Crypto has now been around for well over a decade. There are some clear parallels with the Dotcom boom of the 90s. We are nowhere near achieving the full potential of the decentralization revolution, just like we were nowhere near achieving full potential a few years into the 90s with the original tech boom. In both cases, ‘animal spirits’ and irrational exuberance were in full flow, and there was a willing suspension of disbelief, when hype preceded reality and collapsed before the real work or ‘Buidl’ as it is known now, started.
However, the contrasts are even more striking than the parallels. The dotcom revolution enabled instantaneous flow of information globally. The crypto revolution, however, not just enables instantaneous flow of value globally, it also enables the instantaneous creation of value.
Let us digress and explore this for a second. As someone somewhere has surely noted before, humans are likely the only species that not only fall in love, but also fall in love with the idea of falling in love. This ‘zoom out’ capability, the ability to abstract out and go ‘meta’ is probably an evolutionary edge that our brains have. In the same vein, tokenization and the crypto revolution help us ascribe ‘value’ to value. TCP/IP or HTTP was value; Tokenizing these, like for instance the Orchid protocol attempted to do (where the hell is Orchid btw?), and many more doubtless will in the future, is zooming out and capturing the value of value. To be more specific, there is a monetary value that can be ascribed to anything that can be described or designed or expressed using a ‘smart contract’ or a piece of software that can be executed in a conditional manner. There is a monetary value to any piece of code that can be instantaneously traded for a price that is more often that not, set by the market.
Coming back now to our comparison, the hype cycle this time around consisted of a number of web 2.0 constructs that were expected to be decentralized - Golem, Sia, Augur, Decred, Bloom, Numerai etc come to mind, among promising projects that might still have potential but are clearly floundering at the current moment, in areas as varied as distributed computing, prediction markets, and credit assessment.
And so this is the key difference between the dot com boom and the current crypto revolution. Between 2000 and 2003, while the ‘building’ was happening on top of all the infra and the plumbing that the dotcom revolution enabled, which later enabled the creation of Facebook, Google etc, there was no way to speculate on all this infra that had been created, there was no way to directly speculate on TCP/IP or on HTTP or on any of the foundational building blocks or even on the second order start up plays (Unless of course you were a VC that had access to smart teams coming out of MIT/Stanford, like Google). However, this time it is different. Because we have a way to measure the ‘value’ of value, tokens such as bitcoin have become established assets in their own right. Therefore, while we ‘Buidl’, and attempt to, for instance, modern finance through DeFi and STOs, the market also speculates, by directly trading the primitives - especially Bitcoin, as seen from the secular increase in derivative trading volumes for BTC!
Let us look at the numbers. It is well and truly impossible to ignore BTC as an asset class, irrespective of where you stand on blockchain’s long term transformational potential across industries. BTC has returned a whopping 2,332,803% over the past decade. Compare that to the 189% of the S&P 500 and the 19% returns that Gold has had over the same time frame.