Blockchain Is Dead. Long Live Blockchain

The title is clickbait, the author is wrong, dislike, no constructive criticism. This article is a reflection on the current state of the cryptocurrency market. There won’t be a deep analysis or endless philosophy about where we’re headed. I feel like a member of an anonymous club. Hello, I’m Ivan, I’m a crypto (fool) enthusiast. I tried it in 2013, didn’t get it. Tried again at the end of 2016, and now I can’t quit. It’s interesting, eventful. What kind of events? I’ll cover everything below, as impartially as possible, but definitely not objectively.

This is a brief overview of everything that happened in 2017-2018. You can find more details about each point from the attached sources or by Googling yourself. Like this format? Grab some tea, there will be a lot of text and criticism—some objective, some not so much.

In the Beginning Was the Word, and the Word Was Blockchain

Let’s agree on something: everything in this article is my humble opinion. Don’t agree? Welcome to the comments—let’s discuss.

Not so long ago, a globally accepted data storage algorithm called blockchain was created. There were other attempts before, but that’s not the topic today. What is it? I won’t describe it—everyone’s read about it a hundred times. What matters is that every mention of the technology is tightly linked to currency. Initially to Bitcoin, later to its many (and not) analogs. But… I get why this was necessary at the dawn of the technology. That’s how consensus was designed. But Bitcoin itself has long since moved forward, keeping its vision and basic technological principles. Since then, only a handful of projects have tried to achieve something new. Most importantly, almost no one tries to separate these two concepts. Why? Everyone says to distinguish and separate, but all projects are tied to the idea that blockchain must go hand-in-hand with some coin. Any debate devolves into demagoguery about the inseparability of these concepts.

Few people mention, for example, the Hyperledger project, created and supported by major fintech companies specifically to develop the technology without a token. Among well-known market projects, the much-maligned Ripple is also not a cryptocurrency-based ledger; its token is a fiction—a plaything for the public to trade on exchanges. All their clients use the technology for data transfer and transaction registration, not the currency itself.

Business Solutions

Speaking of clients and business: every new technology takes years to gain supporters, developers, and clients. Traditional businesses are slow to adopt cutting-edge developments—classic story. Blockchain is no exception. It’s not needed where there are (non-)relational databases, where SWIFT, VISA, and MasterCard already exist. Some companies don’t even have websites, and if they do, they may not engage with clients or communities.

Blockchain is no exception. It started as an example of a system for exchanging goods, and over the past couple of years, it’s spawned many variations. But the market doesn’t need these solutions. All those flashy “YouTube on the blockchain” projects and the like are just hype; most disappeared after their crowdsale.

Marketing aside, let’s return to the main point: blockchain is, first and foremost, a technology, not a currency. And since it’s a technology, the question is whether its implementation makes sense. Blockchain isn’t needed everywhere. People, accept it. Fanaticism has led the community to split into die-hard supporters and opponents. It’s a phenomenon. Any other technology just exists—those who need it use it, those who don’t simply acknowledge its right to exist. But with blockchain, there’s some bizarre obsession. It’s just a data storage method, relevant in some cases, not all.

The ICO Market

Speaking of crowdsales and implementation where needed: it’s no surprise that the 2017 frenzy ended in total failure by the end of 2018. How did this happen? Let’s break it down briefly.

First, good intentions don’t last long in humanity. A simple, philanthropic idea turned into a market full of scammers and regulators. The crypto world’s version of crowdfunding wasn’t the Wild West, as I used to call it, but a circus. It’s a nursery for primates—some orangutans beat their chests, baboons go extinct, and only a few evolve into “homo sapiens blockchainus.” The result: either someone tries to scam you (sometimes elegantly, sometimes blatantly), or you have to jump through hoops with KYC/AML to buy tokens. And no one seems bothered that there are NO guarantees for passing KYC/AML. Then you get calls from brokers offering their services because some project shamelessly sold your contact info. There are solutions, like blockchain-based auditors—Civic raised a lot of money with a unique ICO—but if only every project offered such guarantees… That’s why projects like AMLT are emerging, offering address audits, but these are rare, not the norm.

Supply and demand led to another major problem: investor blindness. Promises of huge returns trump everything. The value of the project is secondary to marketing tricks. There’s a saying: a blockchain startup marketer is only 20% marketer, 80% salesperson. As mentioned, it’s all about being “the first in their segment/on blockchain,” price growth charts, and promises of dividends for every little thing. The biggest fundraisers were investment funds and profit-promising projects. Is that bad? No.

By focusing on value, commercial market players started paying attention. It became a tool for bypassing sanctions and restrictions (the anonymous side of blockchain), and for proving deals were made (blockchain transparency). Many companies decided to speculate on this.

Is this right? It comes down to the difference between the ideal scenario and human nature.

Because so much money flowed into the financial segment, the public now believes blockchain and money are inseparable. I mentioned this at the start. People, really? A project’s success doesn’t depend on token pricing. Profit isn’t the ultimate goal of a startup. There are many blockchain applications where tokens aren’t even mentioned. And vice versa—why add a token everywhere just to boost your valuation when it’s not justified?

We’ll return to this later, but for now, back to ICO problems.

The third problem (have I lost count?) is young IT teams. Not so much in terms of blockchain, but business in general. They didn’t (and still don’t, judging by their concepts) understand how to organize business processes or how much to ask for their project. Their world is cool code. Then marketers and advisors step in. In my humble opinion, advisors are a relic of the crypto market. Let’s be honest: what function were they supposed to perform? At the start of the ICO market, they gave business advice, acted as escrow, communicated with their audience, and promoted the project. What did it turn into? For a percentage of the raised funds, they let you put their name and photo on your site. Cool. What next? Because of these formalities and the uselessness of “useful” people, projects often lack their own financial experts. Huge sums were spent recklessly, project efficiency was minimal. And investors never learn.

How many projects are still working today? Of those that raised money last year? This year? Sure, compared to late 2017 and early 2018, the end of this year can’t compare in terms of fundraising and new projects, but they still appear—almost every single day.

Still Going: Project Prospects and Roadmaps

Point four: evaluating project prospects and roadmaps. The euphoria of early projects energized the community. “We’ll make a project that changes everything!” “This is a tech revolution!” You get the idea. So, bold slogans and promises were everywhere. All whitepapers promised huge returns, full of inspiring charts. In practice? Nothing. Teams split, leaders ran off with the money. Technical papers were rewritten because promises couldn’t be delivered, websites shamelessly deleted. Ethereum, the first ICO platform, promised so much in its first version that it’s still trying to catch up to its original WhitePaper. And let’s not forget the DAO and the problems of every other ICO in these two years.

Of course, technology evolves. Ideas are discarded, die out, or become something new. As one recent article’s author wrote, one thing replaces another. But people cling to mistakes, ready to die for them! All these blockchain evangelists, crypto enthusiasts—who are you? Heirs to a new faith? What’s with the mass hysteria?! Technology is just technology, nothing more. The romance of full decentralization and anonymity is dead.

It remains in your fantasies and those of the last crypto-anarchists, who are a dying breed. History doesn’t like revolutions, and people are inherently cautious. The justified fear of radical change slows technology adoption—this is visible everywhere. The last officially recognized cryptocurrencies look like relics regulators are eager to remove or destroy.

Classic “but”: Bitcoin is the OG, it will exist, there’s no getting around it.

ICO – Society’s Pain

It’s a pain like a mosquito bite—annoying, but you still scratch it. Hundreds of projects raise money for who knows what, and people throw in all their savings and loans.

That’s why token creation platforms became a trend—an easy tool for anyone to generate their own tokens. The leader here is, of course, Ethereum. What about other projects? Some are better, some worse, some radically different. But the main thing is—they exist! But how many projects actually launch on them? Just a handful!

Here’s some two-year stats from a tracker:

• Projects on Ethereum: 2,785
• On Ethereum Classic: 8
• On Ontology: 0
• Waves: 118
• Nem: 17
• Stellar: 28
• Bitshares: 5
• Neo: 18
• Cardano: 1
• Tron: 0
• EOS: 11
• On their own blockchain: 324

Yes, Tron, Ontology, EOS are new, so startups haven’t launched on them yet. Also, this data isn’t fully representative since it doesn’t correlate with other trackers.

But what does this tell us? People either copy smart contracts on Ethereum or copy blockchains from GitHub. Quality suffers from laziness. Many don’t even check what they downloaded or how it works.

One platform’s dominance (not even the most convenient) means new startups can’t generate hype—they’re lost in the sea of junk, even if they’re technologically or functionally interesting.

The community remembers the first big projects on Ethereum: Wings, Bancor, and the earlier mentioned Civic. Maybe a few more. What about other platforms? On Nem: PundiX, COMSA, maybe one or two more. On Neo: THEKEY, and that’s about it. On Stellar: Mobius, and now you can see the dev of a new project, HelpCoin, active in chat. The only significant fork of Bitshares is Steem and Golos—and they have plenty of problems. But they let anyone speak and get rewarded, with no restrictions or requirements. And again, these aren’t ICOs, but forks of the technology.

Can you name any recent ICO projects that are actually worth something?

This whole picture led to the natural death of ICOs as a phenomenon, but even today, over a hundred projects of varying quality are waiting to be listed on trackers.

The next evolutionary step after ICOs is called STO. But that just means regulators have an even tighter grip on developers.

So, two extremes: either you’re in the mass of various shitcoins, or you’re looking for big investors for an STO. I feel for developers who have to exist in today’s market. Guys, you’re awesome if you keep working on your projects no matter what. The useful and completed ones will survive.

As a bonus, if you’re thinking of launching your own ICO, first watch this video (when it’s available again—I don’t know why the author took it down), where an expert will tell you the real financial costs of promoting a project to break even after a crowdsale. It’ll either kill your desire or make you think about how you want to build your project—under the control of every possible authority, or like any fintech project—quietly, in a garage, with friends. Make history.

Faith, Hope, Crypto

Everyone has noticed the new crypto depression. Just this year, Bitcoin was “declared dead” (according to major media) 90 times.

This trend created a psychological bubble years ago: the price of cryptocurrency is the price of the technology. If Bitcoin crashes, blockchain is a scam. If Bitcoin soars, blockchain is useful. It’s a silly trend. Can someone explain why?

Despite every other major project being “buried,” people keep building. They don’t abandon what they started. Do they care about the token price on exchanges? Not really. For example, Constellation lost over 90% in value, but still released a testnet and talk about their technology. Or RSK, implementing smart contracts on Bitcoin. They didn’t even have a crowdsale, but they keep working. I think independent projects like these are important—they’re created for the technology, to foster development where the market is otherwise stagnant (and that’s the only way to describe today’s market).

One popular criticism of cryptocurrencies is energy-intensive mining. As a solution, mining on hard drives and other media was proposed. There are hardly any projects left in this area: Burst is still alive, but Storj can hardly be called a full-fledged project anymore, since it’s now just a token on Ethereum, not a standalone ecosystem. There’s also Chia—worth checking out if you’re interested, as it’s being developed by the creator of BitTorrent. And it’s open source, so why not share?

Let’s share projects that bring real value to society. They exist, but finding them is a challenge. If you’ve read this far, you probably have something to say too. I’ll be waiting in the comments.

Disappointment of the Year

Now, a bit about the media. The coolest thing that could have been—killed by huge cash infusions. News portals want so much for a project article that it’s shocking if you know prices in the traditional sector.

For example: publishing an article on CoinTelegraph costs $2,900. The relevant audience (based on public info from their Telegram channel) is 7,500 people (while they claim almost 8,000,000). Meanwhile, a paid article on a tier 1 business portal like Forbes will cost about $5,200 through an agent, with a claimed audience of over 112,150,000.

So, the question: is it even worth looking at crypto media if they demand such huge sums for a much smaller return than comparable business and fintech news portals?

Instead of an answer, I suggest you read this article, where, albeit in a rough way, the interviewer and his guest explain this issue quite clearly.

In Conclusion

Blockchain is more alive than dead. But the toxic atmosphere that’s grown around it is a problem. I hope the new year brings people the realization that we should chase not after tokens and profits, but after truly useful applications of the technology where it’s needed.

I left out a lot in this article—forks, technological alternatives (marketers’ favorite “Bitcoin 2.0,” “Blockchain 3.0” phrases), mining in general, and much more. If there’s interest, I’ll cover those separately, outside of this year-end summary.

If you’ve read my “non-article” to the end, thank you for your patience—huge respect to you.

Happy New Year! Wishing you to the moon and all the good that comes with it.