Crypto Critics – What’s the Beef with Blockchain?

Crypto has grown from humble beginnings to a maligned technology, with a legion of enthusiastic critics ready to mock any obstacle in the industry.

The reasons for criticizing crypto vary from person to person and can range from questioning its use cases and pointing out that bad actors are scamming people, to hatred and predictions that the market will crash.

Famous investor Warren Buffett has expressed his disdain for the crypto industry more than once, while stockbroker Peter Schiff and US Senator Elizabeth Warren have spent a lot of time and energy criticizing crypto.

Dina Tsbulskaya, CEO of Web3 telecommunications company Esim Plus – who spent more than 20 years in the mainstream telecom industry before jumping into crypto – told Cointelegraph that, in her opinion, some of the arguments presented by critics may have merit, which is why they carry so much weight. Weight.

A common criticism is that crypto business models are unsustainable. According to CoinGecko, an average of 947 listed cryptocurrencies will die or fail from 2018 to 2022. This figure does not include 2021, which saw a whopping 3,322 coins fail.

“The hype surrounding the sector's unsustainable business models, lack of regulation and valuation-based incentives is not entirely untrue, and this often echoes the voices of detractors,” he said.

“I always say there are two sides to a story, and it's easy to get carried away by the frenzied, sensationalized part of social media today,” she added.

Misinformation and lack of understanding about crypto

Some of the points raised by crypto critics can be taken as constructive criticism. Still, Tsybulskaya thinks there are many others who are fueled by “misinformation and lack of awareness” about the tech sector.

Even the invention of email was fraught with skepticism before it was rolled out in a form that consumers could better understand, she said. In her opinion, some crypto-skeptics may criticize the industry because they don't understand the technique.

According to data from Explosive Topics on October 11, approximately 89% of American adults have heard of Bitcoin (BTC), but 24% say they know nothing about crypto.

“If you look at things only from an investor's point of view, the current level of skepticism may seem justified,” Tsbulskaya said.

“Crypto and Web3 solutions have a much longer customer adoption cycle and a lower short-term profit, putting investors at two extremes in their desire to feed.”

The collapse of crypto exchange FTX and the public downfall of former crypto critic Sam Bankman-Fried also helped create a few crypto critics. However, Tsybulskaya said that most new technologies have bad actors who are ready to exploit people.

“Web3 and crypto are at the pinnacle of human ingenuity if you look at them as mere technologies, fundamentally sound, historically significant and valuable,” she said.

“But like any new technology, it is equally affected by the issue of bad actors playing on unsuspecting customers.”

The Internet went live to the public in 1993 and has revolutionized many different aspects of life, from the way we view and communicate content to banking and online shopping.

Related: Sam Bankman-Fried's perspective on FTX's failure

However, it has opened the door to new types of scams that see billions of unsuspecting victims every year.

In the year According to a 2023 report from the United States Federal Trade Commission, Americans lost $2.7 billion to social media scams between January 2021 and June 2023. During the same period, people lost an estimated $2 billion to scams on websites and apps.

A silver lining for critics of the industry

Tsybulskaya believes that not all criticism of crypto should be taken negatively – and in some cases, it helps to identify key areas where the industry needs to improve.

“As this is a new technology, there will be flaws that will require constant iteration to come up with the right model,” she said.

“The challenge is developing something that doesn't completely disrupt the familiarity and trust of the existing solution.”

Related: How security, education and regulation can slow the rise of crypto scams

However, she thinks that the crypto industry is much better today than it was ten years ago, with regulators and businesses having a common position to lay a solid foundation on which to build.

According to PwC's Dec. 19 “Global Crypto Regulation Report,” at least 25 countries will have stablecoin laws or regulations in place by 2023.

Overall, Tsybulskaya believes that the scorn of crypto critics is misplaced because the technology behind Web3 and crypto is already being applied in many sectors, demonstrating its viability and value as a “game-changing technology.”

Otherwise, she said, she doesn't see many traditional companies — including those in financial services, retail and telecom — incorporating it into their growth plans.

Regardless of the critics, Tsybulskaya thinks “Web3 and crypto are here to stay.”

Crypto has great potential and as a result, it attracts criticism

Bitcoin and the broader crypto market have been said to have died happy more than a few times during bear markets, but some experts say it takes far more extreme events to actually die.

Nick Percoco, chief security officer at crypto exchange Kraken, said that one of the reasons critics like to flirt is the market's resilience in the face of adversity and its “potential to be truly disruptive to the benefit of everyone on the planet.” The industry.

A good opportunity to get out of crypto again and to weigh in from Chinese stocks, both of which cannot be trusted

— Jim Cramer (@jimcramer) January 9, 2023

Speaking to Cointelegraph, Percoco said that crypto has the potential to transform financial services, and that it's a force that's been fueled by significant misinformation and hate.

“It's common to read misleading content about the origins of the technology, how it's implemented, who uses it, and whether it's safe to use,” he said.

He specifically pointed to the “tired old claim” that crypto is an effective way for criminals to exchange value, saying it's “simply not true” because the technology is fundamentally transparent.

Even when a hacker finds an exploit and makes an unearned profit, the community, security experts and crypto exchanges can track exactly where it goes – like the $573,000 stolen from multi-chain token bridge Albridge last year.

BNB Chain identified the Allbridge attacker following on-chain analysis. We are actively supporting the Allbridge team in the recovery of the fund. Allbridge's team offered a bounty to the hacker.

We want to recognize AvengerDAO's efforts in this recovery effort.

— BNB Chain (@BNBCHAIN) April 2, 2023

“Crypto is transparent to everyone, so all transactions are recorded on a publicly distributed ledger. Currently, those investigating criminal activity range from interested individuals to well-funded for-profit enterprises,” Percoco said.

“In addition, both law enforcement and the private sector have collaborated to share information to prevent the criminal use of the technology,” he added.

Crypto is still developing and needs more time to resolve issues

Markus Thielen, author and head of research and strategy at digital asset research and investment firm 10x Research, believes that crypto attracts criticism because the technology is still “trying to find a problem with the solution it provides.”

“Bitcoin as a payment method has been tried in different forms and in different years, but it has not been implemented,” he said.

“Bitcoin is the quintessential social currency, and with Bitcoin's incentive to store rather than spend money, the focus is on increasing its value rather than transaction capabilities.”

According to Thielen, one narrative that's creeping into the debate is digital scarcity and weak tokonomics, where founders and early investors get more stakes, making it less attractive for the next person to buy.

RELATED: ‘Can be resisted' or smooth sailing? Bitcoin ETF where experts can weigh in

He believes that not all critics are looking at the whole picture, and any problems the industry faces can be fixed in time.

“A common excuse for lack of usability issues is a messy user experience, but this can be easily fixed with many front-end developers,” he said.

“Perhaps Web3 will have to think easier about solving real-life issues than going head-to-head with the old financial system because regulators are pulling Web3 toward Web2 instead of the other way around,” Thielen added.