2022, or the Year Crypto Failed

Photo by Vadim Sadovski on Unsplash

I left traditional finance to get into crypto full time (instead of a hybrid role where I addressed both worlds) in 2022.

Prior to that, I had been working with the space since 2018, but never totally untethered (pun intended) myself from the traditional financial world. I had conceived of lending structures to allow banks to loan cash secured by bitcoin. I had done a deep dive into stablecoin models, designed my own stablecoins based on economic models I had seen in traditional financial markets, and later on, actually put together a financial product that would have solved the volatility on reserves issues while preserving much higher yields (nobody listened). I had come up with a risk framework to allow banks to have a diversified portfolio of crypto lending to companies that actually had, you know, assets.

But in 2022, I took the leap to go all-in. What timing, huh?

2022 has justifiably shaken much of the public faith in crypto. In addition to the hacks and exploits, two catastrophic failures of large size (Terra and FTX) have left behind a smoking crater where once there was optimism.

Put differently, ETH began the year at ~$3,800 and trades, at the time of my writing this, at $1,223. Ouch.

I’m also going to say that my personal thoughts at this point are a mixed bag for the space, and I think it is fair to say I am not the only one here who believes that. I’ve never been a true believer in the DeFi Degen sense of the phrase, but I am true believer in the sense of a peer-to-peer network for transacting that eliminates parasitic intermediaries and institutions that abuse centralized trust. Thus, I want to start by just saying in words where I stand with regard to crypto at the start of 2023 after witnessing 2022:

Self-Referential Systems Don’t Work

Terra is the perfect poster child here. What crypto does not need is just more crypto for crypto. It’s a fractal problem of just building ever smaller structures on top of the structures you already have.

In good times, it’s amusing but ultimately pointless.

In bad times, your entire structure collapses under the weight of endlessly replicating pointless shit, until you are left with a smoking…