“Diversity” meant all the different “business models” that species had for making a living in nature, and “stability” meant very small fluctuations in population levels.
What does this have to do with crypto? Actually, quite a lot.
Crypto/Blockchain is an Ecosystem
We can think of the crypto/blockchain universe as an ecosystem with all kinds of participants providing a broad range of services and consuming various resources. As this diversity grows, the interrelationships increase.
Going back to ecology—it’s difficult to prove scientifically what the reality is, but I always believed that diversity led to stability, not the other way round. And I think we have good reason to believe that this is exactly what is happening with crypto and blockchain right now.
Insights from the Bitcoin 2022 Conference
At Bitcoin 2022, I attended one session on covenants, which are a boring legal topic to most people, but they are of crucial importance in areas like traditional finance.
What are covenants, you ask? Simply put, they are promises in a contract. A non-compete clause in an employment contract is a covenant. All the do’s and don’ts created by a Homeowners Association are covenants. And so are a lot of terms in loans, like the lender having their books audited, or maintaining specific asset-to-debt ratios.
As crypto lending increases and crypto gets put into trusts, the need for covenants is growing. None of this is sexy or likely to excite crypto hustlers, but you can be guaranteed that a lot of high-priced lawyers are going to love it.
Like it or not, embedding these “suits” in the ecosystem will make it more diverse and stable.
The next data point from Bitcoin 2022 was a panel during Industry Day that spoke about derivatives. Some of the panel members were extremely experienced in derivatives–options, based on commodities, equities, and debt instruments.
Derivatives appeal to people who enjoy mathematics, so again, the topic inherently lacks sex appeal in terms of firing up the average consumer.
However, derivatives can allow you to hedge risk and get leverage, so they are appealing on both the fear and greed fronts.
Listening to the panel and seeing how highly experienced traders have become involved in crypto provided more proof of growing diversity.
A Flourishing Ecosystem
All biological ecosystems are decentralized, not centrally planned, and yet they function.
Although we have only touched on a couple of data points, Bitcoin 2022 provided plenty of evidence that the decentralized crypto/blockchain ecosystem is growing.
Perhaps even more compelling, it’s becoming a mesh of complex interrelationships that will likely provide feedback loops that increase stability, just like the biological counterparts.
That is a good thing, as complex, diverse, and stable ecosystems tend to flourish for a long time.
The Bitcoin 2022 Conference helped further cement the viability of crypto, not only in the city of Miami, but also the world. Read (and watch) more recaps about the event here on Blockster.
In one example, Peter Thiel gave an earthshaking keynote address at Bitcoin 2022 in which he cast his vision for the future and also named his enemies. This is one recap you won’t want to miss.