I compare it to the dot com bubble. This is simply what happens when you introduce large amounts of stupid money to a very immature sector. The average American doesn't exist. But of course a lot of amateur investors with dollar signs that lost their money 20 years ago, are the same kind of gullible fools lining up for a repeat of that. So, I'm happy it is happening and it can't happen fast enough for me. In fact, it's long overdue.
Back in the day, if you even hinted at "we might get a domain name and a website", you'd be getting funding. People were dumping millions in some pretty moronic and misguided notions. A lot of those companies failed for quite obvious reasons. But not without making several people very rich. Investors have a way with money where they manage to not lose when things go bad and win a lot when that fails to happen. That's one of the perks of playing with other people's money. Worst case you just take your cut and then you wash your hands of the whole thing. Best case it was all you and your genius insights. Sometimes stupid money is tempting for smart investors. When it's on offer, there will be people taking it.
And of course few companies actually had some good ideas and got a little more funding than they would have otherwise gotten and used that to become amazingly successful. Amazon, Google, Ebay, and a few others survived the bursting of the bubble and survived and thrived.
The same is happening with crypto and blockchain companies. Most of them are obviously empty shells run by charlatans operating out of dodgy jurisdictions. But those are actually pretty easy to spot. If it looks dodgy, it more than likely is super dodgy. If it looks to good to be true, it probably is. So, people losing their money are mostly just fools. The exact same kind of fools that lost their money 20 years ago. When some of those fools are institutional investors betting with your pension money, you'd be right to be a bit concerned about that though. That too happened 20 years ago.
More interesting is to look for the things that just aren't that dodgy at a first glance. Some of these companies are looking pretty serious actually. Solid investors, actual customers, working products, etc. It's not all scams and pyramid schemes and those might be the possible survivors of the crypto bubble bursting. Some of the tech is actually quite impressive and looks like it might be used to solve some real problems.
There are probably more than few very good tech companies just putting their heads down and getting some real work done right now. Those are the interesting ones to follow.
> So, people losing their money are mostly just fools. The exact same kind of fools that lost their money 20 years ago. When some of those fools are institutional investors betting with your pension money, you'd be right to be a bit concerned about that though.
Why can't I be concerned about the thousands and thousands of fools that are losing money they can't afford? Yes, they are fools but are they deserving to suffer for being fools and getting carried away by con-men?
I know some poor, desperate people in Brazil who got caught in cryptocurrencies and NFTs out of desperation, they are fools but I believe they do deserve empathy when their families go hungry because of a predator with confidence was able to scam them. Not feeling concerned that thousands of individuals like that exist and are being tricked is a bit concerning for me...
> So, people losing their money are mostly just fools. The exact same kind of fools that lost their money 20 years ago. When some of those fools are institutional investors betting with your pension money, you'd be right to be a bit concerned about that though. That too happened 20 years ago.
That last part is my primary concern: there's a good argument that the real-estate bubble was in part caused by big investors seeking returns high enough to make up for their bad dotcom calls, and the cryptocurrency world seems to have a much higher risk of returns being at or close to zero — pets.com at least had some assets which could be sold to Petsmart but there's no value in random hashes.
> More interesting is to look for the things that just aren't that dodgy at a first glance. Some of these companies are looking pretty serious actually. Solid investors, actual customers, working products, etc. It's not all scams and pyramid schemes and those might be the possible survivors of the crypto bubble bursting. Some of the tech is actually quite impressive and looks like it might be used to solve some real problems.
Do you have any examples? In the dotcom era it was pretty obvious at the time which companies had a real chance: some were losing money on every transaction but others were actually doing something real (e.g. Amazon was a popular punching bag but if you looked at the financials it was clear that there was a solid business there). That last part has been missing so far in the cryptocurrency world — the only companies which seem to have a real business are the ones which seem to have pivoted away from the blockchain world where they got their early funding to do things like supply chain management using more conventional technology.
A lot of stuff in the Stellar ecosystem is pretty OK. Quite a few companies operating under out of e.g. Germany or other countries doing e.g. remittance networks using simple stable coins. Not that glamorous but looks real enough. In general, that ecosystem seems to be generally designed to be fintech friendly. Meaning people are working with financial authorities and generally are trying to do the right thing. E.g. Bitbond is a German company doing an investment products on top of Stellar. They've been working with the German financial authorities (Bafin) and are also partnering with a few big banks.
There are also plenty of traditional enterprise consultancy companies that have been working with various customers to implement e.g. blockchain based schemes for carbon trading, or solutions related to logistics or sourcing materials. Not all of that might succeed but it seems that trading/inventing some new crypto currency is not a goal with these projects.
During the dot com era, it all looked like a bunch of hippies going on about digital highways and crazy stuff like that.
> E.g. Bitbond is a German company doing an investment products on top of Stellar. They've been working with the German financial authorities (Bafin) and are also partnering with a few big banks.
That's interesting, not being German I hadn't heard about them.
> There are also plenty of traditional enterprise consultancy companies that have been working with various customers to implement e.g. blockchain based schemes for carbon trading, or solutions related to logistics or sourcing materials. Not all of that might succeed but it seems that trading/inventing some new crypto currency is not a goal with these projects.
That last part seems to fit with what I've seen in the companies I've looked at: they were pivoting away from what the cryptocurrency people call a blockchain to a ledger restricted to known parties since they're tracking existing business relationships anyway and things like efficiency or offline/low-connectivity support are important.
> During the dot com era, it all looked like a bunch of hippies going on about digital highways and crazy stuff like that.
That was definitely present, but it wasn't anywhere close to a majority position by at least the middle of the decade. You definitely had the hippies but also a ton of distilled capitalism: companies seeing new businesses which weren't previously viable, companies seeing advantages from moving their business online, selling services to the previous groups, etc. The Wired crowd got a certain amount of publicity but there were an awful lot of boring companies spending considerably more money.
I don't see the similarity. Yes, the stocks were overpriced, and people who didn't understand venture capital were effectively providing venture capital. But the dot com era produced some major corporations: Google, Amazon, eBay, Netflix, and many more. Those companies have real economic value because they create products that people want to pay for.
Web3 hasn't produced anything comparable. The space is now polluted enough that I doubt it will.
Yet; each of those companies burned through quite a bit of investment before they became profitable. You need to look at this space in ten years again. Web3 is just a marketing term that some people came up with in the last year or so. It takes longer than that for companies to become successful.
And BTW., that's your connection to the dot com bubble right there. That was web 1.0. This is web3. The tech is different. The investment behavior is the same level of idiocy.
Back in the day, if you even hinted at "we might get a domain name and a website", you'd be getting funding. People were dumping millions in some pretty moronic and misguided notions. A lot of those companies failed for quite obvious reasons. But not without making several people very rich. Investors have a way with money where they manage to not lose when things go bad and win a lot when that fails to happen. That's one of the perks of playing with other people's money. Worst case you just take your cut and then you wash your hands of the whole thing. Best case it was all you and your genius insights. Sometimes stupid money is tempting for smart investors. When it's on offer, there will be people taking it.
And of course few companies actually had some good ideas and got a little more funding than they would have otherwise gotten and used that to become amazingly successful. Amazon, Google, Ebay, and a few others survived the bursting of the bubble and survived and thrived.
The same is happening with crypto and blockchain companies. Most of them are obviously empty shells run by charlatans operating out of dodgy jurisdictions. But those are actually pretty easy to spot. If it looks dodgy, it more than likely is super dodgy. If it looks to good to be true, it probably is. So, people losing their money are mostly just fools. The exact same kind of fools that lost their money 20 years ago. When some of those fools are institutional investors betting with your pension money, you'd be right to be a bit concerned about that though. That too happened 20 years ago.
More interesting is to look for the things that just aren't that dodgy at a first glance. Some of these companies are looking pretty serious actually. Solid investors, actual customers, working products, etc. It's not all scams and pyramid schemes and those might be the possible survivors of the crypto bubble bursting. Some of the tech is actually quite impressive and looks like it might be used to solve some real problems.
There are probably more than few very good tech companies just putting their heads down and getting some real work done right now. Those are the interesting ones to follow.