<\/p>\n
There\u2019s been a lot of bad in crypto over the last few years.\u00a0<\/p>\n
FTX in particular \u2014 but also Three Arrows Capital, Terra, Celsius and many, many others. However, there\u2019s also been promising developments for the cryptocurrency pragmatists. And pragmatism is a word, in general, not attached to crypto when it comes to mainstream thinking.\u00a0<\/p>\n
Take, for example, a recent Financial Times article<\/a>, written ahead of former FTX CEO and crypto shyster Sam Bankman-Fried\u2019s sentencing<\/a>. This hot take sums it up best:\u00a0<\/p>\n \u201cBut what is our verdict on crypto? Have we learnt the lessons from the disastrous 2022 crash in digital assets? To judge from recent action in the crypto market, the answer appears to be no.\u201d<\/p>\n While there are good points to the article, I disagree with this. There is very real antifragility in the cryptocurrency ecosystem \u2014 even in the face of an undaunting amount of bad actors. This is why, in part, the market has returned in 2024.\u00a0<\/p>\n Crypto\u2019s antifragility is due to its interconnected, but never locked in, building blocks. This concept can be easily conveyed with toy bricks \u2014 Legos \u2014 in this new world of financial \u201ccomposability.\u201d This concept means the future of finance will be increasingly \u201ccomposed\u201d of many building blocks rather than being centralized.\u00a0<\/p>\n Think of this similar to Lego bricks \u2014 built on a foundation of consensus, blockchain, cryptocurrency and smart contracts.\u00a0<\/p>\n Various building blocks comprise the crypto world. Each piece is of its own and used to build bigger things. These can be taken apart as well, but it doesn\u2019t mean a few blocks can\u2019t fail or disappear.\u00a0<\/p>\n This is exactly why Bitcoin was proposed by Satoshi Nakamoto well over a decade ago. It was in response to the very centralized financial system that blew up catastrophically back in 2008, the impetus for the Great Recession.<\/p>\n It\u2019s important to keep in mind that the FT piece focuses on centralized, non-transparent actors like FTX. No focus is on any of the novel technological aspects of the crypto ecosystem \u2014 decentralized components that work together to create a system that, since the advent of Bitcoin, has worked well.\u00a0<\/p>\n I\u2019m not surprised, however, that many do not realize that crypto\u2019s perceived centralization in light of FTX doesn\u2019t reflect reality. A good way to think about this concept can be from a foundational building block approach:<\/p>\n Consensus<\/strong> is the way that each crypto network can secure its network in a decentralized manner. As examples, Bitcoin uses proof-of-work mining, Ethereum uses proof-of-stake and Iota uses a Direct Acyclic Graph (DAG) based consensus. The FT article mentions \u201cconsensus\u201d only once, and in the context of identifying it as an \u201cesoteric subject.\u201d It\u2019s hardly that, and one of the most important foundational concepts to grasp, especially when thinking about crypto\u2019s decentralization.\u00a0<\/p>\n Blockchain<\/strong> enables a transparent record that requires no third party to verify. This can be public, like Litecoin\u2019s blockchain. Or, it can be private, like HyperLedger\u2019s Fabric. Hybrid models also exist, combining the best of a private and public blockchain. But the fact that blockchains can be separated from crypto is something important that the FT article dismisses entirely.<\/p>\n Cryptocurrencies <\/strong>are digital assets that are secured by cryptography. These digital assets are almost always built and created on top of a blockchain for transparency, but some of them are privatized like Monero. I won\u2019t deny that there\u2019s been a lot of stigmatism of privacy coins, but regulators have made measured moves to find ways to clamp down on this without affecting transparent cryptocurrencies.\u00a0<\/p>\nBreaking down the blocks<\/h2>\n