Lessons from History: What we can predict about the Future of blockchain & crypto technology
Participants in the blockchain and crypto community frequently compare the crypto evolution to the adoption of the Internet since the 1990s. Actually, most tech booms (steel making, telegraph, radio, TV, automobile, the Internet) and their subsequent evolution (which may take decades to play out) share very similar characteristics.
For this short essay, I would cite some examples from the Internet (2000s most disruptive tech) and automobile (1900s most disruptive tech) evolution to make a few predictions about the future of blockchain and crypto.
Automobiles Evolution
Now, close your eyes, and I want you to imagine what a car looks like… Try to see the vivid details, the colour, and inside the car, the steering wheel, the seats, etc.
Ready? Now, open your eyes. I am going to guess that you just pictured either a 5-seat sedan or a 2-seat coupe sports car (especially if you are a guy), probably a gasoline powered car with rear view mirrors and adjustable seats. This is the “car” or a mental model of it you had your whole life, but cars didn’t always look this way.
The automobile tech boom started in 1890s, and at the beginning, car designs were all over the place. There were cars that have 3 seats, some with 1 seat; there were cars that were powered by electricity (Edison battery), by steam (most common engine type then) and gasoline; there were cars that look like horse carriages and cars that look more like a bicycle than a car.
The point is that there was little consensus of what a car “should” look like, since the whole world was running on horses and buggies then. By the early 1900s, market participants (car buyers) were able to vote with their dollars on what they want a car to look like. For example, some were probably some big enthusiasts of the steam-powered car because they could go very fast (up to 127mph), maybe you can even call them “steam car maximalist”, and in fact, at one point, two-third of all the cars sold in the early 1900s were full electric vehicles (EVs). However, by the end of 1910s, one clear winner stood out, it was the best of everything, price, utility, design, etc. It was the Ford Model T, and since then, Ford set the industry standard and all cars begin to look more or less like the Model T.
With this, I predict that only one blockchain consensus mechanism is going to be the clear winner and that is probably going to be Proof of Stake.
Bitcoin was the original cryptocurrency, and it uses Proof of Work (PoW) consensus mechanism. Revolutionary and necessary at the time, but later PoW projects began to have problems as 51% attacks (double spend) were common, and the resources to mine crypto (validating mechanism for PoW) were capital intensive. For example, to become a miner, an Antminer S19 pro costs about $14k USD in upfront and in addition you need access to cheap electricity in order to break even in mining. This creates a bigger barrier to entry over the years as professional miners leverage on their economics of scale, which means most individuals cannot participate on mining activities and therefore collect the reward for the network.
Proof of Stake (PoS) on the other hand can be secure and non-capital intensive to participate. In order to become a staker and collect the reward for validating the transactions on the network. You only need your smartphone and the Internet (which 61% of the world currently has). In addition, with the rise of Decentralized Finance (DeFi), crypto staking has become a widely popular activity, with many early adopters and promoters, who are essentially believer of the PoS consensus mechanism. The second largest cryptocurrency with millions of users, Ethereum is also shifting its tech from PoW to PoS, a move that will certainly drive adoption to PoS. Other large crypto projects that support the PoS consensus mechanism includes Cardano, Polkdot, etc. Each with more millions of users and promoters.
Just like how automobile designs got standardized by Ford, the consensus mechanism will likely get standardized by PoS, with majority of the projects ended up being PoS. However, I should state here, PoW won’t disappear totally. I think PoW will always lives in Bitcoin, and maybe a few other crypto such as Litecoin.
Lastly, given the most popular PoS projects to be, such as ETH 2.0, Cardano, Polkdot are still in their development stages. A lot can still happen. Obviously if any of the major PoS projects fail, that would be a blow to the head for the PoS consensus mechanisms.
The Internet Evolution
The Internet promised to change everything. But did it? Or most importantly, did it change everything in the year 2000, when all the Internet enthusiasts promised that the Internet is going to change everything.
If you are familiar with the history of the internet, you probably know that in the dot com boom, entrepreneurs came up almost every possible idea that can be run on the Internet. Some ideas ended up being widely successful and became a valid use case for the Internet, for example, shopping for goods online (Amazon, eBay), others were never going to work because part of the commerce needs to be offline, and lastly some were great ideas but just too ahead of its time (For example, Webvan was a grocery delivery service that promises 30-min delivery after you order online, it raised $400M USD and failed after just 3 years after. In contrast, Instacart which does almost exactly the same is one of the most successful companies of the 2010s. Webvan’s problem was “right market, wrong timing”, Instacart was only able to be successful today thanks to the mobile computing wave, uprising of the gig and sharing economy, and as the trend of shopping everything online becomes the social norm, none of which existed when Webvan started).
So here comes my second prediction: Blockchain is NOT going to change everything, at least not yet. Some use cases of blockchain and crypto are going to prevail like the Amazon during the dot com, others were probably never going to work, and some will work but just too ahead of its time right now. After all, the industry is just 10 years old.
The 2017 ICO craze is almost a replication of the dotcom IPO craze, where every entrepreneur with a one-page white paper that contains with a cryptocurrency/blockchain idea that promises to revolutionize a whole industry, such as medicine, supply chain, finance, gaming, eCommerce. Many were highly unrealistic and technically infeasible.
However, in the current 2020 crypto cycle, real use cases (with millions of users) actually emerged. Most notably, Decentralized Finance (DeFi) and NFT (digital art and collectibles). I think these two use cases are here to stay and will only grow larger as time goes by. That being said, I see the current use cases of blockchain and crypto as Crypto 1.0, similar to the Internet 1.0 of the later 1990s. Internet 2.0 began in the early 2000s (with companies like Facebook, Google, Youtube, Netflix, etc), in a similar fashion, more disruption is going to be brought on by the blockchain technology but Crypto 2.0 has not arrived yet.
In Crypto 2.0, some of the ideas that failed in Crypto 1.0 because they were ahead of their times might make a comeback, as participants grow and technology further develops. For example, IoT blockchain and supply-chain blockchain tech. Speculation here is futile because there is so much more to ve developed, just like no one would have imagined the success of Facebook when examining the business idea in 1999.
Thanks for reading guys! I’d appreciate your feedback and comments if you have any. Find me on Twitter venturefounder
