BlockchainThought Leadership

Why Bitcoin going to zero would be good for enterprise blockchain applications

Bitcoin has been on a wild-ride and some people think the future is zero. This will be a good thing for commercial blockchain applications. 

A lot of attention has been paid to the super-fast rise of Bitcoin. The Wall Street Journal made a compelling case that Bitcoin is a bubble and is likely going to zero. The argument they make is that Bitcoin will never replace the dollar and therefore will be nonfungible for most goods and services. If Bitcoin were to fail and drop to zero that would be a good thing for the blockchain industry and technology applications. 

The rapid ascent of blockchain into the lexicon of our industry has left many wondering what the technology is, how it works, and how they can benefit from it. Most often the conversations revert immediately to Bitcoin. If you are lucky, a more informed person will mention Etherium, demonstrating a basic awareness that there is more than one digital crypto currency.

The important thing to know is that blockchain is not Bitcoin and the terms are not interchangeable. To compare bitcoin and blockchain is the equivalent of comparing Facebook and the internet. In fact, the internet is the framework in which Facebook operates, but they are not the same thing. You can access Facebook through the internet, but without the internet, you could not access Facebook. Bitcoin is like that. WIth blockchain, you can create digital currencies like Bitcoin, but without blockchain you could not create Bitcoin or other digital currencies.  

Lately, there has been too much dumb money going into the sector that has propped up prices of worthless crypto assets into the stratosphere. Applications that should be getting built are struggling because of the confusion around the technology and the lack of talent available to develop real-world blockchain applications. Some entrepreneurs that are active in the space are not building real companies, but businesses that look sneakingly close to giant digital ponzi schemes. 

A recent blog post by Wang Chang on regarding Initial Coin Offerings (ICOS) highlighted the craziness of the ICO bubble:

What really upsets me is that most of the white papers pumped out by ICOs today are emphatically not the way we best understand how sustainable new companies come into existence. Many contain big grandiose plans that stretch years and don’t admit the necessary network effects, new technologies, etc., for even modest success. An idea, a LaTeX installation, and WordPress landing page are a very low bar for raising millions of dollars, especially by today’s standards. With open source software and services like AWS and GCP, we should expect more.

Startups by definition are organizations in flux seeking their scalable business models, and claiming to have all the answers upon inception is an exercise in hubris and/or grandstanding. The late Steve Jobs did say that customers don’t know what they want, but many of these ICO firms don’t even seem to take the first steps in talking to early prospects.

1999 is calling, and they want their 18-month growth plans, 50-page business plans, and million dollar war chests back…

Most of these companies have little to no commercial successes and even less infrastructure to succeed if they took off. What the industry and nascent technology needs are successful commercial pilots at scale and interoperable standards between commercial entities in the same sector, like the one that the Blockchain in Trucking Alliance is working on. 

While a bubble bursting would be a bad outcome for anyone that had money in these crypto startups, it would be a wonderful thing for qualified blockchain companies and enterprises. People would gain a clear distinction between what is real and what is vaporware. It would free up really smart blockchain engineers to pursue meaningful pursuits to solve real problems and it would allow legitimate companies to differentiate their stories from the pretenders in the market. Investors with real processes for evaluation and discipline would end up treating the technology with respect, not as some sort of lottery ticket. 

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