The Second Blockchain Bubble Is Over: Now What?
It’s been a tough year for crypto investors, and the crypto bear market continues to drag us down. Now that the second blockchain bubble has burst, what happens next?
That’s a question asked by Danny Crichton at TechCrunch earlier today. Crichton believes we saw the first blockchain bubble in 2013, when the price of bitcoin suddenly surged above $1,000 for the first time in history before retreating to lows of $200 for a multi-year period.
“It’s clear that the second blockchain bubble is now complete,” writes Crichton. “The question is: What’s next for blockchain?”
Blockchain Has A Narrative Problem
One of the problems with answering that question, according to Crichton, is that blockchain has a narrative problem. Over the years, two clear narratives have emerged about blockchain technology. Crichton believes those narratives are closely related to the Dot Com bubble, where investors clashed with technologists over how to handle the new “internet” technology:
“I have previously argued that blockchain’s rise is a dual parallel to that of the internet. On one side that I dubbed the 1960s narrative, the technology is extraordinarily nascent, with limited use cases and almost no ability to scale. The other side is the 1990s narrative — that this is a groundbreaking new technology that should be invested in immediately for maximum returns.”
The problem with blockchain, in the eyes of Crichton, is that the enthusiasm of the 1990s “investor” crowd never matched with the enthusiasm of the 1960s “technologist” crowd. One group was focused on assigning a value to everything in the blockchain space, while the other group was focused on building that value.
The problem is that blockchain isn’t as useful today as the “investor” crowd thinks. Blockchain has a long ways to go, and a lot of development hurdles to cross, before it becomes mainstream:
“As conversations with leaders like Vitalik Buterin can attest, many of the core engineers are hyper-aware of just how much work remains to be done to see blockchain become a foundational technology.”
At the end of the day, the 1960s crowd is delivering hard-to-swallow truths to the 1990s crowd, according to Crichton:
“The simple answer is that the 1960s crowd is right, and the 1990s crowd is just too early. Much more development is needed to get blockchain where it needs to be.”
Innovation Takes Place Slower Than We Expect It
Innovation takes place slower than we expect it. Blockchain technology isn’t even a decade old. It took several years for people to realize the value that could be derived from bitcoin’s underlying blockchain technology. It’s going to take several more years for real-world blockchain use cases to actually emerge.
As proof that innovation takes a long time, Crichton points to the mobile phone and the internet. The internet didn’t emerge out of the ground one day to dominate the world, nor did the mobile phone; both technologies emerged after literally decades of development, research, trials, and tribulations:
“The cell phone took almost two decades from its original launch in the 1980s to the launch of the iPhone in 2007. The internet took roughly three decades from its conception at ARPA to what we now understand as the world wide web.”
Crichton believes blockchain is on a similar timeline. There is clearly value in the technology, but it’s going to take time to unlock that value.
This is where some might disagree with Crichton. Crichton admits that bitcoin’s roots go back to digital gold and cryptography movements in the 1980s and 1990s, but he claims that the launch of bitcoin in 2009 is where we “can start the clock” in terms of blockchain innovation.
Crichton believes blockchain innovation will take place on a similar scale to the innovation of the mobile phone and the internet, which suggests we might not realize the potential of blockchain technology until the mid-2020s or early 2030s.
Others might disagree with Crichton and state that bitcoin is the “iPhone” of the cell phone movement. Bitcoin is the result of decades of research into cryptography, digital gold, double spend problems, and the internet. Bitcoin and the cryptocurrencies, blockchain platforms, and blockchain companies launching now are the Amazons and Googles of the blockchain era.
Ultimately, it’s easy to disagree here, but the disagreement isn’t as serious as you may think: both sides are bullish on the future of bitcoin. One is just on a longer timeline than the other.
You can read Danny Crichton’s full article on the “second blockchain bubble” here.