The last few months have not been easy for cryptic investors. After the high summits of the crypto trading at the end of last year, which saw Bitcoin reach a peak of $ 19.276 and a market capitalization of $ 323 billion and Ether reach $ 1.152 with a market capitalization of over $ 112 billion , prices have crashed. Today, Bitcoin is trading at around $ 6,500 and Ether at $ 204. Their joint market capitalizations have lost about $ 300 billion in value
. Basically there are five losses by Bernie Madoff.
The situation has undermined the cryptic investors. As an illustrative example, The Wall Street Journal profiled the investor of the crypt in a good mood Olaf Carlson-Wee, who founded Polychain Capital. The fund, which has seen tremendous growth in recent years turning a few thousand dollars into tens of millions of profits, has lost about 40% of its $ 800 million in capital through investment losses and withdrawals from investors.
It is clear that the second blockchain bubble is now complete (the first was the price hike of bitcoins in 2013). The question is: what are the next for blockchain?
The problem of the two stories by Blockchain
I have already argued that the rise of blockchain is a double parallel to that of the internet. On one hand that I dubbed the narrative of the '60s, technology is extraordinarily nascent, with limited use cases and almost no ability to scale. The other side is the narrative of the '90s – that this is an innovative technology that should be invested immediately to get the highest returns.
The story of Blockchain so far is the bizarre combination of these two narratives. Investors' enthusiasm of the 90s on evaluation has never equaled the enthusiasm of the "60s" crowd of the crypto researchers and the core blockchain designers, who have focus on the potential of these technologies beyond the vagaries of the price. As witnessed by conversations with leaders such as Vitalik Buterin, many of the basic engineers are hyperconscious of what remains to be done to see the blockchain become a fundamental technology
In fact, the interaction between these two groups explains a lot about the kerfuffle this week on Buterin's comments on the lack of potential "1000x" with blockchain. While the media have painted his comments in a deeply negative light, and has been criticized by crypto-acolytes, I think it is clear that his pragmatism comes from his engineering background rather than his focus on investment.
The simple answer is that the crowds of the 60s are right, and the crowds of the 90s are too early. A lot more development is needed to get the blockchain where it needs to be, and more analysis will have to be done to figure out where the investment returns will be. Search and social are the killer apps for the Internet, but the winners of these categories have just emerged instantly.
True innovation is slower than expected
The pace of innovation may have accelerated over the last two centuries, but there is still a limit on how fast things can change. The mobile phone took almost two decades from its original launch in the 80s to the launch of the iPhone in 2007. The Internet took about three decades from its concept in ARPA to what we now mean as the world wide web.
Blockchain is almost certainly on a similar timing. While the technology has antecedents dating back to the digital gold of the 90s, we can start the clock with the launch of Bitcoin in 2009. This means that we have not yet finished with the first decade of understanding of this technology, building a theory of how it works, or thinking through its use cases in a scalable way. In short, there is still a lot of work to do to take advantage of this technology for our purposes.
The good news is that the massive investment infusion by cryptographers in recent years should help to speed up the development of blockchain rapidly. Some of these projects, which would not have received funding even from a university laboratory, are sitting on a ridiculous level of seed funding. They could create a lot of progress in this space, assuming that these projects use their funds effectively.
The downside is that morale has certainly been shaken for many participants, and morality is fundamental to seeing through complex new projects to completion. There will be ups and downs with the design of any new technology at the engineering frontier – but morale and stubbornness can go a long way in maintaining momentum.
Where should we focus?
For me, several veins of research and development around the blockchain remain deeply exciting, if we have the patience to see them. They are:
- Identity : I have already written about projects like Element and Learning Machine. There are incredible challenges on how to offer portable and secure identities for every human being on earth, not to mention every animal and physical object. Blockchain looks like a technology that might be able to help here if we can understand how to connect the digital world to the analog world. Once, Facebook was considered the level of identity of the Internet, a claim that was not at the height. In the end, Blockchain could get to complete that mission.
- Decentralized Web : I was lucky enough to meet Jutta Steiner of Parity Technologies last week at TechCrunch Disrupt and to host it at our event in Zug last July. You and others like Gavin Wood have done a lot of work to start thinking about how chains can interact, and how to rebuild our modern web infrastructure in a decentralized way. Their ideas – like everything in this new world – are very precocious and unexpected, but they are stimulating in their potential. While centralized servers have huge performance advantages over decentralized technologies today, there is no reason why this gap should be permanent. Web3 and other projects could pave the way for this model forward.
- Security Tokens : Can blockchain technologies help us build a safer and more efficient financial system? I can think of Bloomberg's Matt Levine on shareholder votes to take Dell's private staff and the enormous level of induction and complication he has enlightened when it comes to ownership in our modern economy. Security tokens could provide a means to handle this complexity much more smoothly, particularly in a world where sharing is increasingly the norm around fixed assets (cars and Uber, homes and Airbnb, etc.)  Use "may" and "could" for each of these examples because we have no idea what we will discover on the frontier of the blockchain. The good news is that these are exhaustive indications to investigate, and even if we do not discover something specific in these areas, we are likely to discover something that pushes technologies along the way.
All this to say that we have to stop reading the latest token prices every 10 minutes and get back to the real work of building this new technology and turning it into the revolution that one day could be.