The sense of urgency is everywhere I look. Bitcoin is dying, and it’s time get a new job. The warnings are stark. Bitcoin’s price has lost 70% since its $20,000 peak last year, the Securities and Exchange Commission has rejected every bitcoin ETF it’s seen so far and Goldman Sachs has delayed its much-touted roll-out of bitcoin trading.
Bill Clinton’s former senior economist Nouriel Roubini can’t seem to stop talking about the “useless” cryptocurrency, and even the controversial Wolf of Wall Street Jordan Belfort, who pleaded guilty to fraud relating to stock market manipulation, has said that bitcoin is headed for the scrapyard.
As bitcoin and its cryptocurrency peers including ethereum, XRP and others have exploded into the public consciousness over the past year, the warnings must indeed seem dire. But this is not new. Bitcoin may eventually fail, blockchain could prove to be a bunch of smoke and mirrors, but they haven’t yet, and what we’re experiencing right now is just a lot of more of what has already happened.
The first recorded claim of bitcoin’s demise was in 2010, on a little-known blog that found itself posted on a record of “bitcoin obituaries” collected by 99Bitcoins, a bitcoin information site. While I consider myself among the first wave of bitcoin writers, having written my first article on the subject in 2011, this early claim of bitcoin’s death came when the cryptocurrency was valued at only $0.23. It is now worth almost $7,000.
The year I wrote my first article on bitcoin, the nascent cryptocurrency was declared dead six more times as its price fluctuated between $3.12 and $19.73. The site has tracked a total of 309 deaths of bitcoin, the most recent of which was a 24-page take-down by the Economist, which ventured that not only is bitcoin useless but blockchain was probably on its way out too.
Over that time, I’ve seen bitcoin battle it out for survival with the first early forks, or copies, of the open source code that sought to create value from the original code written by Satoshi Nakamoto. Back then, the widely held belief was that in the end there would be only one cryptocurrency, a Swiss Army knife of global finance that would evolve to include the best of all possible cryptocurrencies until old-fashioned fiat currency issued by central banks was as dead as a cowrie shell strung around the neck of a Papua New Guinea tribesman.
Then, in 2014, ethereum started its rise in popularity, and many deemed that cryptocurrency, which has a coding language that could be used to write decentralized applications, a death knell to bitcoin. Others saw the end of previously unregulated bitcoin when the IRS said owners would have to pay taxes on earnings. When Mt Gox, the largest bitcoin exchange in the world, was forced closed by a massive, $500 million hack, many a skeptic declared the cryptocurrency dead. When the Silk Road marketplace for buying illicit goods was shut down by the FBI, bitcoin experienced what many believed was a catastrophic collapse in price, falling all the way down to $418, and many declared the cryptocurrency’s only widespread use case—buying drugs—a lost cause.
So bad has the state of cryptocurrency become that a new website dedicated to “DeadCoins” lists more than 900 cryptocurrencies that are no longer active, are scams, or were never anything more than a joke. But from that first claim of bitcoin’s death, bitcoin has risen 2.8 million percent to $6,477, with a total value of $111 billion. Ethereum is valued at $23 billion, and XRP is $11 billion, with a total cryptocurrency market cap of $204 billion.
What is perhaps the biggest difference in this most recent cry of the death of bitcoin is the negative focus on blockchain itself. If bitcoin caused users to question the role of banks in global finance, any number of other middlemen—from central securities depositories to land-titling registries—might also be reimagined. But this latest round of skeptics has cast doubt on these and other possible use cases as well.
Lending support to concerns that even blockchain is dying is a Deloitte report from last year finding that out that more than 90% of the almost 27,000 blockchain projects on the Github code repository were no longer active. Yet that number is only slightly higher than the failure rate of any startup, according to a 2012 Harvard Business School report, and right on par with the conventional wisdom that says 90% of all startups fail.
So, what’s going on here? Why is an entire industry being declared dead when its startups rather predictably fail? Why don’t we declare restaurants dead or healthcare dead or technology dead because a high percentage of their startups fail? It’s hard to say for sure. But one obvious possibility is that the vested interests for blockchain to succeed or fail are strong.
Traditional economists who have spent their career studying the status quo run the risk of seeing their life’s work get tossed into the proverbial dust bin in a decentralized world. Any financial institution or middleman making money runs the risk of seeing profits fall if counterparties can connect directly using open source technology, and they have spent money accordingly on defensive exploration.
On the flip side, enterprises have continued to hire thousands of staff to build and sell the new decentralized systems, blockchain developers have invested months and years on learning the technology and droves of investors who have been prevented from investing in startups by regulations and other barriers have thrown their hard-earned money into the chance to participate in a new paradigm.
If either of these groups is proved wrong, they have a lot too lose. Another possibility, though, is that we’re on a totally different time frame than any of us realize.
Friends of mine who write computer code talk about being able to recognize whether a person learned to code when they were a child or an adult based on how elegant the solution is. The younger the person when they learned to write, the more imaginative and simple the solution. In blockchain, everyone currently in the workforce learned to code as an adult. They grew up in a centralized world and started studying the computer languages to decentralize it only after their worldview had begun to solidify. The real innovation, I believe, won’t come until young people who grew up with decentralized possibilities and learned to write smart contract code while their minds were still forming start to implement their ideas in the workforce.
In the meantime, so long as some people choose to place their trust in the cryptography and the electricity that powers blockchain instead of the middlemen between them, innovation among enthusiasts of bitcoin and its descendants will remain alive and well.