The Blockchain Revolution: Have we learnt from Dotcom?
Blockchain technology is taking the world by storm, totally disrupting the way many industries work. The global blockchain market is expected to be worth $20 billion by 2024 while 90% of major North American and European banks are exploring blockchain solutions, as Forbes reports.
“What the internet did for communications, blockchain will do for trusted transactions.” Ginni Rometty, CEO of IBM
A characteristic example of the Blockchain frenzy is the case of On-Line plc (LSE AIM:ONL) — a London Stock Exchange-listed firm which quadrupled its share price overnight just by adding ‘Blockchain’ to its name.
What are the characteristics of blockchain that’s driving the demand? blockchain is basically a real-time open ledger of anything that can be recorded, it’s transparent and immutable.
Blockchain’s current rise seems great so far, but the past has taught us to be very careful with booming successes. Don’t get me wrong, I have no doubt that blockchain technology will become an essential part of our lives. Nevertheless, it’s also essential we learn from past experiences and avoid repeating those mistakes.
One of these can be the dotcom bubble and it’s “tsunami” of events.
Who remembers the Amazon IPO (Initial Public Offering) when its share price doubled continuously from $2 to reach its zenith (about $100) in a year? It was an era when millions of people were snapping up shares in any company with a dot-com attached to its name fueling a wild speculation mania. People invested in any tech company, without worrying whether the company was profitable or not. After the bubble burst, we saw companies go from a market cap of 300M$ to 0$ within less than a year.
Will it be the same with Bitcoin, the flagship of Blockchain technology? No, if we have really learnt our lessons from the dotcom bubble and use them to our advantage.
A direct comparison of the two reveals the following:
IPOs (dotcom bubble) are not ICOs (Token sales)
While both IPOs and ICOs are public sales, they involve different assets and holding them involves completely different methods.
The IPO markets in the dotcom bubble misallocated investment funds to areas dictated by speculative trends, rather than to enterprises generating long term economic value.
“Here (ICOs) it’s just a whitepaper and a few developers. It’s so far from what the IPO boom was in the ’90s. It does take a lot of in-depth thinking and reading. Back then they talked about valuations based on eyeballs.” Dan Morehead of Pantera Capital
The Cryptocurrency market is very young
Blockchain technology is currently building a new ecosystem, a new technical and economic environment. However, it is still immature and at the start of a learning curve. It will take a lot of effort to not inherit all the disadvantages of the traditional finance like bubbles, for example, and in time will set its own rules and standards.
Bubbles are a phase not the whole lifecycle of something new
Bubbles do happen and will not cease to occur. They’ve happened before and will happen again. Not only for ICOs or IPOs but for other parts of finance as well. However, they do not cover the whole lifecycle of something new, they are only a part of it. They might impact the beginning of the new technologies for a specific phase, but the technologies will learn and survive to change our lifestyle and business in the long-term. The sooner we understand that, the better.
Regulators are starting to take Bitcoin seriously
Numerous messages coming from all parts of the world indicate that regulators have switched their focus on Bitcoin, ICOs, and cryptocurrencies in general. Although Bitcoin and blockchain technologies have created a parallel crypto-finance system, we all know that so far, they are unregulated and poorly controlled. It remains to be seen whether the application of regulation will be towards a positive, constructive direction and avoid “strangling” the new technologies before reaching their peak.
Although Ethereum ICOs need to be handled with care, they could also generate massive innovation
Yes, we should be cautious with the plethora of ICOs taking place nowadays. However, at the same time, we shouldn’t forget that many of them are initiated to support the development of entirely new inventions. Inventions that might change our future significantly.
No one can predict what the future holds for blockchain. However it’s easy to see that blockchain technology is here to stay. With it’s ups and downs, it’s flaws and advantages, it is expected to disrupt many industries and radically change a lot of traditional marketplaces.
