What exactly is cryptocurrency — and how does it fit into the broader Web3 ecosystem? To better understand this buzzword and why it matters, HBR associate editor Ramsey Khabbaz spoke with Jeff John Roberts, a technology journalist and the author of Kings of Crypto: One Startup’s Quest to Take Cryptocurrency out of Silicon Valley and onto Wall Street. Their conversation sheds light on the origins of crypto, how businesses are incorporating it into their strategies, the environmental impact of the technology, and what its future could look like.

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Editor’s note: We first interviewed Jeff John Roberts in April, before the May 2022 cryptocurrency crash. We spoke with him again, on May 12, to ask him about it. His comments follow the original interview. Cryptocurrencies are having a moment, to say the least. From Elon Musk’s tweets, to cryptic Super Bowl advertisements, to the freshly rebranded Crypto.com Arena in Los Angeles (formerly known as the Staples Center), blockchain-based digital currencies feel unavoidable — even inevitable — these days. This momentum seems to be thrusting us toward the next phase of the internet, Web3, an internet ecosystem based on blockchains, crypto wallets, NFTs (non-fungible tokens), and DAOs (decentralized autonomous organizations). And as we hurtle forward, it’s important to pause and consider how we got here — and what these technological developments could mean for business. To help me understand the origins of cryptocurrencies, think through their present problems, and situate them in a Web3 context, I spoke with Jeff John Roberts, a technology journalist and the author of Kings of Crypto: One Startup’s Quest to Take Cryptocurrency out of Silicon Valley and onto Wall Street. Roberts is also executive editor of Decrypt. This interview has been edited. Many people hear “crypto” and immediately think Bitcoin — maybe Dogecoin or Ethereum — but obviously the term encompasses much more than that. Help me understand the basics of what crypto is, broadly, and why it’s so important today. Crypto is kind of an amorphous term. In essence, it’s software that runs blockchains. And blockchains are just ledgers that record every transaction that occurs. This means that they’re tamper-proof, distributed, and immutable. That might sound like a lot of jargon, but it’s really just the notion of running the same computer program on multiple computers, verifying its accuracy along the way. Bitcoin is the first and most famous blockchain, and it does all those things. It also comes with a currency that can be spent. And that’s part of what the Bitcoin blockchain ledger maintains: a tamper-proof record of transactions — who’s paying whom. Now, there are literally thousands of blockchains with varying levels of quality and security. Bitcoin stands out because it’s the first, has never been hacked, and has sort of proved to the world the promise of blockchain technology. Do we know exactly how many cryptocurrencies there are? Or is that hard to pin down? There are literally thousands of cryptocurrencies. Most of them are kind of fly-by-night hustles that don’t have the underlying technology to make them valuable. But since cryptocurrencies attract so many speculators, if you create one, someone out there will be willing to buy it. What can you tell me about the origins of cryptocurrencies? They grew out of a movement called cypherpunks, which originated in the 1980s. Cypherpunks were a collection of privacy-obsessed cryptography fans and programmers in the San Francisco Bay area. These people experimented with how to create a new form of money that didn’t rely on a central bank, a government, or other intermediaries. Their goal came to fruition with the Bitcoin white paper in 2008, which put out this new proof of concept. It’s a fundamental theory of a private, decentralized form of money that could not be hacked and did not require trusted authorities to maintain. So, cryptocurrencies — and bitcoin being the first — are the first application of this blockchain technology. Yeah. And since it’s clear that it does work, it’s secure, and it’s valuable, people are now building all sorts of other things on top of it. You can think of it as a sort of operating system. And now there are various applications of the technology. Creating currency and spending money is just one. Who is the person or group behind that 2008 paper — the Benjamin Franklin of the technology, so to speak? The Benjamin Franklin of Bitcoin and blockchain would be the anonymous author Satoshi [Nakamoto]. It’s almost impolite in the world of Bitcoin to speculate on who Satoshi is — but I don’t really observe those niceties. I think Satoshi is a mix of those early Bay Area programmers. Namely, a guy named Hal Finney, who died of ALS several years ago, working closely with a guy named Nick Szabo, a polymath programmer, lawyer, and libertarian. And it’s pretty clear from the early records and listservs that those two guys, if they’re not Satoshi, are indispensable to the success of the project. So, Satoshi is somewhere between the Benjamin Franklin and Banksy of Bitcoin. Exactly. Great analogy. Today, there are billions of dollars of crypto in circulation. It’s a huge system. Who governs it? That’s a fantastic question, because when you talk to crypto people, the first thing they always tell you is “Decentralized, decentralized, there are no leaders, there’s no bank, there’s no authority.” But every project needs some sort of leaders, for lack of a better word. And even in the case of Bitcoin, which is by far the most decentralized blockchain, there’s still a clique of insiders who are responsible for maintaining the code. Bitcoin is software, and just like your Apple software updates periodically, or your Chrome browser updates, Bitcoin receives updates. Most of them are quite minor, but they’ll expand the functionality of it and improve the security of it. There is a core group of developers who are the guardians of Bitcoin. But they don’t control it. Other blockchains are much more centralized. Usually a handful of people control a lot of the money behind it and have an outsized influence. So, decentralization is a spectrum. Bitcoin is the most decentralized — but even it’s got influential people who are the guardians of its code. A lot of the newer blockchains (Cardano and TRON, to name two) are not decentralized at all. I’m interested in decentralization as it relates to who’s able to own and profit from cryptocurrencies. How can we reconcile the concentration of crypto wealth at the moment, when that’s really the opposite of the goal of this technology? There’s a term in crypto, “whales,” which refers to people who own an outsized amount of bitcoin or ether or something similar. By virtue of owning most of the money, they can have an immense influence on the value of the currency and other governance decisions. Defenders of crypto would say that whales have a big stake in making it work — it’s not in their interest to “pump and dump” it, because then people would lose trust in its value. Although that’s the nature of many new blockchains: Spin it up, urge suckers to buy it, then get out. That’s been endemic since the early days of crypto. But the more successful currencies are becoming increasingly decentralized — in the case of Bitcoin and Ethereum especially — in terms of who actually owns the allocations of coins tied to each blockchain. Switching gears a bit, crypto seems like it will play a huge role in the growth of Web3. Would you say that Web3 is the ecosystem that crypto spawned? Or is it the other way around? Crypto came first. But what’s key to Web3 is having a wallet. MetaMask and Coinbase Wallet (different from a Coinbase account on its centralized exchange) are two of the most popular. Wallets allow you to carry your cryptocurrency around. That’s the backbone of Web3. You need money and a wallet, whereas in Web2, you simply need a browser. Businesses and organizations — how do you see them fitting into this landscape in the future? I see businesses interacting with Web3 and the crypto world in two ways. One is simply taking payments as more and more people use ether and bitcoin — and increasingly something called stablecoins, which are coins pegged to the U.S. dollar that don’t have the same volatility. It’s a superior way to move money around. There seems to be a really big push to have everyone, from Wall Street to retailers, switch over to use crypto as a payment mechanism. That’s why PayPal and Square, which changed its name to Block to reflect its interest in blockchain, and even Apple are moving in this direction. So I have no doubt in a few years, crypto is going to be a mainstream payment mechanism. The other is the more amorphous Web3 world. Should we have a virtual storefront? Should we issue NFTs? Will people interact with our brand in the metaverse? Brands will be asking themselves these kinds of questions. High-fashion brands like Chanel and Gucci are dabbling in this already. But this is all much less proven than crypto. What are some other businesses using crypto or other Web3 tools in a smart way today? Again, I’d keep your eye on PayPal, which has facilitated money transfers. And Coinbase, which, of course, is a crypto native company. They’re making a push to challenge the likes of Western Union through international payments and transfers. You’re also seeing companies like Robinhood trying to remake stock trading using a more code-based ecosystem to record exchanges and transfers and finance. I think the more interesting use cases so far are in the arts. In music, there’s a lot going on around NFTs to break the conventional record label model. DJ 3LAU and the Chainsmokers are popular musicians deep into NFTs. Gaming, too, is increasingly adopting NFTs. Companies like Ubisoft and Zynga are traditional gaming companies dabbling with them today. Am I right in thinking that crypto is pretty much unregulated right now, but that’s not going to last? If regulations are coming, where are they happening, and what kind of impact do you think they’ll have? Regulation is circling crypto already in many places. The EU has moved seriously to ban proof-of-work blockchains like Bitcoin due to environmental concerns. And of course China has basically banned crypto altogether. Meanwhile, the U.S. Securities and Exchange Commission (SEC) is making life difficult for a lot of crypto startups, and New York just passed a bill halting certain types of crypto mining. The reality is that, contrary to popular imagination, Bitcoin and crypto have always been subject to certain forms of regulation, especially from law enforcement. But the pressure from regulators has increased dramatically in the last two years, as governments have gotten more sophisticated in their understanding of crypto, and as some countries — including the United States — have come to view it as an important new source of tax revenue. This won’t stop the growth of blockchain and Web3, but it will complicate it. It can be difficult to understand how digital currencies could have a real-world, environmental impact. Could you explain this relationship? The environmental impact of crypto is one of the most misreported and poorly understood subjects when it comes to crypto discussions. In some cases, it’s because people distrust crypto to begin with. They don’t understand it. So they seize on the environmental critique as a way to project their larger mistrust. Take Bitcoin, for example. Bitcoin mining — basically, adding blocks to the blockchain — can take a lot of brute-force computing. Once upon a time, you could add a block to the blockchain with your home laptop or with your phone. Now, there are factories devoted to it: warehouses full of servers, going full blast, devoting a massive amount of computing power, which takes a lot of energy to run. The question becomes, What kind of energy are you using? If you’re plugged into a hydroelectric dam or solar or wind power, that’s not so bad. If you’re burning coal, then I think environmentalists have a very good point that this isn’t acceptable. But what’s incredibly misunderstood is that Bitcoin is just one part of crypto. It’s just one blockchain of many. And the majority of the others rely on much less energy-intensive operations. It’s a bit of a red herring when people say, “I’m not touching crypto because of the environmental impact.” It depends on which crypto. I think it’s also important to note that the conventional financial system uses a ton of energy, too. So I think Bitcoin proponents object correctly in asking, “Why are we being singled out?” To close, what are the next steps that need to happen to bring crypto and Web3 into a more mature stage of their life cycles? The user interface needs to get a lot better. Right now, if you go to prowl around Web3, it’s a very clunky experience. In that sense, it’s a lot like the early internet before we had browsers. Remember, the internet existed for a long time before the World Wide Web, but we were waiting for the tools to make it accessible to the mainstream. And on the flip side, what would need to happen for us to look back a couple decades from now and think of crypto as a failed experiment? I’ve been writing my crypto for more than 10 years. At this point, I just don’t think you can stuff this technology back in the bottle. It’s sort of like asking, in 1993, whether the internet’s going to be a flop. There’s that axiom: We tend to overhype the short-term impact of technology but underestimate the long-term effect of it. I think that absolutely applies to crypto. The crypto market has experienced a crash since this article was originally published. Briefly, what’s driving it? The crypto market is being hit by a one-two punch. First, inflation and other macroeconomic forces are driving down the price of assets across the board — and many funds are dumping their crypto holdings first. The other factor is internal to the crypto markets: The collapse of the algorithmic stablecoin terra has led to mass selling of bitcoin and other tokens as people scramble to cover their positions. Is there a precedent to a crypto market crash of this magnitude? Believe it or not, yes. There have been spectacular crashes since the very beginning of Bitcoin, notably after a hack of the exchange Mt. Gox in 2014 and the 2020 Covid sell-off. Some of us are joking that this feels like the old days of crypto, when prices regularly swung 30% or 40%. What do you expect will happen to the crypto market in the coming days, weeks, and months? At this point, the crypto market is likely to stay in the dumps for months, especially if the broader economy stays weak. But history shows that the crypto market is cyclical, and it will gradually rebuild and likely surpass its highs of last November within a year or two. What might this week’s crash mean for Web3 projects that rely on crypto? Well, every Web3 project relies on crypto, and it’s not like a market crash is going to cause blockchain technology to disappear. But obviously a lot of projects are going to have to tighten their belts — and many of the weaker ones that have been propped up by the recent bubble will blow away altogether. As a reporter who has covered this topic for a long time, how do the events of the past couple of days change how you think about crypto? To be honest, these events have mostly confirmed what I thought already: Crypto has been, and remains, highly speculative and volatile. The only difference this time around is the scale — there are a lot more people losing a lot more money. But the serious entrepreneurs will stay focused on improving their products for the next boom cycle.