Is Crypto Following a Familiar Pattern?
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If bitcoin were to have a real, transformative impact on the world, how might that play out? For the purposes of thinking about this, let’s consider the entire arena of
cryptocurrencies
Cryptocurrencies
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities.
Read this Term and blockchain technology, that is, the ecosystem, industry and movements that were initiated by bitcoin.
It may be that a previously occurring pattern, related to Amara’s Law, is unfolding again. Think back to how we all came, over a period of years, to be addicted to the internet. How did that happen and what were the timescales?
1991: The First Website Launches
The world’s very first website went live on August 6th, 1991. It was created by the celebrated British computer scientist, Tim Berners-Lee and contained, appropriately enough information about hypertext and how to create web pages.
1995-2001: The Dot Com Bubble and Burst
The dot com bubble began expanding in 1995, but it was not until 1998 that it really got out of control, as US tech stock equity valuations went through the roof. By the end of 2001, most publicly traded dot com ventures had gone under, and trillions of dollars were lost.
From 2006: The Web as We Now Know It
The bubble burst, but it was only an interval. In 2006, Facebook allowed anyone over 13 to join, and from here on in the social media and ecommerce age takes hold of the planet. There is disruption to most aspects of our lives and communications, right up to the unfolding of national elections with global geopolitical consequences.
Look at that sequence, and you can see that there are fifteen years from the start of the process, in this case, the first website to the beginning of the third tumultuous stage, in which the technology in question transformed the ways we live our lives and do business.
And so, how about crypto?
On January 3rd, 2009, the bitcoin blockchain began with the mining of its genesis block. This act of creation was performed by Satoshi Nakamoto (whoever that may be), and in that first block’s data was encoded a message:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
A reference to a British newspaper headline that acts as both additional timestamp, and descriptor of the financial conditions in which bitcoin was forged.
2016-2019: The ICO Bubble, and the Hype and Crash of Crypto
Initial coin offerings go back to Mastercoin in 2013, and there was Ethereum in 2014, but it was in 2017 that they boomed as a means for crypto projects to raise capital. What followed though, was a multi-year crypto winter: an extended and brutally severe bear market following the bitcoin and crypto surge at the end of 2017.
From 2023/4/5?
If crypto were following the same roughly fifteen-year pattern as we saw with the web, what would happen next?
Bitcoin, Ethereum and other altcoins have already made huge gains again after the post-2017 bear market, institutional investment and adoption is occurring, we have DeFi and NFTs, but the prevailing sense is still one of anticipation that we are on the cusp of something.
What we might now expect is that somewhere around 2023 to 2025, we will experience the beginning of a transformative crypto expansion, at which point this new tech starts to have a profound effect on lifestyles and societies.
Is that likely? Is the current state of bitcoin and crypto such that big changes could be coming? Do you see any indicators? From where I’m standing, the answer would have to be a resounding yes, although exactly what those shifts and shake-ups will develop into is a more speculative game.
On the broad not-bitcoin side of crypto, NFTs and smart contracts are key. Digital asset ownership is possible, and persistent virtual environments (metaverses, if you like) will be built. Some people will eschew working for companies, and earn a living through DAO membership instead. Banks and TradFi institutions will be of decreasing relevance, as growing numbers of people learn how to DeFi.
Goods and services can be transacted in a decentralized manner through a variety of tokens and currencies, depending on the setting, and additionally, a lot of this will be gamified. Entering your online financial environment might (possibly) look more like a game of Zelda than a trip to the bank.
And, over on the bitcoin side of things, consider this extract from a report by Fidelity Digital Assets:
“History has shown capital flows to where it is treated best and embracing innovation leads to more wealth and prosperity. We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance. In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future. We therefore wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.”
And so, pleasingly, we have both gamification and game theory at work, as blockchain technology branches out and reconfigures critical layers of our societies and institutions.
Gameplay, perhaps, is the concept to keep in mind regarding bitcoin and blockchains as we move, potentially, into the most material stage of a pattern that has played out before.
It may be that a previously occurring pattern, related to Amara’s Law, is unfolding again. Think back to how we all came, over a period of years, to be addicted to the internet. How did that happen and what were the timescales?
1991: The First Website Launches
The world’s very first website went live on August 6th, 1991. It was created by the celebrated British computer scientist, Tim Berners-Lee and contained, appropriately enough information about hypertext and how to create web pages.
1995-2001: The Dot Com Bubble and Burst
The dot com bubble began expanding in 1995, but it was not until 1998 that it really got out of control, as US tech stock equity valuations went through the roof. By the end of 2001, most publicly traded dot com ventures had gone under, and trillions of dollars were lost.
From 2006: The Web as We Now Know It
The bubble burst, but it was only an interval. In 2006, Facebook allowed anyone over 13 to join, and from here on in the social media and ecommerce age takes hold of the planet. There is disruption to most aspects of our lives and communications, right up to the unfolding of national elections with global geopolitical consequences.
Look at that sequence, and you can see that there are fifteen years from the start of the process, in this case, the first website to the beginning of the third tumultuous stage, in which the technology in question transformed the ways we live our lives and do business.
And so, how about crypto?
On January 3rd, 2009, the bitcoin blockchain began with the mining of its genesis block. This act of creation was performed by Satoshi Nakamoto (whoever that may be), and in that first block’s data was encoded a message:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
A reference to a British newspaper headline that acts as both additional timestamp, and descriptor of the financial conditions in which bitcoin was forged.
2016-2019: The ICO Bubble, and the Hype and Crash of Crypto
Initial coin offerings go back to Mastercoin in 2013, and there was Ethereum in 2014, but it was in 2017 that they boomed as a means for crypto projects to raise capital. What followed though, was a multi-year crypto winter: an extended and brutally severe bear market following the bitcoin and crypto surge at the end of 2017.
From 2023/4/5?
If crypto were following the same roughly fifteen-year pattern as we saw with the web, what would happen next?
Bitcoin, Ethereum and other altcoins have already made huge gains again after the post-2017 bear market, institutional investment and adoption is occurring, we have DeFi and NFTs, but the prevailing sense is still one of anticipation that we are on the cusp of something.
What we might now expect is that somewhere around 2023 to 2025, we will experience the beginning of a transformative crypto expansion, at which point this new tech starts to have a profound effect on lifestyles and societies.
Is that likely? Is the current state of bitcoin and crypto such that big changes could be coming? Do you see any indicators? From where I’m standing, the answer would have to be a resounding yes, although exactly what those shifts and shake-ups will develop into is a more speculative game.
On the broad not-bitcoin side of crypto, NFTs and smart contracts are key. Digital asset ownership is possible, and persistent virtual environments (metaverses, if you like) will be built. Some people will eschew working for companies, and earn a living through DAO membership instead. Banks and TradFi institutions will be of decreasing relevance, as growing numbers of people learn how to DeFi.
Goods and services can be transacted in a decentralized manner through a variety of tokens and currencies, depending on the setting, and additionally, a lot of this will be gamified. Entering your online financial environment might (possibly) look more like a game of Zelda than a trip to the bank.
And, over on the bitcoin side of things, consider this extract from a report by Fidelity Digital Assets:
“History has shown capital flows to where it is treated best and embracing innovation leads to more wealth and prosperity. We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance. In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future. We therefore wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.”
And so, pleasingly, we have both gamification and game theory at work, as blockchain technology branches out and reconfigures critical layers of our societies and institutions.
Gameplay, perhaps, is the concept to keep in mind regarding bitcoin and blockchains as we move, potentially, into the most material stage of a pattern that has played out before.
Cryptocurrency
