The four waves of crypto disruption: where are they today? 

Nearly two years ago, I published a post exploring four key opportunities in crypto. In it, I outlined four crypto waves, ranked from furthest to least developed:

  1. Store of value
  2. Disruption of financial markets
  3. Disruption of every other information market
  4. Disruption of what a firm means

Looking back, I see that we’ve have good progress across all four areas, although the pace is definitely slower than I had originally expected (and hoped). It seems that this is a good time to reflect on today’s status for each of these four waves.

Wave 1: Store of value (product market fit)

Despite its volatile prices, Bitcoin seems stronger than ever and is becoming more and more recognized as a viable store of value. Given the stability of the US dollar, Bitcoin’s value proposition as a store of value may not be easy to grasp for the mainstream user in the U.S. But you only have to talk to people from high inflation countries like Argentina or Venezuela to understand the appeal of a globally-accessible and permissionless digital currency.

In the past year, we learned that Bitcoin probably has a large enough worldwide distribution that it’s hard to stop. When China banned cryptocurrency exchanges in 2017 and then went after Bitcoin mining in 2018, we saw short-term impacts on the price of Bitcoin, but no lasting effect despite the huge size of the Chinese market for the currency.

Wave 2: Disruption of financial markets (early product market fit)

This wave probably experienced the most progress over the past two years with the rise of decentralized finance (DeFi) built on top of Ethereum. While the 2017 story was about equity issuance (tokens…which has since died down, mostly due to regulatory action), the rest of the finance stack was built out: lending/borrowing (Compound, dYdX), stablecoins (DAI), programmatic exchanges (Uniswap), insurance (Nexus Mutual), prediction markets (Augur, Guesser), and user interfaces (Instadapp).

The really interesting development is how these different layers can work together in a frictionless way – the composability of smart contracts is what unlocks real product innovation. Most importantly, there are real users and real money in the system. As of mid October, more than $0.5b dollars worth of Ethereum was locked in these DeFi platforms. However, critics counter that this might be driven by too much of a circular system.

Wave 3: Disruption of every other information market (pre product market fit)

This wave is still very early. The role model for this wave, decentralized storage start-up Filecoin, has yet to launch, more than two years after it started and despite raising over $200m. It’s becoming increasingly clear that decentralized technology is still very early and a lot of heavy lifting is needed for projects that require true scalability. 

With that said, new ideas and projects are continuing to emerge (and launch!) almost every week in this area: decentralized encryption (NuCypher), decentralized wireless telecommunications network (Helium), and decentralized live video streaming (Livepeer), just to name some of the most interesting ones. 

Wave 4: Disruption of what a firm means (pre-product market fit)

This area is also in the very early stages, but I am increasingly excited about the concept of DAO’s (decentralized autonomous organizations). The Aragon project and Decred have probably achieved the most amount of progress in this area.

It’s always fun to look back at what you wrote in the past. I am hoping the speed of progress will pick up in the year ahead, particularly for waves three and four.

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