Why Did the Blockchain Bubble Burst and Will It “Reflate”?
Yes, it was a bubble. And yes, it did burst, causing late investors to lose millions just like it happened during the “Dot-Com” frenzy.
What the hell happened?
Well, it’s essentially quite simple.
There are 3 worlds…
One world is the current blockchain landscape where all those developers and early supporters/investors live.
It’s an exciting world, full of enthusiasm, heavy cash, and hard-to-understand terms. We’ll call it Liberta.
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The second one is the place exclusively populated with the institutions. Think international corporations and organizations, plus now inevitable IoT.
This world is ruled by banks. And banks don’t fancy the idea of decentralized money they can’t control. Let’s call it Instituta.
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The last and by far, the most important one, is the world of people.
Billions of everyday Joes who are still pretty much clueless about the entire blockchain phenomenon. If in doubt, go knock on your neighbor’s door and ask him what the cold wallet is. And if you really wanna spin his brain and make him think twice before opening the door for you again, ask him what the ERC-20 is. That should turn on the question mark above his head…
For the purpose of our short and sweet discussion, this world will be known as Popula.
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Now, take a moment and look at the following diagram…
Apply this diagram to Liberta (the blockchain world).
No, you can’t apply it to the global ecosystem (all 3 worlds) because Liberta, due to its exclusivity, is separated from the other two worlds by the thick, brick wall which prevents fresh blood from coming in. That’s why it’s a bubble in the first place.
As you can assume, the limited demographics existing in Liberta quickly consumed itself. In other words, the blockchain, as an idea, exhausted all available resources. It’s like living in a very, very small town and trying to have sex with every available resident once. It wouldn’t be long before you run out of the options and set the sex date with the very first partner. When that happens, your entire system collapses and you are either changing the environment or the interest (lifestyle).
However, given the fact that you became somewhat addicted to the lifestyle, you will either move to the next town or end up institutionalized (banned).
The problem with Liberta world is that it cannot move to the next town before it becomes appealing to the residents of that new town.
In one hand, there’s Instituta that finds the whole blockchain idea threatening. In the other, there are a bunch of everyday Joes that can’t make any sense in the newly proposed alternative to the centralized paradigm of the monetary-market system.
Which one is “easier” to approach and establish the relationship with to reflate the cryptocurrencies economics?
Popula, of course. It’s easy to tick the people and start the revolution, especially if you pitch some freedom cause against the all-hated System.
But in the case of the blockchain, it’s not like we can just send some manifesto to the global population and expect things to start rolling.
Blockchain, by default, is looking to redefine some of the most sensitive aspects of people’s lives in an extremely complicated way from the perspective of everyday people. Privacy, money, communications, entrepreneurship — this is all on the list.
The problem is that, since the onset of Bitcoin and Enthereum in particular, we woke up one morning to like gazillion different micro-solutions that cannot be combined in a simple way. It came to the point where you need a separate device to store all those different crypto wallets and another one with clear instructions about what each of those wallets pays for. Not a good system!
But OK, if developers could come up with the basic idea of the distributed ledgers, they can come up with the all-in-one solution and reduce the number of the wallets to just one.
That would make Popula welcome Liberta under its roof.
Unfortunately, that may not be enough.
While Liberta can adjust the rhetoric and develop a simple-to-use application to appeal to everyday Joes, it takes a single stroke of a pen from Instituta to limit the outreach. And we are already seeing this in action (think different types of bans in different countries/corporations).
Because, whether we like it or not, it was us the people that established and gave power to the central authorities and institutions when we realized that the anarchy is leading us nowhere.
In other words, for the cryptocurrencies bubble to reflate, blockchain solutions must contain features that appeal to the central authorities (institutions) and the people alike. Both worlds need to see the benefits of this new alliance in order for the paradigm to change from the ground up.
However, like we once built it, we the people can sure as hell upgrade or rebuild Institutions.
In other words, if Liberta plays it smart, it can help Popula to bring Instituta to its knees in no time! In return, Popula will ensure the prosperity of Liberta.
That is to say that, if we want, we can circumvent traditional institutions and even central authorities (read governments). When the critical point is reached, Instituta has no other choice but to capitulate and obey the will of the people. Otherwise, heads are falling (think Nicolae Ceaușescu or Saddam Hussein as the most recent examples).
What I’m trying to say here is that we the people allowed banks and payment processors to charge such high fees in the first place and hold our hard-earned money for 2–3 working days just to spin it and make more of it on our sweat, blood, and tears. We the people allowed corporate ISPs to extort us and make money on our privacy. It was us the people who allowed governments to become instruments of the banks and corporate world.
And it’s us the people who can redefine all of that at any time we like! It’s up to us not them.
The same is with blockchain and cryptocurrencies respectively. It’s us the people that determine whether or not something has a consisting value to buy us bread and milk. Just like we did it with gold and diamonds…
It’s just that the developers and investors have to allow it.
