Why the Crypto Crash is Nothing Like the Dotcom Crash
Great internet tech emerged from the rubble of the early 2000s — but there’s no reason to think blockchain will do the same
When people think about new technologies, they often draw analogies to older ones. This impulse is understandable —it feels like analogies give us something to hold onto. But analogies can also mislead, if we draw parallels between things that are not actually alike but treat them as if they are. Probably the most misleading analogies of all come from individuals who are financially and/or emotionally invested in a new technology asserting that it is like some other already-successful technology.
On June 16, journalist Maria Bustillos, who her bio notes “has worked since 2013 to build journalism platforms using blockchain technology,” published an op-ed in the New York Times, arguing as its title put it, “Yes, Crypto is Crashing Again. Blockchain Will Survive.” No one knows the future, and Bustillos’ prediction that blockchain technology will go one, evolve, and one day thrive even after the current crypto bubble pops may turn out to be right. But the piece also makes an analogy between blockchain today and the Internet in the late 1990s and early 2000s that is deeply misleading. Indeed, if we think through where blockchain is at today and where the Internet was at in 2000, we could come to the opposite conclusion of Bustillos’: not only are these technologies, to date, on different trajectories, there’s also a decent chance blockchain will amount to little.
In the 1990s and early 2000s, Internet markets were expanding like crazy, which is simply not true for blockchain technology today.
We can see this most clearly by examining market sizes, the total number of buyers and revenue in a given technology market. If individuals perceive a given technology to be useful and it is within financial reach, they will buy it. For significant technologies that are widely and quickly adopted, their market sizes will — for a time — grow massively.
In the 1990s and early 2000s, Internet markets were expanding like crazy, which as we’ll see is simply not true…