Is “Crypto-for-Crypto” the right solution? Encryption cannot exist outside the real world

“Crypto-silo” does not exist in isolation from the real world.

Is "Crypto-for-Crypto" the right solution? Encryption cannot exist outside the real world

How to use cryptocurrencies and decentralized finance to impact the world has become a hot topic of discussion, as analyzed by Bits on Blocks columnist Antony Lewis, who imagines a crypto silo and wants to start from scratch to make people understand why the “Crypto-for-hire” mentality doesn’t work for the industry. Crypto silo thinking is not a good fit for the industry. Let’s take a look below.

In general, the development of cryptocurrencies and decentralized finance follows a natural path, much like the path of the early Internet. Crypto capital and tools are creating a flywheel effect (golden financial note: the flywheel effect means that in order to make a static flywheel turn, you have to make a lot of effort at first, pushing it repeatedly round and round, each turn is a lot of effort, but each round of effort is not in vain, the flywheel will turn faster and faster), driving the ecosystem into the preparation phase of integration with the outside world. Building an infrastructure that everyone can use takes a lot of time and effort, and it can’t happen out of thin air.

Let’s make a “crypto island” analogy, which may not be perfect, but will at least help you build a thought model that will give you a better understanding of the new digital crypto native economy.

Imagine a new island in the middle of the ocean, an island with many things that are different from the world we currently live in, but at the same time, it is an island of hope. Initially there is no economic activity on the island, and most people don’t care about the importance of economic activity. But soon a group of explorers came to the island and started to build. At first, other countries considered the island too small and insignificant and therefore did not pay much attention to it. On the other hand, standing in the traditional economic paradigm, other countries also did not quite understand the economic characteristics of the island for some economic activities.

Explorers are unlikely to start importing and exporting immediately because they first have to “lay the groundwork” by building rudimentary shelters, infrastructure, local businesses, villages and towns. These infrastructures would then be transformed into local tools useful to subsequent settlers and important for driving subsequent economic development. But for the outside world, these tools do not seem to be important, as the focus of the island’s infrastructure is inward rather than outward. Next, some explorers will bring many good ideas from their homeland, but the rules are still largely in the making. In fact the settlers on this particular island have found a whole new way of managing financial and property rights that automates economic processes and is also very different from the traditional economic paradigm that requires reliance on intermediaries.

Typically, building infrastructure takes a lot of time, so this “encrypted island” won’t be a tourist destination with luxury resorts, spas and Michelin-certified restaurants, at least not for a long time. But while the island may be perfect for adventurous backpackers who can tolerate many shortcomings, at this stage it is not the ideal destination for traveling vacationers.

Will the island become a hub for imports and exports? Perhaps it will, as some settlers will be able to import assets from their home country, although it makes sense that at first the goods and services produced on this island will not be of export quality.

In fact, the crypto silo is much like a typical emerging market with a lot of opportunities, but without much financial support. People from the outside world are reluctant to lend money to explorers to explore this “crypto silo” because they don’t know the risks involved in lending money and the risk of default is high. In this case, the borrowing rate on the “crypto island” will be very high, which will lead to a rise in the cost of borrowing and a correspondingly low number of lenders. However, if you can get a return on the money you lend, the returns can be quite high.

It is understandable that a “crypto island” would make people question this feeling. Eventually, some people will leave the island and others will enter with new ideas and new capital. As the island becomes more populated, the infrastructure will become better, there will be more certainty, clearer social, political and economic expectations and standards, and “cultural symbols” will emerge, such as a plethora of new words and colloquialisms that have never been heard before.

Over time and with external capital support, the value of the “crypto-island” will be created. For those who like the island, it will be a great place to live; for those who don’t like it, they will be free to leave. As some of the island’s settlers become successful, they may send money home and convert the island’s currency into other countries’ currencies, while others will reinvest their island earnings in more local businesses.

Gradually, the “crypto islands” are becoming self-sufficient. More and more people want to come in or go out. They may not settle on the island, but just go there for a vacation. Better tourist guides will be written, and visitors’ expectations will be better met. Some will buy or build second homes on the islands, island borders will open, the quality of products exported will become better, and more and more of the goods and services created on the islands can be exported because they are already acceptable to the outside world. Crypto-islands become populated, and become relevant and important enough to the outside world to be noticed by the world. Eventually, the “crypto-island” will find a place in the world order and the world will look at the island with admiration.

Okay, the analogy is over. Next, let’s look at what’s wrong with this analogy.

First, in the crypto-island analogy, you find that the island is an autonomous, sovereign “state” that does not need to be connected to the world, but in reality, everyone lives in a state bound by laws and social norms that have been built up over time and experience. People can be imprisoned or threatened with violence if they do things that conflict with the norms of their everyday reality. This is the social contract we need to live by in the real world, and people living in “crypto silos” understand this very well.

Secondly, people living in “crypto silos” also have to follow the paradigm and social contract of the real world, otherwise they cannot survive. This is because they have to rely on various resources provided by the state and the government, such as traveling on real-world roads and flying to meetings in the real world. Many people’s lives are secure because they know that if they are harmed by others, the real-world police will be there to catch the bad guys. It is also worth noting that when people living in the Crypto Silos get into trouble, they seek help from the real-world courts.

Finally, “encrypted silos” cannot exist in isolation from the real world, because people living in “encrypted silos” are themselves people in the real world, we live and breathe in the real world, we have families, we need to eat, we buy things and We buy things and contribute to the real economy. The value created by crypto is also real, just like the value created in the traditional economy by bankers, hedge funds, and real businesses that sell food and trade real estate.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/is-crypto-for-crypto-the-right-solution-encryption-cannot-exist-outside-the-real-world/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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