Will the blockchain boom crash like dot-com?

Chong Li
Chong Li
Aug 24, 2018 · 5 min read

Every few weeks we are blown away by a mind-blowing pitch for a new blockchain project. Without a doubt, blockchain is experiencing a boom, similar to the one “dot-com” underwent in the last decade of the 20th century. If this is the case, only one question rises to the fore — will blockchain, and the industry built around it, likewise crash? In an attempt to better approach this question, let us first understand in what stage of development blockchain is currently in. One approach is to compare, and perhaps contextualize, the rapid development of blockchain within the growth and life of the Internet as a whole. Blockchain and crypto enthusiasts consider blockchain to be Web 3.0 — an evolution of Web 2.0 and Web 1.0. Remember that Web 2.0 facilitates contact between users and platforms. It allows users to interact more freely with each other. Examples of this are of course, social media platforms such as Facebook and Youtube that enable and encourage the sharing of information and media. Web 1.0, on the other hand, is simply a data portal where users passively receive information. It lacks an interface for users to engage with material, i.e. users are not given the opportunity to post reviews, comments, or feedback.

Figure 1 summarizes the development of Internet and blockchain. Let’s walk through the milestones along the paths.

Fig.1. Evolution of Blockchain and the Internet


1. The first workable prototype of the Internet, ARPANET, was created in the late 1960s, and first used packet switching to allow multiple computers to communicate on a single network. (One debatable design goal of ARPANET was to build a network resistant to nuclear war.)

2. In 1974, Robert Kahn and Vinton Cerf devised Transmission Control Protocol and Internet Protocol (TCP/IP), a network communications model for data transmission between multiple networks.

3. In 1983, TCP/IP was adopted by ARPANET, marking the establishment of the modern Internet, or a network of networks. However, this iteration of the network was only used by a very small group of people within education institutions, research centers and governments.

4. Since the invention of World Wide Web in 1990, the Internet became recognizable to public. The building blocks of a public usable/accessible Internet were appropriately assembled. The Web was then able to allow people to access data online in the form of websites and hyperlinks on a slew of different browsers, including Mosaic, Netscape Navigator and Internet Explorer. Thousands of dot-com companies including Amazon, Google, Ebay, Pets (defunct) and Webvan (defunct) were founded during this period. Venture capital was so easy to raise if the company had an Internet-related prefix or “.com” suffix.

Fig. 2. Number of Internet hosts worldwide (1969–2012) with 1000x increase during the dot-com boom. Source: Internet Systems Consortium

5. The year 2001 marks the “dot-com” market crash, a result of a speculative investment bubble related to Internet-based companies. However, the enthusiasm for and development of the Internet allowed the market to quickly recover. In the years that would follow, growth continued and propelled the Internet into its place as part of a stabilized social system. From 2004 onward, humans carved their place into Web 2.0. Shortly after, around 2007, the use of smartphones and the mobile revolution advanced Web 2.0 from stationary to portable, giving users unlimited access to the Internet with little to no restrictions.


1. In 2008, Satoshi Nakamoto described bitcoin as a “purely peer-to-peer version of electronic cash.”[1] With this, blockchain technology made its public debut. In order to understand how bitcoin and blockchain relate to each other, it is best to compare and recontextualize again with the Internet more broadly: bitcoin is to blockchain, what email to the Internet. That it, one facilitates the other, which operates on the platform of a larger infrastructural system. At the time of bitcoin’s inception, however, the emerging technology blockchain behind the cryptocurrency did not immediately attract consumers.

2. In 2015, Vitalik Buterin, an initial contributor to the bitcoin codebase, launched the second public blockchain called Ethereum. Different from Nakamoto’s blockchain, which only records currency, Ethereum was able to record other assets (such as loans and land titles) using “smart contracts” — algorithms that can automatically process in the Ethereum blockchain. In the same year, Linux Foundation began to work on an umbrella project of open source blockchain called Hyperledger, which supported the collaborative development of blockchain-based distributed ledgers. Since then, corporations including Microsoft, IBM, and UBS have invested in blockchain technology.

3. Since 2016, a considerable number of blockchain companies went to ICO (initial coin offering) and quickly grew into large cap projects, e.g. IOTA, EOS, NEO, and QTUM. Similar to the dot-com boom, raising capital for a company even loosely associated with blockchain has been quite easy. We know that a large number of blockchain companies operate under the guise of user engagement, face a number of implementation hurdles, and suffer from poor management. This is arguably called “blockchain bubble.” The flood of press releases announcing new projects has resulted in a type of “blockchain fatigue.” As of now, very few companies have been able to migrate their conceptual projects into products. As a result, the funds dedicated to blockchain projects may considerably decrease.

A quick review and comparison of blockchain and Internet leaves us with a few questions: what’s next? Is a bubble burst on the horizon for blockchain? We believe so. It is of course hard to predict the exact year when the crash will occur, if at all. But if it does come, many blockchain companies will meet their unpleasant end. Those that survive will — after a bumpy journey — stabilize and evolve, much like the Internet companies that rose from the ashes of the dot-com crash.

In closing, let us examine the development of the Internet and blockchain from an academic perspective. Recall that the backbone of the Internet, TCP/IP protocol, was invented in 1983. However, TPC had only been used as an engineering tool to adapt the rate at which a source sends packets through the Internet. Until Franky Kelly’s groundbreaking paper “Rate Control for Communication Networks: Shadow Prices, Proportional Fairness and Stability” (1998)[2] and “Mathematical Modeling of the Internet” (2000)[3], we did not have a theory to describe the essential working mechanisms of TCP/IP or the Internet. When we turn to blockchain technology, it seems a similar series of events is unfolding. We do not yet have a theory to describe blockchain or a mathematical model for investigating the performance limits such as transaction confirmation time, scaling law for the system throughput, etc. As of now, many blockchain applications have been proposed. As a consequence, more and more academic organizations, universities and research institutions have started to pay closer attention to this emerging technology, striving to discover the theory behind the engineering applications. At Nakamoto & Turing Labs, we too are working towards this goal. But how long will it take for a theory to emerge from the chaos of blockchain’s expanse?

Time will tell…

[1] Nakamoto, Satoshi. “Bitcoin: A peer-to-peer electronic cash system.” (2008).

[2] Kelly, Frank P., Aman K. Maulloo, and David KH Tan. “Rate control for communication networks: shadow prices, proportional fairness and stability.” Journal of the Operational Research society 49.3 (1998): 237–252

[3] Kelly, Frank. “Mathematical modelling of the Internet.” Mathematics unlimited — 2001 and beyond. Springer, Berlin, Heidelberg, 2001. 685–702.

Chong Li

Written by

Chong Li

Co-Founder of Nakamoto & Turing Labs; Chief architect and head of research at Canonchain; Adjunct assistant professor at Columbia University.

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