​​What Comes After Crypto Winter?

​​What Comes After Crypto Winter?

Forecasting the future of the blockchain and cryptocurrency industry in 2030.

In this scenario, domestic politics in America makes it impossible to create a CBDC. All the while, Congress and the SEC drag their feet in providing regulatory clarity vis-à-vis stablecoins until well into the 2020s. By this time, China already has a years-long head start over the US in rolling out its digital currency. China has even expanded its currency regime through a digital Belt and Road Initiative, sending digital “stimulus checks” to Ethereum wallets in developing nations. (In crypto terms, this is known as an “airdrop,” where newly launched protocols send free tokens to digital wallets in hopes of increasing its adoption).

Meanwhile, the United States is hamstrung in competing with the digital yuan by not having its own CBDC. And to complicate matters further, the United States is experiencing deep stagflation similar to the economic headwinds it faced in the 1970s. These factors combined shake global faith in the US dollar. The dollar essentially gets “Blockbustered” by a more digitally savvy competitor—the e-CNY. The final nail in the coffin is Saudi Arabia’s abandonment of the petrodollar, a decision it makes out of pure business expedience with the yuan showing remarkable strength over other currencies.

Crypto Coup D'etat: Bitcoin and Ethereum Replaced by Newcomer

 In the 1990s, it appeared the likes of AOL and Yahoo would rule the World Wide Web for decades to come. But today, these platforms are shadows of their old selves—and used more often as punchlines than actual web services.

Could the same fate befall Bitcoin and Ethereum?

Blockchain is an industry still in its infancy, and its early protocols may not be any less prone to disruption than the tech giants of yesteryear. While Bitcoin and Ethereum have the benefit of first-mover advantage, their original code makes these blockchains exceedingly difficult to scale. For example, Bitcoin’s proof-of-work consensus system requires exorbitant amounts of energy to transact even small amounts of value on the network. In terms of environmental impact, Bitcoin could be even worse for the planet than beef as its adoption grows over the next decade. If Bitcoiners fail to find a way to make the protocol more green-friendly, they could face serious obstacles to adoption, not the least of which is environmental regulation. Ethereum, meanwhile, consumes significantly less energy than Bitcoin—but it too faces serious challenges in scalability.

These factors could lead to the Crypto Coup D’etat scenario, where a new cryptocurrency—perhaps one that hasn’t even been invented yet—overtakes Bitcoin and Ethereum in terms of market cap and global usage. This crypto would have the advantage of learning from Bitcoin and Ethereum’s mistakes in the initial design process, allowing software engineers to build a blockchain that is faster, more scalable, and more secure than both. This token gaining market dominance would be the crypto equivalent of Google overtaking Yahoo as the world’s preferred search engine of choice.

The fallout from this scenario could be immense for the millions of investors across the globe who have placed their bets on Bitcoin and Ethereum. It could even lead to digital currency competition between nation-states, depending on the levels of crypto adoption at the time. Even so, the new and improved crypto offers a faster, more secure blockchain than its competitors. And the appeal of building on this blockchain could further expedite the transition from traditional currency to CBDCs.

Conclusion: Plotting the Best Path Forward

“What a year this week has been.” This is a common refrain within the crypto industry. It captures the breakneck pace of change and development within the space as new organizations are born and old incumbents die. Predicting the state of blockchain six months out is no small feat, much less several years from now. But this report doesn’t shrink from the task. Our analysis seeks to paint a general picture of the blockchain industry in 2030 not by making wild-eyed predictions based on pure speculation but by probing historical antecedents and current trends that could lead to each potential future.

In the final count, two primary actors and the dynamic between them will determine the state of blockchain at the end of the decade—the government and the industry itself. With these two actors in a near-constant state of tension, game theory offers them two choices: cooperate in pursuit of relative gain or compete in pursuit of absolute gain. The path of cooperation appears to be the better path forward, both for the country and the world.

Admittedly, the interactions between industry and government could yield a wide variety of scenarios, even beyond Cooperation, Kumbaya, Conflict, or the black swans contemplated in this analysis. Whether any of these scenarios comes to pass is a question left to time and time alone. But no matter the outcome, engaging with these “myths of the future” in the present is a worthwhile exercise—one that could direct our attention to new opportunities in blockchain and prepare us for the challenges ahead.

Sam Lyman works at the intersection of policy and innovation. He is the policy director at the Orrin G. Hatch Foundation and an MPP candidate at Princeton University. He previously served as the chief speechwriter to Senator Orrin G. Hatch and as the speechwriter to the President and CEO of the U.S. Chamber of Commerce.

Image: Shutterstock/Parilov.