A mom from Arkansas, a major donor to Republican causes with very little experience in technology, wants to invest $50,000 in bitcoin. A man from Switzerland curses during a Skype call because his Korean over-the-counter exchange went down during a massive trade. An entrepreneur placed a Trezor bitcoin wallet worth $150,000 on his car key chain. Another futurist is Tweeting late at night about a failed $300,000 wire to a bitcoin exchange.

Meanwhile, Kraken is throwing up server errors every few login attempts. Coinbase can’t keep up with account creation and they can barely hire anyone to ramp up their engineering team of 20 souls. Exchanges take days to confirm new users, trapping bitcoin and cash inside their opaque innards. Shapeshift, a tool for converting currencies, is overwhelmed with work, some trades not going through for hours.

We are hiring for dozens of positions in SF, NY and London. https://t.co/HPkPzwuIk0 pic.twitter.com/gvUO3r6Tz4 — Coinbase (@coinbase) December 1, 2017

Welcome to the new cryptocurrency boom, a roiling, boiling mess of speculation, broken transactions, and confusion. And that’s just how the crypto lovers like it.

Fear, Uncertainty, and Disruption

There is a common thread in the Valley positing that cryptocurrencies are like Linux. In 1991, an unknown programmer named Linus Torvalds built on the work of previous OS devs and launched what looked to be a pet project. It quickly grew underground like a mine fire and slowly but surely upended Oracle, IBM, and Microsoft along with a large swathe of the server market. One one could have predicted that one day we would type a few lines of code into our terminal and spin up a dozen powerful Linux servers but, as the tools grew in popularity, the incumbents spread fear, uncertainty, and doubt until, ultimately, there was none to spread.

Banks, for their part, are trying their FUD tactics as we speak with Jamie Dimon calling Bitcoiners “stupid” even as Wall Street is ramping up their crypto trading and development desks. Wall Street can sense the winds changing far better than Microsoft ever could and they have the money and the brain power to sew up the crypto world for decades to come.

What we are seeing now, then, is a conscious decision by the big crypto stakeholders to give Wall Street – and, to a degree, Main Street – a ticket to the crypto show. The prices have risen not because bitcoin is particularly usable or Ethereum will ever scale. Prices have risen because in the future these are the tools that, like Apache and Netscape, will power the next financial revolution.

So what’s happening right now with the exchanges? To many experts it looks like growing pains.

“I spent the first 8 years of my career working at a SaaS startup that grew quickly and experienced many scaling issues,” said Jameson Lopp, a prominent crypto developer. “This type of pressure is great because it forces the industry to innovate. I think that as long as the ecosystem is growing at rates faster than folks expect, there will be growing pains.”

Lopp is working with BitGo to manage a wallet. It’s pretty hard.

“It’s hard to say if multiple 10X traffic surges are sustainable; I think folks across the industry could use a breather to catch up at this point. Lots of us are spending time fighting fires just trying to keep the services running,” he said.

“Rising prices have two effects on exchanges: lack of support and slow technology,” said Kirill Suslov, CEO of Finom. “The human factor is important because the support team is not elastic. It has a time lag because training new team members takes time. And sometimes those support team members have very important roles, e.g. verification where fraud can kill the exchange and its banking relations. On the other hand, there is a technological stickiness. The matching engine and databases that work perfectly for thousands of users become bottlenecks when there are hundreds of thousands of users. Legacy systems have to be over-redundant to cope with increasing demand. For example, our matching engine can handle one million transactions per second while average exchange processes about one transaction per second. Coinbase has exactly the same issue because they also have a huge retail demand from their app business and they get hundreds of thousands of downloads per day making them one of the most popular apps. This user acquisition channel albeit, very effective, slows down their servers significantly.”

Further, the accretion of oversight that exchanges have added over the years – Know Your Customer requirements, document checks, and fraud prevention – have slowed exchanges to a crawl. “Many of them are unable to keep up with the new user registrations. Their databases and security infrastructure were never designed for so many users so many of them are limiting their signups now to prevent downtime due to too many concurrent users,” said Anshel Sag at Moor Insights.

Users who might have logged in once since creating a Coinbase or Kraken account are now trying to day trade on systems built for one-off transactions. Cash is flowing in and out and the IRS and other governmental organizations want a peek. It is, in short, a mess.

I view "heritage banking" in 2017 the same way I viewed "heritage media" in 2004. It's obvious to me it's over. It'll be obvious to them in another five years. — Mark Rizzn Hopkins (@rizzn) November 28, 2017

The Dark Hand of the Market

Ultimately, this is just where the bitcoin enthusiasts want the industry to land. The FUD helped Linux grow from a scrappy band of misfits to a huge community of zealots and holy wars, wild speculation, and “Linux on the desktop next year” help grow the ecosystem from a hobbyist platform to an enterprise default.

The problem is that cryptocurrencies deal with money. Whereas building Django and Node were fun ways to make web programming easier, building Ethereum (although it was not clear at the time) would bring untold riches to hundreds of programmers. This stew of dedicated technologists, greedy speculators, and instant millionaires is creating a knot that no SEC auditor will ever be able to untie.

Ultimately, crypto community is facing a series of big problems and each must be solved before the technology can be taken seriously. First, there is active price collusion that cannot be truly proven but is nonetheless quite visible. Telegram rooms form and dissipate to plan big moves without a trace, a fact that should give investors pause. Further, it’s been reported there are about a dozen major players who are supplying most of the ICO money and that the wacky “valuations” you are seeing is basically the motion of capital in and out of various tokens. The ICOs that succeed, in short, find access those whales while the rest die on the vine.

Cryptocurrencies are supposed to usher in an egalitarian world peace, prosperity, and mass cross-border payments. Whether this will come to pass in the next decade depends entirely on what happens now. I’ve seen a number of interesting projects – I’m bullish on Overstock CEO Patrick Byrne’s De Soto, Inc. and tools like ClimateCoin – and in this season of despair there is a deep need for future-forward ideas. Whether the current crypto environment can support that need is still to be seen but with the rise of new funding methods, secure person-to-person transactions, and the slow strangling of traditional VC I’m thinking 2018 and beyond will be far brighter than we can imagine.