned through billions of dollars supporting countless new Layer 1s, which we clearly do not need. This is indeed correct, although he slightly distorts the incentive model (venture capital is merely a channel for capital). He also criticizes the proliferation of perpetual contracts, spot DEXs, prediction markets, and meme coin issuance platforms. Certainly, while you can defend these concepts from an abstract level (except for meme coin issuance platforms, which are completely indefensible), it is undeniable that their proliferation is simply due to market incentives and venture capital willing to invest.

Ken says he entered the crypto space with idealism. Everyone should be familiar with this: he has a Randian libertarian inclination. But later, he did not practice libertarianism; instead, he built a casino. Specifically, he is most famous for participating in the development of Ribbon Finance, a protocol that allows users to deposit assets into a treasury and earn returns by systematically selling options.

I personally do not want to be too harsh, but the fact remains. If it were me, I would also engage in profound reflection. As the conflict between principles and practice became increasingly unbearable, Ken ultimately pessimistically realized: cryptocurrency is a casino, not a revolution.

What struck me most while reading Ken's article was that it reminded me of Mike Hearn's famous exit declaration nearly 10 years ago. Hearn wrote:

Why did Bitcoin fail? Because the community failed. What should have become a new decentralized currency, without "systemically important institutions" and "too big to fail" entities, has turned into something worse: a system completely controlled by a few. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have failed, so there is no longer much reason to believe that Bitcoin can be better than the existing financial system.

The details differ, but the argument is the same. Bitcoin/cryptocurrency was supposed to become something (decentralized, cypherpunk practice), but it has turned into something else (a casino, centralized). Both Hearn and Chang believe: it is ultimately no better than the existing financial system.

Their argument can be summarized in one sentence: cryptocurrency was meaningful at the beginning, but later became something else. Thus, we find ourselves in a debate about the "teleology" of cryptocurrency—what does it really mean?

The Five Purposes of Cryptocurrency

In my view, there are roughly five camps, which are not entirely mutually exclusive. For instance, I personally resonate most with the first and fifth purposes, but I also sympathize with the other few. However, I am not die-hard loyal to any of them, even the most hardcore Bitcoin camp.

1. Restoring Sound Money

This was the common dream of most early Bitcoin supporters, but not everyone agrees. The idea is that over time, Bitcoin will pose a competitive threat to the monetary privileges of many countries and may even replace their currencies, returning to an arrangement similar to a new gold standard. People in this group often believe that everything else happening in the crypto space is a distraction or a scam, merely riding on Bitcoin's coattails. Bitcoin has made limited progress at the sovereign level, but becoming a significant monetary asset in just 15 years is already remarkable. Those holding this view are often in a state of disillusionment mixed with hope, anticipating the full adoption of Bitcoin is just around the corner.

2. Encoding Business Logic into Smart Contracts

This is the view most championed by Vitalik Buterin and Ethereum supporters: since money can be digitized, various transactions and contracts can also be written as code, making the world more efficient and fairer. Initially, this was heresy to Bitcoin advocates. However, it has indeed succeeded in certain narrow areas, especially those contracts that can be easily expressed mathematically, such as derivatives.

3. Making Digital Property "Real"

I believe this is the best summary of the "Web3" or "Read Write Own" concept: digital property should be as real as physical property. The idea itself is valuable, but the ways it has been implemented (NFTs, Web3 social) have either completely missed the mark or are too ahead of their time. Despite billions of dollars invested, few defend it today. However, I still see merit in this idea. Most of the problems on the internet today stem from not truly owning one's online space and not being able to control who interacts with them or who can see their content. I believe that one day we will regain control over our online assets, and this will likely involve blockchain. It’s just that the timing for realizing this idea is not yet ripe.

4. Making Capital Markets More Efficient

This is the least ideological of the five. It is hard to find many people who are particularly interested in securities settlement, COBOL, SWIFT, or bank wire windows. But this indeed underpins a significant portion of the value of the crypto industry. The core idea is that the Western financial system is built on outdated technology, and due to path dependency, it is very difficult to update this technology (you cannot just tear down the core infrastructure that settles trillions of dollars daily). This update must come from outside the system and adopt a completely new architecture. The value here is mainly reflected in efficiency gains and potential consumer surplus, so it is not particularly exciting.

5. Expanding Financial Accessibility Globally

Finally, there are those compassionate individuals who view cryptocurrency as an inclusive technology that allows people in underdeveloped countries to access low-cost financial infrastructure for the first time: enabling them to self-custody crypto assets or stablecoins, purchase tokenized stocks or money market funds, and obtain a card through a crypto wallet or exchange account, being treated as equals on the financial internet. This is a very real phenomenon and provides motivation for many disillusioned idealists to continue moving forward.

Pragmatic Optimism

So who is right? The idealists or the cynics? Or is there some unknown third answer?

I could elaborate at length about how bubbles always accompany significant technological changes, how bubbles actually promote the construction of useful infrastructure, and why cryptocurrency is particularly rife with speculation, as it is essentially a financial technology, but much of this is just self-comfort.

The real answer is: maintaining a pragmatic optimism is the correct attitude. Whenever you feel extremely pessimistic about the "crypto casino," you must firmly hold onto this attitude. Speculation, frenzy, and predation should be understood as inevitable and unpleasant external events in the process of building useful infrastructure. They do indeed bring very real negative effects, and I do not want to downplay this. Among young people, the normalization of meme coins, mindless gambling, and financial nihilism is disheartening and harmful to society. But this is an unavoidable side effect of constructing permissionless capital markets. Without blockchain, this situation would not occur. You just have to accept that this is a negative consequence of how blockchain operates. You do not have to participate in it.

To summarize, cryptocurrency has its goals, and it is perfectly fine to hold an idealistic attitude towards it. There is a force motivating thousands of people to dedicate their careers to this industry.

It’s just that this purpose may not be as exciting as you imagine.

The world is unlikely to experience "hyperbitcoinization." NFTs have not fundamentally changed digital ownership. Capital markets are moving on-chain, but progress is slow. Aside from the dollar, not much has truly been tokenized. No authoritarian regime has been overthrown by ordinary people wielding crypto wallets. Most smart contracts only involve derivatives, nothing more. Currently, the applications that truly have product-market fit are limited to Bitcoin, stablecoins, decentralized exchanges, and prediction markets. Moreover, most of the value created may be captured by large companies or returned to consumers in the form of efficiency gains and cost savings.

So the real challenge is: to maintain a grounded optimism based on realistic possibilities, rather than indulging in blind fantasies. If what you believe in is a Randian libertarian utopia, the gap between expectation and reality will eventually lead to your collapse. As for the casino-like operational mechanisms, unrestrained token issuance, and frenzied speculation, they should be seen as unpleasant blemishes of the industry, but they are difficult to eradicate. If you believe that the costs of bringing blockchain into the world outweigh its benefits, you have every reason to feel disappointed. But in my view, the situation is actually better than ever. We have more evidence than ever that we are on the right path. Just stay true to your original intention.

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