What would it take to really kill crypto?

Every time there is bad news about crypto — like a big hack or sudden price hack or a hatchet-faced regulator somewhere threatening sturm und drang — there can be heard loud and gleeful cheers from certain quarters. CRYPTO IS DEAD! they cry joyfully. There have been exactly 461 crypto obituaries in major news outlets over the past 12 years. This is a real figure — there is a site that tracks every “crypto is dead” article and stores it for later embarrassing reveals.

Obviously, crypto is not dead — even in the face of the carnage of the past two months, it has by far been the best-performing asset over the last decade. It is roaring back.

Cryptocurrency prices, transactions volumes, NFT markets, metaverse investments — all starting to look very perky again, especially over the past couple of weeks.

Which got me to thinking, what would actually kill crypto? Really put a stake through its young and optimistic heart?

Actually, there is something that would put a stake through its heart, but I’ll start with what won’t kill crypto. We’ll come to the kill-shot afterwards.

Regulation

First, regulation. This is not going to make much difference to the cryptoverse as a whole, and will most likely help it grow. Yes, of course, there have been some heavy-handed attempts to stomp it out. China, for instance, which is building its own national cryptocurrency, to the criminalised exclusion of all other crypto trading. All this to spy on its citizens’ financial affairs and punish them if they so much as raise an eyebrow at the wrong thing.

But nicer and smarter countries than China are developing crypto regulations for at least some of the right reasons — to protect consumers, avoid money laundering, close tax loopholes — that sort of thing. And some countries are opening their arms wide, eschewing tough regulation in favour of early adoption. Crypto will not die on the hill of regulation.

Unease of use

And then there is the ease-of-use problem. Anyone who has tried to interact with crypto, either through a centralised crypto exchange or more directly through a thing called a “wallet”, (or even worse, tried to figure out the difference between a hot wallet and cold wallet) will know that this stuff suffers from viscous user-experience problems and jargon-heavy foreignness. But this problem is transient — I remember people predicting that cellphones would never penetrate the rural areas for exactly these reasons.

Volatility

Moving on to volatility. Cryptocurrencies will die because no one can handle the wild price swings. To which the answer is — not all cryptocurrencies have price swings, and for some people, volatility is a feature, not a bug. And most importantly, those peaks and values will certainly flatten as the industry matures. Also, it is easy to forget that “crypto” is a much bigger space than cryptocurrencies — not all crypto tokens are tethered to a market price.

Scams, thefts and losses

And, penultimately, hacks and grifts and scams. Ill-understood new technologies, sucky interfaces, billions in value floating around. It has been something of a paradise for opportunists everywhere, ranging from state-sponsored hackers (like those in North Korea) to lone dark-hatters, to your garden variety snake-oil salesmen, to unintended bugs lurking in corners of computer code.

Add a sprinkling of breathtakingly large thefts and losses splashed across major media every month or two, and it is easy to paint a picture of a part of town that you do not want to drive through.

But what is overlooked here is that it is very difficult to steal cryptocurrency and not be seen.

The blockchain is transparent — it is easy to follow the money. So it is quite difficult to get away with it because authorities can now follow illicit flows with ease. And they are getting very good at this and at the problem of identifying the culprits, helped by ever-improving forensics firms like Chainalysis and Elliptical. It is much easier to steal and hide money in the old world of banking, where tracks can be erased.

More importantly, hacks and thefts have almost always been at the edges of the crypto ecosystem — at the exits and entrances to the blockchain — the wallets and exchanges and so-called “cross-chain bridges” and user fronts-ends and NFT marketplaces and Discord servers. Not to mention the good old human failure to store passphrases securely.

Hacked blockchains?

But no one has ever hacked the two dominant blockchains themselves — Bitcoin and Ethereum. They are as hard as the cryptography and decentralised architecture that protects them.

And that’s where the kill-shot lurks. Should anyone ever find a way to directly penetrate the Bitcoin or Ethereum blockchain, hundreds of billions would be drained instantaneously and some of that haul converted to dollars before an inevitable price collapse, and that would be the end of it.

What are the chances of this happening? I suppose one can never say never, but a reading of Satoshi’s white paper leaves little doubt as to the thickness of its armour — impenetrable by design, and now, in 2022, thoroughly battle-tested against the smartest and most incentivised of criminals.

Steven Boykey Sidley is Professor of Practice r at The University of Johannesburg

This article was first printed in Daily Maverick