Blockchains are the new Linux, not the new Internet
Cryptocurrencies are booming beyond belief. Bitcoin is up sevenfold, to $2,500, in the last year. Three weeks ago the redoubtable Vinay Gupta, who led Ethereum’s initial release, published an essay entitled “What Does Ether At $100 Mean?” Since then it has doubled. Too many altcoins to name have skyrocketed in value along with the Big Two. ICOs are raking in money hand over fist over bicep. What the hell is going on?(eta: in the whopping 48 hours since I first wrote that, those prices have tumbled considerably, but are still way, way up for the year.)
A certain seductive narrative has taken hold, is what is going on. This narrative, in its most extreme version, says that cryptocurrencies today are like the Internet in 1996: not just new technology but a radical new kind of technology, belittled or ignored by by most, which has slowly and subtly grown in power and influence over the last several years, and is about to explode into worldwide relevance and importance with shocking speed and massive repercussions.
(Lest you think I’m overstating this, I got a PR pitch the other day which literally began: “Blockchain’s 1996 Internet moment is here,” as a preface to touting a $33 million ICO. Hey, what’s $33 million between friends? It’s now pretty much taken as given that we’re in a cryptocoin bubble.)
I understand the appeal of this narrative. I’m no blockchain skeptic. I’ve been writing about cryptocurrencies with fascination for six years now. I’ve been touting and lauding the power of blockchains, how they have the potential to make the Internet decentralized and permissionless again, and to give us all power over our own data, for years. I’m a true believer in permissionless money like Bitcoin. I called the initial launch of Ethereum “a historic day.”See (and more especially hear) also this weekend's "So, A Florida Man, An FT Journalist and an A16Z Venture Capitalist Walk Into A ...."
But I can’t help but look at the state of cryptocurrencies today and wonder where the actual value is. I don’t mean financial value to speculators; I mean utility value to users. Because if nobody wants to actually use blockchain protocols and projects, those tokens which are supposed to reflect their value are ultimately … well … worthless.
Bitcoin, despite its ongoing internal strife, is very useful as permissionless global money, and has a legitimate shot at becoming a global reserve and settlement currency. Its anonymized descendants such as ZCash have added value to the initial Bitcoin proposition. (Similarly, Litecoin is now technically ahead of Bitcoin, thanks to the aforementioned ongoing strife.) Ethereum is very successful as a platform for developers.
But still, eight years after Bitcoin launched, Satoshi Nakamoto remains the only creator to have built a blockchain that an appreciable number of ordinary people actually want to use. (Ethereum is awesome, and Vitalik Buterin, like Gupta, is an honest-to-God visionary, but it remains a tool / solution / platform for developers.) No other blockchain-based software initiative seems to be at any real risk of hockey-sticking into general recognition, much less general usage.
With all due respect to Fred Wilson, another true believer — and, to be clear, an enormous amount of respect is due — it says a lot that, in the midst of this massive boom, he’s citing “Rare Pepe Cards,” of all things, as a prime example of an interesting modern blockchain app. I mean, if that’s the state of the art…
Maybe I’m wrong; maybe Rare Pepe will be the next Pokémon Go. But on the other hand, maybe the ratio of speculation to actual value in the blockchain space has never been higher, which is saying a lot.
Some people argue that the technology is so amazing, so revolutionary, that if enough money is invested, the killer apps and protocols will come. That could hardly be more backwards. I’m not opposed to token sales, but they should follow “If you build something good enough, investors will flock to you,” not “If enough investors flock to us, we will build something good enough.”
A solid team working on an interesting project which hasn’t hit product-market fit should be able to raise a few million dollars — or, if you prefer, a couple of thousand bitcoin — and then, once their success is proven, they might sell another tranche of now-more-valuable tokens. But projects with hardly any users, and barely any tech, raising tens of millions? That smacks of a bubble made of snake oil … one all too likely to attract the heavy and unforgiving hand of the SEC....MUCH MORE
