Move over crypto, there’s a new hottie in town
If it seems to you that the much-hyped world of cryptocurrencies and non-fungible tokens has slipped out of the zeitgeist, you wouldn’t be far from wrong. For a while, it felt almost daily we’d be told that “Web3” was going to change how we lived, but currently, the crypto hucksters seem to have fallen silent.
There are a few reasons for this, the first and most obvious being the calamitous collapse of crypto exchange FTX towards the end of last year. Its unexpected downfall laid bare the cracks in the crypto facade and set off a chain reaction of bankruptcies and other failures that are continuing today.
Then there was the steep decline in the price of almost all major cryptocurrencies which occurred in tandem with FTX’s unravelling, which not only sapped investor confidence but discouraged any would-be crypto buyers. And finally, a global crackdown by regulators after a run of scams and collapses that have cost investors nearly $US12 billion ($17.3 billion).
However, confront any crypto-focused company about this downturn and you’ll be met with the same response: it’s all fine, crypto is still healthy, we’re just using this lull in the market as an opportunity to “build”.
But build what exactly? A list of staff lay-offs to present to their HR department, maybe? Or possibly a teetering stack of dubious investments in half-baked crypto start-ups? In the seven years I have reported on the crypto industry, I struggle to think of a single thing “built” that could be considered useful in the real world.
A quick snapshot of the most popular cryptocurrencies shows projects that are just purely investment opportunities (bitcoin, BNB), blockchain-centric development tools (ethereum, cardano), memes (dogecoin), or stablecoins used to facilitate crypto trading and investment (tether, USDC).
It’s a harsh truth that after more than a decade of development and billions of dollars poured in from investors, the so-called Web3 industry has so far failed to cement a single “killer app”.
This isn’t for a lack of trying – at first people thought that the programmable nature of ethereum would transform the world of software, which it didn’t. Then decentralised finance (DeFi) took off in an effort to uproot financial markers, which it hasn’t and likely never will (especially not the ASX). And finally, there was 2021’s collective delusion that NFTs could replace art, collectibles, and one day represent all of our digital assets in the definitely-real-and-not-made-up metaverse.
Since then, crypto’s overarching narrative has been one of damage control and self-affirmations, with the industry trying to convince investors and users alike that it is real, legitimate, and not all operated by alleged scammers such as FTX founder Sam Bankman-Fried. So far, they seem to be struggling in their efforts, with venture capital investments dropping 91 per cent last month when compared with a year prior.
But aside from crypto’s obvious issues of scams, collapses, and lack of any real-world usability, behind the scenes, the industry is facing another threat: artificial intelligence.
Put simply, the crypto industry runs on hype. It needs excitement from both the general public and investors to thrive, and when that hype dies away, crypto prices drop and regulators come sniffing. And last year’s launch of Microsoft-backed ChatGPT, and this week’s (albeit troubled) launch of Google’s own generative AI Bard well and truly shows that crypto is no longer the new hotness.
VCs are now hankering for a slice of AI action while pretending last year’s obsession with Web3 was just a passing rain. Just last month, one of Australia’s highest-profile venture capital funds played down the level of its crypto investments despite talking up Web3 just a year earlier.
It’s easy to see why investors have pivoted so quickly, as even just the early versions of generative AI have already had major real-world impacts, with schools having to ban the service and software developers starting to use it for menial coding tasks. Combine this with a simple value proposition and an easy-to-use “Web2” platform, AI could quickly become the anti-crypto.
That’s not to say that there won’t be some AI-integrated crypto project that hoovers up investor dollars – there almost certainly will – but it’s hard to see a return to the unadulterated hype that drove crypto to record highs in 2021. There’s a new kid in town, and this one can do a kickflip.
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Source: Thanks smh.com