The recent run in crypto prices and the blossoming zeitgeist around all things blockchain has drawn comparisons to the dot com bubble and speculation that we're seeing a similar dynamic today around the blockchain. I have no plans to prognosticate on crypto prices, but I find the comparison to the dot com era fascinating given the role tech driven bubbles have played in major technology shifts over the past few centuries. Are there interesting parallels we can draw between today and those previous shifts? And what might those parallels teach us about the impact the blockchain could have on society?
Referring to everything that touches the blockchain as a single thing called the blockchain is a gross oversimplification of what is happening in the space. But it feels about the same as using the internet as a catch-all term for everything that touches the internet, YOLO. Plus, there is a reason for thinking about the blockchain holistically, as a single constellation of related technologies, and it has to do with technology revolutions and the work of Carlota Perez. Technology revolutions are periods of accelerated technological progress, when new innovations are rapidly adopted and abrupt changes in society occur. If you aren't familiar with Carlota's work, she studied the major technology revolutions of the past few centuries and recognized a consistent pattern among the interplays between capital markets, new technologies, the global economy, and society. She observed that each revolution has two phases: (1) installation phase, when the core infrastructure needed for the new paradigm is built (highways for automobiles), and (2) deployment phase, where the technology gains widespread adoption and externalities emerge (increasing adoption of the automobile + highways = suburban expansion). See a graph of the In each of these revolutions, a key ingredient was a constellation of new and existing technologies that, when combined, enabled a paradigm shift. This is why looking at the blockchain as an agglomeration of related technologies can be useful, specifically when thinking about potential long-term implications.
Carlota Perez Technological Surge Cycle
The innovations that fuel these revolutions are often built on the back of technology breakthroughs from prior generations. Universal electricity was an innovative technology in the early 20th century, but by the 1970s, and the birth of the microprocessor, electricity was a commodity and served as a foundational layer for the computer age. The internet's adoption rate followed a similar trajectory to that of electricity; and will undoubtably play a foundational role in the next revolution.
Technology, on its own, is actually a poor indicator of a when a paradigm shift will happen. One of my favorite aspects of Carlota's work is how it highlights human behavior as a vital determinant of tech revolutions. How the changes in how we interact with technology—our collective technology *best-practices—*are the highest signal indicators of a pending revolution. And it is the changes in human behavior around the blockchain that get me most excited about its potential impact.
The most challenging form of innovation is changing human behavior. It is the one persistent and unknowable variable new technology must solve for to unlock adoption. When viewed through that lens, the fervor around the blockchain bodes well for its staying power. Despite a user experience that is objectively pretty terrible, millions of people are flocking engage. Sure, some of the draw has been to speculate on crypto prices, but I think it's deeper than that. Discussions about the future of blockchain with people close to the space often turn from heady to pollyannaish. You can almost hear the echos of someone describing the potential of the internet in the 90s. It's like a religion, and newly baptized members are quickly spread the word. As a result, a growing multitude of people are building and engaging with these technologies and developing a set of best practices as they go. I found this recent announcement from Visa particularly strong signal that corporate affinity for the blockchain is growing. Minds are being changed, and human behavior along with them. That is as strong a signal as any that we are in the midst of meaningful and broad-based technological change. But it's also a tell-tale sign that things might be frothy in blockchain land.
To be clear, I am not saying we are in a blockchain bubble, that a crash is imminent, or even that long-term a correction is inevitable. I am also not saying that a crash won't happen. Do I think the path to broad-based adoption for the blockchain will be linear and smooth? It seems unlikely. But as to how the vicissitudes of market forces will play out here, I won't pretend to know.
What I do believe is that the blockchain is here to stay. As my friend Packy McCormick is apt to say, "Genies don't go quietly back into bottles." There are certainly some overvalued, highly speculative, and even fraudulent projects in the space. But there are many others, built by legitimate teams focused on solving real problems, that have the potential to meaningful change how we interact and exchange value with one another. Finding stability will take time. For broader adoption to be unlocked the ecosystem, like the internet before it, development of the ecosystem must be bimodal. Optimizing areas that are more predictable and well-understood (like taking a personal loan), while concurrently pursuing more exploratory and experimental solutions to new problems (quadratic payments). And judging by the broad range of project types that are popping up almost daily, this seems to be underway. The sea-saw of progress between these two types of development will result in some volatility, but like the internet, I expect underlying adoption of the blockchain will continue to increase despite these ups and down. The revolution is now begun. Strap in, it's going to be a wild ride.