Castle Island Ventures Partner: I Have No Regrets About Eight Years in the Crypto Space

Original Article Title: I do not regret spending 8 years of my life in crypto

Original Article Author: Nic Carter, Partner at Castle Island Ventures

Original Article Translation: AididiaoJP, Foresight News

Ken Chang recently published an article titled "I Wasted Eight Years of My Life in Cryptocurrency", in which he lamented the inherent capital destruction and financial nihilism of this industry.

Crypto enthusiasts always love to mock these "rage quit" articles, gleefully recounting the stories of historical figures like Mike Hearn or Jeff Garzik who famously exited the space (while also noting how much the price of Bitcoin rose after they left).

But Ken's article is mostly right. He said:

"Cryptocurrency claims to help decentralize the financial system, something I fervently believed in, but the reality is that it is merely a super system of speculation and gambling, essentially a replica of the current economy. Reality hit me like a truck. I was not building a new financial system; I was building a casino. A casino that does not self-profess as a casino, yet is the largest, 24/7, multiplayer casino we as a generation have constructed."

Ken points out that venture capitalists have burned billions of dollars funding various new public blockchains, which we clearly do not need so many of. This is true, though his description of the incentive model is slightly skewed (venture capitalists are fundamentally conduits of capital – they will only do so much as their limited partners will tolerate). Ken also criticizes the proliferation of perpetual and spot DEXes, prediction markets, meme coin launchpads, and more. Indeed, while you can argue for these concepts at an abstract level (excluding meme coin launchpads, which make no sense), their proliferation is undeniable because the market incentivizes it, and venture capitalists are willing to foot the bill.

Ken says he initially entered the crypto space with idealistic visions and a sparkle in his eye. This is familiar to many participants in this field: he was imbued with a sense of libertarianism. However, he did not realize his libertarian ideals but instead built a casino. Specifically, he is most known for his work at Ribbon Finance, a protocol that allows users to deposit assets into a vault and earn returns through systematic selling of options.

I don't want to be overly harsh, but it's true. If it were me, I would also deeply reflect. When the conflict between principles and work becomes unbearable, Ken came to his grim conclusion: cryptocurrency is a casino, not a revolution.

What struck me deeply is that it reminded me of an article written by Mike Hearn almost a decade ago. Hearn wrote:

Why did Bitcoin fail? Because the community behind it failed. It was supposed to be a new kind of decentralized currency, without "systemically important institutions," without "too big to fail," yet it became something worse: a system completely controlled by a few people. Worse still, the network is on the brink of technical collapse. The mechanisms that were supposed to prevent all this have broken down, so there's not much reason to think Bitcoin can do better than the existing financial system.

Though the details are different, the argument is consistent. Bitcoin/cryptocurrency was supposed to be something (decentralized, cypherpunk practice), but it turned into something else (a casino, centralized). Both agree: it ultimately didn't prove to be better than the existing financial system.

Hearn and Ken's arguments can be summed up in one sentence: cryptocurrency had an original purpose, but it eventually went astray. So we have to ask ourselves: What is the purpose of cryptocurrency?

The Five Goals of Cryptocurrency

In my view, there are roughly five camps, and they are not mutually exclusive. Personally, I most identify with the first and fifth camps, but I have empathy for all camps. However, I am not dogmatic about any one, not even the hardcore Bitcoin camp.

Restore Sound Money

This was the original dream, shared by most (though not all) early Bitcoiners. The idea was that, given time, Bitcoin would pose a competitive threat to the monetary privileges of many sovereign nations, possibly even replacing fiat, leading us back to a new gold standard kind of order. This camp usually believes everything else in the cryptocurrency space is a distraction and a scam, merely riding on the coattails of Bitcoin. It is no secret that Bitcoin has made limited progress at the level of national sovereignty, but in just 15 years, it has come far enough as a significant monetary asset. Those who hold this view have long been in a contradictory state of disillusionment and hope, carrying almost delusional expectations, believing that Bitcoin's mainstream adoption is just around the corner.

Encode Business Logic with Smart Contracts

This view is advocated by Vitalik Buterin and most Ethereum camp members: since we can digitize currency, we can encode various transactions and contracts in code to make the world more efficient and fairer. To Bitcoin purists, this was once heretical talk. However, it has indeed succeeded in some narrow areas, especially those contracts that are easy to express mathematically, such as derivatives.

Making Digital Ownership Real

This is my summary of the "Web3" or "read-write own" philosophy. Its idea is not unfounded; digital ownership should be as real and reliable as physical ownership. However, in practice, NFTs and Web3 social experiments have either completely missed the mark or, to put it more kindly, are ahead of their time. Despite billions of dollars poured into this space, few now defend this philosophy. But I still think there are aspects worth contemplating. I believe that many of our current network woes stem from not truly "owning" our digital identity and space or being able to exert meaningful control over the entities we interact with and content distribution. I believe that one day we will regain sovereignty over our digital property, with blockchain likely playing a role. It's just that the idea is not yet ripe.

Enhancing Capital Market Efficiency

This is perhaps the least ideological of the five goals. Not many people get excited about securities settlement, COBOL language, SWIFT systems, or wire transfer windows. Nevertheless, this is indeed a substantial driving force behind advancing the cryptocurrency industry. The logic is as follows: The Western financial system is built on outdated technology, and due to the extreme path dependence, upgrading it has been nearly impossible (no one dares to easily replace the core infrastructure that processes trillions of dollars in settlements daily). Thus, a refresh has long been overdue. This refresh must come from outside the system and adopt an entirely new architecture. The value here is mostly seen in efficiency gains and potential consumer surplus, hence not as thrilling.

Expanding Global Financial Inclusion

Lastly, some fervent individuals see cryptocurrency as an inclusive technology that can provide the world with low-cost financial infrastructure, offering financial services at a fraction of current costs. For some, this may be their first time accessing financial services. This entails empowering individuals to self-custody crypto assets (nowadays, stablecoins are more common), engaging with tokenized securities or money market funds, obtaining credit cards issued based on crypto wallets or exchange platform accounts, and being treated equally in the financial internet. This is a very real phenomenon, and its apparent success has provided solace to many waning idealists.

Pragmatic Optimism

So, who is right? The idealists or the pessimists? Or is there a third possibility?

I could go on at length about how bubbles often accompany major technological shifts, how bubbles catalyze the construction of useful infrastructure, and how cryptocurrency is particularly speculative because it is financial technology. However, that's somewhat self-soothing.

My real answer is this: Maintaining pragmatic optimism is the right approach. Whenever you feel despair at the cryptocurrency casino, you must hold onto this. Speculation, fervor, and money grabs should be understood as the inevitable yet unpleasant side effects of constructing useful infrastructure. They come with real human costs, and I do not intend to trivialize them. The normalization of meme coins, senseless gambling, and financial nihilism, especially among the youth, is particularly disheartening and of no benefit to society. But this is an inevitable (even if negative) side effect of building capital markets on a permissionless track. I believe there is no other way; you can only accept that this is part of how blockchain operates. And you can choose not to participate.

The key is this: Cryptocurrency has its aims, and it's perfectly normal to hold idealistic views about it. It is precisely this goal that motivates thousands of people to dedicate their careers to this industry.

However, it may not be as exhilarating as you imagine.

The world is unlikely to suddenly and universally adopt Bitcoin. NFTs have not revolutionized digital ownership, and the capital markets are slowly moving onto the blockchain. Apart from the US dollar, we have not yet tokenized many assets, and no authoritarian regime has been overthrown because ordinary people hold a crypto wallet. Smart contracts are mainly used for derivatives, with few other use cases. To date, applications that truly have product-market fit are limited to Bitcoin, stablecoins, DEXes, and prediction markets. Much of the value created may indeed be captured by large corporations or ultimately returned to consumers in the form of efficiency gains and cost savings.

Therefore, the real challenge is to maintain an optimism rooted in realistic possibilities rather than indulging in blind optimism and fantasies. If you believe in a libertarian utopia, the gap between expectation and reality will eventually disillusion you. As for the gambling effect, unrestrained issuance, and rampant speculation, these should be viewed as unsightly warts on the industry's underbelly, difficult to remove but objectively present. If you think the costs brought by blockchain have outweighed its benefits, then choosing disillusionment is entirely reasonable. However, in my view, the current situation is actually better than ever before. We have more evidence than ever that we are on the right path.

Just remember that goal.

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