Relying on other people to tell you about a product you’ve never seen or used is like having someone describe to you what it’s like to ride a rollercoaster; you can sort of imagine it, but you can’t form an opinion of whether you like being hurled up and down a track in a little buggy until you try it.
I was ignorant about cryptocurrency as a product. So, I recently decided to get hands-on and think about it from a product perspective.
Dipping my toe in
I did what I think are the very basics with cryptocurrency: I acquired, transferred, and exchanged.
- Acquired: I used an online exchange to convert some US dollars into one cryptocurrency. I also found some places online that would give a small amount of cryptocurrency in exchange for viewing ads or letting a browser “mine” for coins.
- Transferred: I used a couple of ways of transferring cryptocurrency from one place to another. Specifically, I transferred from an exchange into an online wallet.
- Exchanged: I used a few different means to exchange that one cryptocurrency into another.
In the span of minutes, I witnessed my US dollars being converted into a digital store of value and be sent over to a virtual storage place. I watched as a distributed ledger running on a bunch of different computers confirmed the transaction. I also watched fees paid to those running the computers that helped me do the transfer or exchange.
First impression: it works, but it’s hard
I was impressed that the technology worked and worked quickly. Transferring money was much faster than an Automated Clearing House transfer between banks, and in some cases was lower cost than a credit card transaction fee or a Paypal merchant fee.
However, most options to buy, transfer, and exchange cryptocurrencies are not well documented, not easy to access, and confusing. I ended up committing several hours of research and experimentation with about a dozen different websites to do what I did. And I feel I was just scratching the surface.
The walls are up, but there’s still no running water
If cryptocurrency was a house, it would be far from ready to live in for most people. Sure, developers will point to the walls and say “look, they’re standing!” and take pride in the tarp roof they’ve stretched across the walls. But most people will point to the lack of a toilet and ask, “where do I go to pee?”
Developers are busy addressing infrastructural problems, like how much information is part of each section of the distributed ledger, how fast the transactions are processed, how the transactions are verified or proven, and how time- and energy-efficient the verification process can be. There is demand for this work because coins are racing to differentiate from each other in order to get adopted by those running servers to verify transactions and those interested in buying the coins.
So. Much. Hype.
As of this writing, there are over 1,400 cryptocurrencies listed on CoinMarketCap. The barrier to entry is low. Can you fork an existing open-source project, setup a server running that code, and create a reasonably nice-looking website? Congratulations, you’ve just started a cryptocurrency.
Also as of this writing, there are over 1,000 books on Amazon about cryptocurrency. Many focus on cryptocurrencies as an investment vehicle, promising some insider secrets that others don’t have.
So, what’s it good for?
Right now, not a lot. You can buy some coins and keep them, speculating on their future value. You can buy them to send money to people, but the transaction fees sometimes make this unappealing compared to Paypal or Venmo or just a simple check. You can also go online and argue about why one coin is better than another, in various forums.
So what about the future? Optimists say cryptocurrencies will replace gold as safe stores of value. Others think they will upgrade or replace the banking system, and expand money services for those unbanked and for those wishing to send money overseas. Still others see the distributed ledger as a way to create a new computing platform, complete with file storage and information transfer.
And then the pessimists point to the crazy state of the product today: lose your private key? Congratulations, you’ve lost your money. The same congratulations is warranted if you keep your money in an exchange and the exchange gets hacked. Oh, and you can lose your money trying to buy a cryptocurrency from an ATM because the transaction fees are too high.
I think that both optimists and pessimists are right; currently, cryptocurrencies aren’t ready for the mainstream user. What I don’t know is whether the innovations will hit a critical mass that will free developers to focus on building things at the application layer, solve end-user problems, and allow for everyone to easily adopt the technology.
This could be another BitTorrent
Remember BitTorrent, the distributed file sharing system, letting you quickly download files from multiple other computers that had all or part of those files? Movie studios and music labels were shaking at the prospect of everyone downloading films and albums for free with this technology. Then, the streaming revolution happened, and people realized paying a few bucks to Netflix and Spotify was much easier than spending time downloading a pixelated version of a movie with Portuguese-dubbed audio only to then receive a stern letter from their ISP.
Or, this could be the future.
Cryptocurrencies could follow the same path as BitTorrent: a lot of hype around a cool technology that remains in the margins, outside of most people’s everyday life. Or, it could be the beginning of the next platform in computing, creating a new way to store, transfer, and transact value and information without a central authority with killer apps yet to be imagined.
Only product people’s creativity, developer’s ingenuity, and what customers ultimately spend their time and money on, will tell.