ChainLinkGod Podcast - The Current State of the Cryptocurrency Ecosystem and Its Future
Primer: ChainLinkGod sits with Crypto Oracle to discuss the current state of the cryptocurrency ecosystem and its future. They discuss topics ranging from Bitcoin and Ethereum to issues facing the industry, culminating in a discussion on the future trends for Chainlink.
Crypto Oracle’s Take On The Current State Of Crypto
In a state of limited innovation
Market moves in cycles from high innovation to low innovation/forks
Most “innovations” are actually selling points (e.g. launch on new chain, slightly different governance or rewards structure, new token, etc.)
“Subsidized yield is not a product, tokenomics is not a product, having a narrative is not a product, like these are all things that kind of reinforce what your actual product is.”
- ChainLinkGod
Actual innovation is occurring in L2s and oracles
People are speculating on the service becoming valuable instead of actually using the service
Do not have enough users to use the tech yet
Incentives For Developers
Incentives for developers are broken
Devs might want to build an app serving a billion people, but people do not care about that
In people’s eyes, success is just number go up
Real projects have to compete in an unrealistic environment
Teams could get all the money upfront without having achieved anything
The NFT Market
Projects will pretend to have a utility, but most of them don’t
There’s a facade of caring about the artists and the art, but most people buy NFTs to sell them to others at a higher price
People watch what the big speculators are speculating on, reinforcing the feedback loop
Might develop into 2 NFT markets:
One for culture/social clout
Another for real world assets
Questions whether the culture/social clout scene will hold value as people speculate over the next hottest thing
Eventually, the speculation would happen faster and faster until it dies out
“There's two markets, there's the fundamental market, which I would say like your blue chips, and then you have the casino. I would say the casino dominates the market right now.”
- Crypto Oracle
Crypto And Its Perception Problem
People are complaining about:
Crypto and Environmental, Social, and Governance (ESG)
Crypto is just a big ponzi system
Have 2 analogies in crypto:
Player versus everyone (PvE), where existing players fight to get money from new entrants
Player versus player (PvP), where everybody is fighting over the same money
Money will shift and concentrate to the few winners, with the majority getting rekt
This perpetuates the negative perception of people getting rekt
Speculation is not 100% bad. Money that comes from speculation provides funding for real development as well
The Current System And The Crypto System
Crypto has become big enough that it cannot be ignored
The current system is focusing on stablecoins
The Scalability Issue
High speed blockchains are coming in
The winner would be the one getting the most apps and users
A lot of retail users do not care about decentralization
There’s demand for cross-chain bridges
The existing infrastructure cannot provide the level of security that users need
Seen billions lost in bridge hacks
Bitcoin’s Real World Use Case
Observed in the Ukraine-Russia situation
Bitcoin as an alternative to the existing financial system when the latter relegates you from it
Bitcoin being used as a political tool
Difference Between Bitcoin And Ethereum
People believe Bitcoin to be a trust-minimized reserve asset. Hard for Ethereum to unseat this
Ethereum has more utility and better economics
Eventually, people would have to think about the declining Bitcoin security budget and make changes to the protocol
Crypto Oracle’s Take On The Future
Crypto will get increasingly political
People in power do not like that they can’t control crypto
Don’t think that most people would want to take personal responsibilities
Hence, this introduces intermediaries into the system
ChainLinkGod thinks that it will split into 2 systems:
One that is permissionless
The other is permissioned
The Two Markets
Institutions and whales will buy up projects with strong fundamentals because these are the infrastructure of the future
The casino game will still go on among retail
Over time, the existing players will end up owning most of the projects with strong fundamentals and the dominance of TradFi would repeat in crypto
Consolidation Among Blockchains
Consolidation will occur around multiple blockchains
Narrative of individual DApp chains is unlikely. Hard to bootstrap security for individual chains
Might have specific chains that are good at a particular thing
Might even see DeFi lending apps consolidating
ChainLinkGod thinks that the multichain ecosystem will end up as a multi-rollup ecosystem where they have Ethereum as a settlement layer
Together, EIP-1559 and the move to Proof-of-Stake will reinforce the value of ETH and the security of the Ethereum blockchain
Mass Migration Of People Working In TradFi & Web2 Into Crypto
Crypto is more intellectually stimulating
People feel that they can actually change things for the better in crypto
Lots of money in crypto
There will be a culture war. New people coming in may not have the same vision as the early people
People might become more long-term focused since they did not get rich immediately
Proof-Of-Stake VS Proof-Of-Work
Every chain, except Bitcoin, will eventually move to Proof-of-Stake, generating higher security for lower cost
ESG has always been used to critique crypto. Once Ethereum shifts to Proof-of-Stake, this argument is no longer valid
The environmental impact of Proof-of-Work has always been overblown. There’s a lot of stranded energy that could be redirected to Bitcoin instead of letting it go to waste
People need to think about the long-term security of the Bitcoin network — how much issuance is needed to secure the chain as block rewards are trending downwards
There are 2 options:
Inflation — Doesn’t think that the Bitcoin community will go for this
Add the ability to verify zero knowledge proofs to support smart contract applications and earn fees from that
However, most Bitcoiners do not like the idea of generalized computation. They think it adds risk to the network
Thoughts On Chainlink Trends
In a hyper-growth stage
Chainlink creates a new type of computing environment: trust-minimized off-chain computation
Trust-minimized off-chain computation sits in the middle of blockchain computation and Web2 computation
Trust-minimized means creating code with high certainty that it executes exactly as you intended to
Historically, Chainlink’s approach is to meet user demand and preemptively meet user demand
Chainlink launched their price feeds, leading to the explosion in DeFi DApps
Launch of Verifiable Random Function, leading to NFTs blowing up
Chainlink’s Cross-Chain Interoperability Protocol (CCIP) and cross-chain/multi-chain
“It's about becoming the standard today so that when the inflection point hits, it's already well accepted that you need to use Chainlink for your smart contract application.”
- ChainLinkGod
In the beginning, user cost is negligible. This enables Chainlink to attract a huge network effect across different verticals
As the ecosystem grows, the revenue of those DApps grows. Chainlink grows with them as it powers the ecosystem
When the whole ecosystem scales up, and billions of dollars of revenue are generated, a significant portion would flow back to the Oracles that enable this
Chainlink has the largest value capture in the space in terms of most DApps on any blockchain or L2
Today, people think that tokenomics is a product. However, it is not
Oracle services, which have revenue attached to them, is a product
Today, a lot of revenue comes from speculation and casino games
Once there are real world use cases in place, that’s where the real revenue comes in
Future growth is coming from enterprises
Enterprises look for long-term relationships, which aligns with Chainlink’s long-term approach
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