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Stephen Tse: Fixing Crypto’s Silos

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It’s an established truth the cryptocurrency sector is more fragmented than shattered glass. Industry devotees have long made the most of working piecemeal, accepting ever-increasing fragmentation as the price of a decentralized financial system. But what advancements might we achieve if we could stop paying it? 

At first glance, interoperability seems like a near-impossible goal. According to CoinMarketCap, over 8,000 unique cryptocurrencies currently exist – a 400% increase from two years ago. These numbers sound impressive at first, however, the veneer wears off once you consider the sheer inconvenience that variety poses.

Stephen Tse, is founder and CEO of Harmony.one. He was previously a researcher at Microsoft Research, a senior infrastructure engineer at Google and a principal engineer for search ranking at Apple. 

Decentralized applications (dapps) are limited by the constraints of their home blockchain. If a dapp is built on Ethereum, it can usually only enjoy the benefits provided by Ethereum (ex., smart contract functionality). Thus, for all of the advantages that diverse cryptocurrencies might present individually, users may struggle to take full advantage of the multiplicity because the blockchains are not interoperable

Here’s the issue – while career cryptocurrency traders may be willing to manually “hunt and peck” across fragmented cryptocurrency exchanges and blockchain apps for the features and services they want, it seems overly optimistic to think that the rising cohort of investors will be content with the status quo. Consider the push towards cryptocurrency normalization we saw in 2020. Three major fintech firms (Square, MicroStrategy and Mode) embraced bitcoin, and PayPal recently launched its own cryptocurrency trading service

As a result, the people we see entering the crypto market aren’t technology professors or developers, they’re ordinary consumers and investors who are accustomed to more streamlined and cohesive experiences.

“As new users enter the industry, I’ve seen a clear demand for ‘intermediaries’ that mirror the centralized financial entities consumers are used to, improved user experience, and greater liquidity, but I’ve also seen the control and holding of users funds: sacrificing ownership for access,” cryptocurrency expert Alexey Koloskov recently wrote for Forbes

If the crypto sector’s fragmentation remains unaddressed by those within it, Koloskov suggests, there is a risk that conventionally minded players will offer solutions that undermine the freedoms cryptocurrencies were invented to provide. 

Consumers are right to ask for interoperability. They need innovation, they need new interoperability tools.

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The blockchain fragmentation problem is significant and, in the absence of proper consolidation tools, expanding. The cryptocurrency sector needs to provide solutions that facilitate blockchain connections among all people and any economy. 

Our fragmented and siloed status quo will not work indefinitely. We have the technological means – and the market impetus – to seek interoperability without compromising on decentralization or consumer experience. By literally bridging the silos, we won’t just improve user experience, we’ll usher in a new era of financial innovation and creativity. 

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