I’ve found that comparing the current state of blockchain adoption to the early days of the internet is a useful analogy when introducing someone to the potential of cryptocurrencies.
Of course, it helps if people remember what life was like before the internet really took off in the late 1990s, and have some experience with things like getting a daily newspaper, making mixtapes, mailing letters, finding a job from the classifieds, using a phone book, or paper maps, etc.
I’ve seen the comparison between the early internet and today’s state of blockchain before. In fact, I mentioned it in my review of Digital Gold: Bitcoin and the inside story of misfits and millionaires trying to reinvent money.
Normally, though, when the blockchain-as-early-internet conversation comes up, the focus is on value and the prospect for big investments. But it’s also important to think about what this means from the technology development side.
Will monetizing innovation limit blockchain applications?
The idea of comparing blockchain to early internet came up again yesterday when I was reading an article in the Harvard Business Review.
It was written by the director of MIT’s Media Lab and two researchers from MIT’s Digital Currency Initiative, an academic group that studies cryptocurrencies and contributes to open source blockchain projects.
In the HBR article, the team talks about how after years of development, mostly away from the attention of the public, the internet eventually hit a watershed moment:
“The “killer app” for the early internet was email; it’s what drove adoption and strengthened the network. Bitcoin is the killer app for the blockchain. Bitcoin drives adoption of its underlying blockchain, and its strong technical community and robust code review process make it the most secure and reliable of the various blockchains. Like email, it’s likely that some form of Bitcoin will persist. But the blockchain will also support a variety of other applications, including smart contracts, asset registries, and many new types of transactions that will go beyond financial and legal uses.”
So far, many are searching for blockchain’s killer app in the financial sector. Making financial transactions more efficient and less expensive is one of most dominant and potentially impactful early applications for blockchain.
But, the HBR article points out, one of the key differences between how the early internet was developed and how blockchains are being developed is the role of investment capital and the growing pressure for cryptocurrencies and blockchain to make quick returns.
This pressure might ultimately drive the direction of blockchain development. The authors write:
“In the case of cryptocurrencies, we’re seeing far more aggressive investments of venture capital than we did for the internet during similar early stages of development. This excessive interest by investors and businesses makes cryptocurrencies fundamentally different from the internet because they haven’t had several decades of relative obscurity where non-commercial researchers could fiddle, experiment, iterate on, and rethink the architecture.”
Another key point the article raises is that for the internet to really take off, there had to be a consolidation of sorts around protocols. There’s a possibility that this might happen with cryptocurrencies too, and that only a few blockchain networks will truly become dominate.
So where does that leave us as supporters and investors in cryptocurrencies?
I think that the early internet analogy is still really useful for explaining the potential and possible upside of cryptocurrencies and blockchains, especially for people that are just coming to the technology.
But, I do think it’s also important to also explain that the development of new cryptocurrencies and blockchain technologies is also being fuelled by speculation. That means the quest for the next big valuable thing is leading to some technologies and applications that are not durable, and in some instances, just straight-up scams.
In the meantime, we can get to work on figuring out blockchain’s killer app.