Demystifying Cryptocurrency and Blockchain Ideologies

In 2018, equity investments in blockchain and cryptocurrency startups exceeded $1 billion, surpassing the approximately $300 million invested in 2017. In addition, over $6 billion flowed into Initial Coin Offerings (ICOs). In the second half of 2018, however, the valuations of most tokens, including Bitcoin, dropped more than 80% from their peak values in 2017.

Growing interest in the cryptocurrency and blockchain space has given rise to different ideologies regarding where the space is headed in 2019 and beyond. This article presents four ideologies, and categorizes them using a simplified framework. They are:

• Nocoiners: Nocoiners believe that cryptocurrencies are overhyped and overfunded, the valuations of cryptocurrencies are unjustified, and most private blockchain projects are solutions looking for a problem.

(To read more about Nocoiners, please visit the Insight blog)

• Bitcoin Maximalists: Bitcoin Maximalists believe in the value proposition of a decentralized cryptocurrency but believe that Bitcoin is so far ahead of alternatives in terms of traction, credibility, security, and computing power that it will benefit from a “winner takes all” effect.

(To read more about Bitcoin Maximalists, please visit the Insight blog)

• Tokeners: Tokeners believe that the creation of separate cryptocurrencies to address specific use cases will drive innovation in decentralized cloud services and marketplaces, much like open protocols and open source software facilitated the widespread adoption of the Internet.

(To read more about Tokeners, please visit the Insight blog)

• Private Blockchainers: Private Blockchainers believe that cryptocurrencies are limited in their usefulness to businesses and governments that need to operate within regulatory frameworks, and who have scalability and performance requirements that can’t be handled by public blockchains. However, they believe that the underlying blockchain technology is useful by businesses and governments to create secure distributed ledgers that can address use cases such as provenance, identity, and smart contracts.

(To read more about Private Blockchainers, please visit the Insight blog)

(Note: while “Bitcoin Maximalist” and “Nocoiner” are commonly used terms in the cryptocurrency segment, “Tokeners” and “Private Blockchainers” are made up terms for this post).

These four ideologies are distinguished by their stance on whether cryptocurrency assets or traditional money (“fiat currency”) are better at incentivizing the creation of, and innovation around, distributed networks and decentralized marketplaces. They also differ in their view of whether a winner takes all effect will prevail or if diverse solutions will emerge that are tailored to specific use cases.

Like any framework attempting to categorize a wide variety of perspectives into a few groups, this segmentation is an enormous oversimplification. Most well-informed individuals have points-of-view that are significantly more nuanced than any of these category descriptions would imply. Perspectives of people and firms don’t fit neatly into these categories and there are many ideologies that are not captured well by this structure. That said, this could perhaps serve as a helpful organizational framework for thinking about 2019 and beyond.