The bear market of 2018 is neither the longest (so far) nor the toughest in the history of crypto. It was way worse 4 years ago when Bitcoin went down to around $400 just in 3 months after reaching almost $1200 in December 2013 and did not recover until January 2017 (three whole years !).
That collapse is usually said to be caused by two reasons. First, in December 2013 People’s Bank of China announced that banks and payment companies were prohibited from dealing with Bitcoin. Second, in February 2014 Mt. Gox, the exchange that handled 80% of Bitcoin transactions, was hacked and went bankrupt in just in a couple of weeks.
Both occasions caused the bubble to burst, though, it seems like there was another, more fundamental reason, why sooner or later things just had to go bad. This reason seems comprehensive if one takes a look at Coinmarketcap largest cryptos list for December 1, 2013.
Bitcoin, Litecoin, and Ripple are probably the only three currencies that look recognizable even to crypto newbies. The rest, including Peercoin, Namecoin, Megacoin, Feathercoin, Worldcoin, Primecoin, Freicoin, Novacoin, Zetacoin, and all these something-coins were nothing but just a copy of the Bitcoin code created as its clones for speculative purposes.
Five years after its creation (2009-2013) Bitcoin remained the only significant cryptocurrency with the market dominance of >95%. What was even worse though, Bitcoin was merely the only technology on the market. No one seriously considered Litecoin or any other chain as a disruptive distributed ledger technology, and consequently, the stagnation of Bitcoin meant the decline of the entire industry, unless protocols containing a completely different logic do not appear. Back then many of those, who were irritated by a sudden rise of Bitcoin happily thought the game was over.
“So Bitcoin, we’ll remember the good times, like the time that one guy got a heat stroke while mining Bitcoins. Or the time there was the great heist caper that shut down trading site Mt Gox for an entire day. The lulz were abundant. But frankly, it’s time for you to go. Farewell” wrote Gizmodo Australia in 2014.
However, one thing seems to have been left unconsidered and that was the rise of the disruptive technologies within the newly created protocols. Amidst the market depression, forever remembered as Crypto Winter, Dan Larimer has presented Bitshares protocol, offering much higher transaction speed capacity and innovative governance, including Delegated Proof of Stake (DPoS) consensus algorithm and a decentralized exchange. Created to address Bitcoin’s shortcomings, Bitshares made it to the top-4 cryptos already by July.
That same year Darkcoin (now known as Dash, the world’s first anonymous cryptocurrency) appeared. Both Bitshares and Dash were successful enough to attract large tech communities that contributed to their open source development and built their infrastructure on Decentralized Autonomous Companies principles. Later, in 2015 Ethereum was released, offering first decentralized virtual machine and smart contracts to optimize business processes.
This was a big promise not only to the blockchain community but to businesses and enterprises as well. Ether quickly became the world’s 2nd most valuable currency by the end of 2015. Ethereum smart contracts together with the ERC-20 tokens made the ICO process even faster and easier, turning it to a “ready-made” product for the entire industry (and out of it).
All this is worth mentioning because the market bull run in 2017 was not just a random bubble, but rather an acknowledgment of what happened in the industry during the past three years (2014-2016). Game changer projects that were released during these years did the spadework for what happened to the crypto market in 2017 when total market cap grew from $17,7 B on January 1 to $615 B on December 30.
The bear market of 2018 has similar features as to what happened in 2014 both in terms of “red” indicators and the overall absence of a clear vision of what is going to disrupt the industry. Although new ledgers are launched more frequently than they were four years ago, claims don’t change: the majority of them promise to become “better Ethereums” just like all these Peercoins and Junglecoins claimed to be a “better Bitcoin” in 2013. Even if something improves (speed capacity, transaction cost, etc), scaling is not enough to attract enough attention to the industry and consequently new solid investments. As an example, invented in 2011, Litecoin was an improving (but not a disrupting) technology. And on the contrary, Bitshares was not just a “slightly better” Bitcoin, it changed the whole logic of Distributed Ledger Technologies by introducing a revolutionary consensus algorithm.
Let’s try to figure out who has more chances to change the things in the blockchain industry.
Ethereum is still #2 currency in terms of capitalization and its founder Vitalik Buterin proudly keeps his place of the most influential public person in the entire industry. However, there are two major concerns about its future development.
First, technology updates that were announced quite a long time ago still haven’t been implemented and releases are constantly being postponed. The main update – “Casper” – moving Ethereum to POS was announced back in early 2016, while it’s whitepaper appeared only a few days ago announcing no clear deadline commitments.
Second, there is a constant decline in the number of Ethereum daily transactions, while the number of ERC-20 tokens keeps growing. On one hand the ICOs times of are coming to an end, second – there happens to be almost no “Dapp ecosystem” around Ethereum: according to Dappradar there is only one (!) Dapp with the daily audience over 1 000 users and something around 12 000 daily users in total.
Launched by Dan Larrimer, the guy who has probably the best track record in blockchain industry (creating Bitshares and Steem networks), EOS was positioned as an operational system for distributed apps and main Ethereum rival. While designing the protocol Dan Larimer had numerous public online disputes with Vitalik Buterin, however, no one has shown signs of interest in EOS as a technology layer. So far there are only 120 dapps in EOS ecosystem which is 10 times less than in Ethereum (who’s not doing well either – see above), and there is not enough information, whether any big players (banks, enterprises) are considering using EOS. Moreover, EOS is a very centralized currency with the top 1.6% of holders owning 90% of the total supply, making it a risky asset for big players to invest in.
Probably the most promising solution so far, however, we haven’t seen much of it yet. Ton’s strongest selling point is, of course, the fact that it potentially has a base of 200 M users and almost everything introduced by the team might get an immediate mass adoption after being implemented as a Telegram feature. This summer TON has presented a blockchain-based Telegram Passport that has it all to outpace the half-forgotten Ethereum-based apps like Civic as soon as Ton’s mainnet is launched. However, the real game changer is the Ton wallet. If there is a simple Gram-fiat gateway designed, it would have great chances to be adopted by millions of messenger users bringing them all to the industry.
Ton is probably the only project at the moment that can move the industry towards mass adoption, however, the biggest risk is the extreme lack of information about the project as it is kept strictly confidential.
More and what’s next?
We did not mention private and permissioned chains, including Corda and Hyperledger, because their development will not directly influence the growth or decline of the crypto market. However, this is a field where disruptive blockchain technologies could appear once these products succeed in bringing mass adoption of crypto and decentralized technologies together.
Another potential ray of sunshine promising fresh blood and new money is security tokens. Many things have to be done here in terms of legal regulations and infrastructure development. However, in my opinion, STOs will become a relatively new Penny stock market as opposed to the ICO 2.0. The thing is, blockchain protocols are not products, but open-source technologies and, therefore, don’t have any shares. A company behind a blockchain protocol (let’s say Block.one) is just a developer unit and not an entity that has control over technology, so why one might need their equity?
Blockchain has pretty high chances in disrupting securities market, but I am not sure it’s vice versa.