Riding The Wave of the Blockchain Bubble
One of the benefits of being on this Earth for a lot of time is that you get to see stuff. If you have a moderately good memory and some basic cognitive abilities, you may also discover some interesting patterns.
Take for instance the dot com bubble. It happened in 2000-2001, but the signs were there since 1999. That was the year I started my first company, the one that I sold 9 year after.
It wasn't a particularly different year, other than the news that we're getting from across the ocean. Like "this startup was valued at $3 millions". What does this startup does? A website. A beautiful website. And then tomorrow, another news about another website with another evaluation: $4 millions. And so on and so forth. Every day more news about the potential success of a brand new world wide web service (the term "disruptive" wasn't cool at that time, it was all about "world wide web").
I remember I talked to a Romanian friend who was in New York at that time and he was telling me how every Saturday they had a party celebrating at least one $1 million acquisition or investment in some dot com. Every Saturday. At least $1 million.
Although I was just starting and all I had was a handful of domains hosted on a server, with just a few thousands users, even I got an interested "partnership request", from somebody hinting at a $2-3 valuation for the next 4-5 years. And I was somebody in Romania, barely scratching the surface of it all. I didn't follow up on that offer, by the way and I don't regret it. I sold 9 years after, with an audience of more than 1.5 millions people per month. Not even close to the price initially offered, but at least I built something.
But let's get back to 1999 again. Just 2 years after the initial signs, the bubble exploded. Thousands of businesses closed, no more money, a huge backlash on the entire industry and dozens of lawsuits and accusations about how "dishonest" analysts, investors and entrepreneurs were. That's how a bubble works.
The Blockchain Revolution
Yesterday I attended the second day of d10e conference in Bucharest. It was an amazing event, clearly out of this world (even my girlfriend told me in the evening, after I shared a few things with her, that I seemed like coming home straight from a sci-fi movie) and I plan to write a more detailed report about it today. But beyond the technical breakthroughs that I witnessed there, there was a constant buzz about how much money there are pouring right now in the blockchain industry.
It wasn't uncommon to hear conversations like this, between guys in their late twenties, speaking in an English spiced with very different accents, over a cup of coffee:
- So, when do you plan the ICO?
- Well, I think in a month. Or two...
- What's your strategy? How much do you want to raise?
- Well, we don't know, you did a very successful one, with at least 2 millions. It was two millions, right?
- Well, it was only two millions because we capped it before. Dumb move. I don't recommend it.
- Aham. So what's your advice?
- First day without cap, then put a hard limit. I clearly see you guys raising at least 3 to 5 mils.
Again, laid back guys, some of them carrying their Mac in a backpack, having a croissant and a coffee in a hotel in Bucharest.
Please stop reading for a while and try to digest this.
How Bubbly The Bubble Is?
Another information heard at the conference is that prominent investors have a speed of 2 investments per month with a half a million ticket each, on average. That's investing 1 million per month, only equity, in startups, not ICO. ICOs are a different vehicle.
So, how bubbly this thing is? How much the market can absorb? How much technology can we create that will actually be used? We have obviously the blockchain with Bitcoin and then a computer inside the blockchain with Ethereum. We also have our familiar social media experiment backed with Steem. We have IPFS and BigchainDB. We have Polkadot and Tendermint. All these technologies are disruptive. All these technologies are more or less ready for production or in production already. But how big the usage is? Bitcoin is holding between 15 and 17 billions dollars as market cap. But it's mainly a speculative currency. Some sort of an on-demand mistress for the distressed and underfucked fiat currency moguls who are turning to her only when it rains outside. And, if you don't count Steemit, which is a working beta prototype, not much real usage, with significant traction of these technologies is out there.
My rhetorical questions for today are: how long until the bubble bursts? How much the bubble can still eat? How long until we will see a startup proposing the internet of the internet of the virtual machines on the blockchain of blockchains? A startup with such an innovative solution, such a brilliant mathematical consensus and lightning speed of transactions, which is used by only two people: the CTO and the CEO?
I may sound a little bit pessimistic, but please remember I just got back home from an incredible sci-fi movie and the real world is looking even more depressing than before.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
Here is my unsolicited observation on your bubble concern:
I see one vast and fundamental difference between the internet bubble and the present rise of the blockchain. The difference is in what they represent.
Yes, internet created vast value by providing us with an "information superhighway" that streamlined all communication and that has now allowed for rapid, even instant interaction between individuals without mediation by the state.
The blockchain, however, allows for an agreed upon representation of anything and everything of value. Most fundamentally, this is currency.
Because the blockchain can and has become a currency, this means that we can potentially see all human value represented there. ALL symbolic wealth can be transferred to blockchain storage.
And so, my conclusion is that, though you may see roller-coaster ups and downs while people figure this out, there is ultimately no way to go but up. There is a vast amount of wealth remaining for the bubble to devour. 😄😇😄
Very interesting thoughts. I was thinking the other day that the real bottleneck is our own cognitive dissonance: we don't know for sure what is and what it isn't valuable. There's so much information out there that our brains are literally fried and we can't judge with a clear mind anymore. I'mv very curious about how the future will handle this bubble.
There is an awful lot to process these days. It is sort of like trying to drink out of a fire hose!
Are any of the sessions from the conference going to be posted on youtube or elsewhere?
Well , I wonder if limited access of most of the population to blockchain world may also make a difference
I mean is not easy to get crypto coins for many people , while at the top of the dot bubble , you could have a conversation with a taxi driver about Yahoo ,Lycos... etc :)
If access to crypto would be as easy as access to smartphones, then I think we will see a significantly bigger adoption. But until then, we're just bubbling...
Yeah , you are probably right
But there are already many smartphone wallets for Androids
I dont understand while in countries like Venezuela bitcoin does not become more popular
Maybe is because of the strict laws , or bitcoin is not as useful as I think ....
It must be adopted by merchants first and merchants will adopt it when there will be enough of it on the market. And there will be enough if it on the market when you could actually buy something with it from merchants.
It's a chicken and egg situation...
Good article, thanks!
I am not sold on blockchains and you may well be right but I do have to say the following. I would say, something whose amount is predictable and knowable (such as a blockchain-based currency, for instance) is, in my opinion, far less likely to cause a bubble than something that can not be quantified (such as, the potential of a new technology).