This year we published for the first time an explanation of “What It Takes” to win (?) the Crypto Tulip Of The Year award. The award recognizes the combination of Irrational Exuberance, legal and technical disaster, and Orwellian linguistics that is contemporary Cryptocurrency and Blockchain culture.
Throughout the year, a number of candidates have been mentioned. Everyone can’t win, and it was not an easy task for the judges (well, for me) to pick just one winner.
The Crypto Winter of 2018
The big story at least in the minds of many, was the long “crypto winter” throughout 2018. Bitcoin and every other cryptocurrency regressed toward the mean, plummeting in “value” from record highs at the end of last year. This, if anything, was the very definition of Crypto Tulip-ness! (Notably, this blog ignored this story! Until now.)
The ironies abound here.
The alleged peak “values” were, in fact, peaks in exchange rates against fiat currencies (!). Bitcoin is supposed to disrupt and make these currencies obsolete, so who cares about exchange rates?
Obviously, these swings do not seem to have any relation to valuable or even meaningful economic or technical developments. However, people who played this market have been caught out with not so many fancy cars and too many baffling tax and accounting problems. Whatever else this perfectly ordinary speculative bubble and pop cycle may have proved, it was in no way “innovative” or “disruptive” to legacy finance.
The bubble and subsequent crash were driven by speculation and possibly by manipulation. In the US, some suspect murky conspiracies from “China”. I’m sure that other places suspect dark conspiracies from other shadowy powers. What we know for sure that this was perfectly standard behavior for unregulated markets—in other words, exactly what Nakamoto designed.
While this “crypto winter” is a notable, and arguably Tulip-icious, event, it was not selected as Crypto Tulip of the Year. Frankly, it’s irrelevant—this is not what either blockchain or cryptocurrencies are about.
OK, Calll it Already!
Let’s get down to it.
Honorable Mention: Bitcoin
Bitcoin is the great patriarch of the Nakamoto clan, so it must be the proto-Tulip. But perhaps its dominant position has made Bitcoin boring. I mean, the big excitement was when they fixed a bug. Imagine!
We should note, of course, that the scaling crisis has still not been dealt with. Indeed, I’m not aware of any plan to do so. Of course, there are hacky extensions and other bags-on-the-side that off load much of the action to other systems.
In general, Bitcoin’s notable “innovations” involve legal actions: criminal prosecutions, securities and tax rulings, and efforts to get listed on US stock exchange.
That and, oh yeah, leading the pack up and then down the giant bubble.
Runner Up: Ethereum
Last year’s winner Ethereum is still very Tulipy.
After all the talk about upgrades in 2017 and through 2018, they still haven’t dealt with scaling issues or other critical engineering. But they do have twelve, cout ‘em!, twelve working groups. These include not only scaling but also a rework of the critical Ethereum Virtual Machine. After all these years, they are actually trying to engineer the EVM! What an idea!
And, by the way, they still haven’t dealt with that oopsie from 2017, though they have argued without conclusion about formalizing the non-Nakamoto process of undoing such a disaster.
But Enthusiasm is still high, and Ethereum is still the platform of choice for all kinds of projects from serious stuff to silly games.
And of course, Ethereum is the go to platform for…
The Winner Is: The ICO
This was the year that ICOs hit big time—at least for issuers.
As far as Tulip-ness, an ICO is the pure white powder, injected into a vein. Issued by who knows who, managed by “smart contracts”, and offering a purely speculative value, these are the purest Tulips of all.
Irrational Exuberance, thy name is Initial Coin Offering!
The judges are particularly struck by the fact that an ICO is nominally selling digital tokens which are clearly and for sure Tulips. Economically meaningless objects, imbued with value by exuberance, mostly irrational.
A check of the main features of ICOs shows strong Tulipiness:
“Innovation”? Not at all. ICOs are basically unregulated financial instruments. Some are shares, some are loans, some are lottery tickets. Dress it up all you want, but these things are just digital versions of stuff that was invented a long time ago (and in many cases is now illegal).
“Disruptive”? Only in the sense that ICOs evade regulations and speed limits, letting you beat the old legacy systems to the punch. And, of course, anyone can do it, whether have a clue or not.
“Transparent”? Don’t be silly. The whole idea is to sell a pig in a poke. Too Much Information would ruin the fun!
“Trustless” You betcha! In both the Nakamotoan sense (the code is the law) and in the conventional sense (you are so on your own). Analysts estimate that the majority of ICOs are bogus if not deliberate frauds.
And, for extra points, ICOs are generally being ruled to be securities and therefore governed by security regulations. So we can expect ICOs to weave, dodge, and mutate in the next year, continuing the record of rapid fund extraction throughout 2019.
Finally, ICOs are designed to be easy for anyone to (ab)use, and, sure enough, they lie at the heart of so, so many bad ideas. A gateway technology, for sure.
Congratulations to ICO technology for setting a new standard for Tuipi-ness!