Bitcoin, I’ve Been Here Before
In the summer of 2000 I was momentarily worth 200 million dollars. It was the dot-com era and in only a few months our company had skyrocketed to a market cap of over a billion dollars. It was exciting and we thought it would last forever. Four months later it was gone.
Dot Com Daze
In 1991, I left my day job to found Sonic Foundry. I wrote one of the first Windows based audio editors, Sound Forge. The company grew, added new products and went public in 1998. What was once a startup in sleepy Madison, Wisconsin turned into a substantial company.
In 1999 things went crazy. The internet bubble had begun and we went from being an audio/video editing company to a company that was “Moving Media Online”.
In December our stock went from $9 to over $50 in less than a month. We were local heroes. By March of 2000 the stock doubled again as investors rushed in. At over $100 a share there was a feeling of euphoria as investor portfolios swelled.
Sure, there were the nay-sayers. Our revenues hadn’t grown to meet the valuation, they said. Caught up in a bull market, we brushed them off as old people who didn’t get the new paradigm of the internet.
People were taking out loans to buy internet stocks as no one wanted to be the person at the party who missed out. But for every doubting Thomas there was an analyst who predicted that the ride would continue.
Boom Becomes Bust
It didn’t take long for us to go from heroes to goats. In just four months, our stock was back where it started. I went from $200M to $200k net worth.
Wherever you went in town you had a good chance of running into someone who’d lost money on Sonic Foundry. The complaints and personal attacks were impossible to ignore. Occasionally I would run into someone who’d say “I love Sonic Foundry, it allowed me to put an addition on my house!” These were the happy few who took profits on the way up.
Most of us didn’t take anything off the table during this time. We were along for the ride and obviously selling would’ve been bad optics. But we were also true believers.
Rebuilding from the Bust
We downsized quickly and in 2003 we sold off our main products, Sound Forge, ACID and Vegas to Sony. Over the next 8 years I led our team to build Mediasite a knowledge capture platform. Unfortunately in 2011 a difference in opinion between myself and some of the board would leave me “pursuing other interests”. One of those would be Bitcoin.
Drunk on Bitcoin
I had been aware of Bitcoin as early as 2011 but in 2013 I ran across a talk by Bitcoin cheerleader, Andreas Antonopolos, https://antonopoulos.com/. After a couple of videos and a few days of research I immersed myself in the technology. I completed a 2 semester online course in cryptography http://www.crypto-textbook.com/. I purchased an overpriced AMD video card, a couple of cheap hardware miners from Butterfly Labs, set up a mining rig and joined a mining pool.
I wrote code to map out the bitcoin network attaching myself to as many nodes as I could swamping our home network. I didn’t realize it until my wife walked in and said “Is our internet down?”
I sponsored a Bitcoin Hackathon and attended a fair amount of anarchist filled Bitcoin meetups. I even made the first Bitcoin election donation to a state candidate in Wisconsin (only to have to take it back).
So what does all of this have to do with anything? I’m trying to show you that I believe there is great promise in block chain technology. But when people are comparing Bitcoin to Amazon there’s a problem. And it’s reminding me of 2000.
Bitcoin isn’t Amazon
Bitcoin isn’t a company. It was an open source experiment to create a payment network with no central authority. It succeeded. Back in 2014 I was paying for lunch with Bitcoin. Transactions were picked up and validated almost immediately and cost less than pennies.
Today you can’t do a transaction for less than $15 in fees. The Bitcoin network is creeping along at 3 transaction per second, the same as 7 years ago and since software by committee tends to move slowly don’t expect to be buying lunch with Bitcoin anytime soon.
The financial establishment has long been bashing Bitcoin. Back when it was working as intended I thought they were wrong. Terms like Ponzi scheme didn’t really apply but we’ve entered new territory. Unfortunately every Bitcoin price increase makes it even less useable as a payment network.
Maybe a Nice Sun-room?
I love the idea of Bitcoin just like I loved the idea of moving media online. But I’ve been here before, smack in the middle of a bubble. Will there be more upside? Possibly. But if you’re in Bitcoin I hope you end up with an addition on your house and not a bunch of worthless bytes.
Crypto-currencies and the block chain are here to stay. Good things will come from all of this attention. But just like 2000, the price of that attention will be paid by unfortunate people hoping to make a quick buck.
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