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Crypto vs. the critics

Cryptocurrency is no longer the provenance of niche communities and tech-savvy futurists—it’s now mainstream.
Illustration by Nick Little

  • The big idea

    Crypto used to be a niche community. Now everyone wants in.

  • The billion-dollar question

    Will crypto disrupt finance, culture, work, and more? 

    Techno-utopians, cypherpunks, and software enthusiasts have heralded blockchain as a revolutionary technology. But in its early years, it fell short of its promise amid large-scale hacks, scams, and competing factions. 

    After a huge decentralized finance (DeFi) boom in summer 2020, NFTs brought crypto back into the mainstream—this time with an arts and culture focus, with celebrities and auction houses alike jumping on the trend. VCs are bullish too, but it’s not just diehard members of the crypto community: Trading volume in the third quarter surged 704% from the previous quarter to hit $10.6 billion, per DappRadar. 

    If proponents have their way, crypto will transform everything about the structure of the web today, from making payments to achieving grander metaverse ambitions. Before that can happen, though, the industry needs to tackle a slew of problems, including regulation, poor user experience and onboarding, environmental impact, diversity, and more.

  • By the digits

    1.3 million: Ethereum transactions per day (as of Oct. 25, 2021)

    $2.2 billion: Size of Andreessen Horowitz’s crypto fund

    2,791: Number of “nodes,” or computers running the decentralized Ethereum network

    $7.56 million: Selling price of the most expensive CryptoPunk NFT

    1.54 million: Number of daily unique active wallets 

    $10.7 billion: NFT trading volume for Q3 2021

  • One big number

    $86 billion: How much new money has been locked into DeFi projects between Oct 2020 and Oct 2021

    TVL measures how much money people have deposited into DeFi projects and is often used to indicate DeFi adoption. In October 2020, some $20 billion was “locked” into DeFi projects. As of October 2021, the total value locked has surpassed $106 billion.

  • Charting Ethereum transactions

    The number of transactions on the Ethereum blockchain has exploded as NFTs have taken off. 

  • Commonly held question

    What’s the difference between bitcoin, ethereum, and other blockchains/cryptocurrencies? 

    Decentralized blockchains are databases run by a network of volunteers. Each of these volunteers have a copy of the ledger and run software that helps verify transactions made on the blockchain. Some of these database networks have embedded cryptocurrencies, which reward people for validating the transactions. These are referred to as layer 1 blockchains, which include other underlying blockchains like Solana or Avalanche. 

    Both Bitcoin and Ethereum are blockchains with native cryptocurrencies (bitcoin and ether, respectively). But their use cases are radically different: Bitcoin is purely a payments network—think peer-to-peer money—and cannot really be used to do anything else, while Ethereum can handle complex programs. Bitcoin is essentially a record of transactions (Alice sent 0.5 bitcoin to Bob), while Ethereum is able to record and process more complicated code that has conditions and logic (Alice will send 1 ether to Bob IF he completes this task). That’s why Bitcoin is commonly referred to as digital gold and used as a store of value, while Ethereum is described as a decentralized computer.

  • Person of interest: Vitalik Buterin

    Russian-Canadian programmer Vitalik Buterin co-founded Ethereum when he was 19 years old. 

    In 2011, he learned about Bitcoin—which had existed for just two years at the time—through his father, when he dismissed it as fated to fail. But when Buterin stumbled upon it the second time around, he was sold on the concept of decentralization (especially after Blizzard nerfed one of his favorite characters in World of Warcraft). 

    “Because ultimately power is a zero sum game,” Buterin said to Wired in 2016. “And if you talk about empowering the little guy, as much as you want to couch it in flowery terminology that makes it sound fluffy and good, you are necessarily disempowering the big guy. And personally, I say screw the big guy. They have enough money already.” 

    In 2013, Buterin published the Ethereum white paper, garnering praise from fellow cryptographers. The project officially launched in 2015 and has continued to dominate the market since, as Ethereum remains one of the most popular blockchains to build apps on. 

    Today, Buterin, 27, remains involved in Ethereum development—focusing on scaling solutions—though the network is largely community-run.

  • Brief history of crypto

    1983: Cryptographer David Chaum introduces the concept of digital cash in his paper, “Blind Signatures for Untraceable Payments”

    1997: Cypherpunk Adam Back invents Hashcash, a proof of work algorithm to prevent email spam. This proof of work system later inspires Bitcoin’s mining system

    2008: Pseudonymous developer Satoshi Nakamoto publishes the proof of concept for Bitcoin, after the 2008 financial crisis

    2009: Bitcoin is officially launched as open source software

    2013: Vitalik Buterin publishes the Ethereum white paper 

    2014: Co-founder Gavin Wood publishes the Ethereum yellow paper, which details the technical architecture of the blockchain

    2015: The earliest iteration of Ethereum, known as Frontier, goes live

    2016: Ethereum hard forks—splitting into Ethereum and Ethereum Classic—as a result of The DAO hack

    2020: The Beacon Chain launches, the first step in the Ethereum’s upgrade to a proof of stake system (known as the ETH2 vision)

    June 2021: El Salvador becomes the first country to make bitcoin legal tender

    September 2021: China officially bans cryptocurrency trading

  • DIY

    Want to dive deeper into the world of crypto? The first thing you’ll need to do is set up a wallet and buy some crypto. Coinbase, Metamask, and Rainbow are some of the most popular and beginner-friendly wallets. (If you want to go one step deeper, look into decentralized exchanges and “cold” hardware wallets for maximum decentralization and security.) 

    From there on, it depends on what you want to do. 

    • Want to invest? Research different exchanges where you can buy or sell crypto. There are more complex financial products in the decentralized finance space as well: Lending protocols, for example, allow you to stake your assets to earn interest. (Keep in mind, though: with DeFi projects, interest is doled out in crypto, which is volatile in value, and your assets are not federally protected. If you aren’t already gambling with stock options or speculating with other financial derivatives currently, you probably should be even warier of experimenting with DeFi projects.) 
    • Want to build or meet other people in the space? Participate in decentralized autonomous organizations. Developers can find and contribute to projects through Gitcoin, while Friends With Benefits is a social club that you pay to gain access to. 
    • Want to buy or sell NFTs? Poke around NFT platforms, like OpenSea. Look out for upcoming projects on Twitter, where artists will often announce their newest drops. 

    If you want to learn more about the different types of projects in the space, try doing some quests on Rabbithole.