Has Blockchain Crossed the Chasm? The Netscape Moment for Blockchain
Blockchain and cryptocurrencies have made dramatic strides since their inception in 2008. The DeFi market now measures its Total Value Locked (TVL) in billions of dollars - and the progress is showing no signs of stopping. But how did it get this far? Before truly understanding how blockchain has reached the level in which it is now and what the future holds for it, we need to retrace its steps. So let’s take a deep dive into how it all began and endured.
The story of blockchain started in August 2008, with the appearance of the mysterious bitcoin.org domain name. A couple of months later, a shadowy figure or a group known only as Satoshi Nakamoto, posted a whitepaper to a cryptography mailing list. The title of the said whitepaper was “Bitcoin: A Peer-to-Peer Electronic Cash System”.
The paper outlined a digital currency secured by something called “the blockchain” - a peer-to-peer network that would establish a system facilitating electronic transactions relying on trust.
On January 3rd, 2009, the bitcoin network was born. It happened when Satoshi Nakamoto mined the “genesis block of bitcoin” (block number 0), which had a reward of 50 bitcoins - and the world’s never been the same since. The first open-source bitcoin client was launched a few days later at SourceForge.
First transaction and some growing pains
The following year welcomed the first transaction using bitcoin, in which 10,000 bitcoins were used to buy two Papa John’s pizzas. The transaction’s value was negotiated on the bitcoin forum, and this was the way things were done for all such transactions at the time. This was also the year when the first and only major vulnerability to date was discovered in bitcoin’s protocol. It was the lack of proper verification of transactions before adding them in the transaction log (blockchain), allowing users to generate unlimited bitcoins.
It was only a matter of time before someone exploited it - creating more than 184 billion bitcoins in a single transaction and sending them to two addresses on the network. Fortunately, the transaction was discovered in a matter of hours and removed from the blockchain. The flaw in question was also resolved and the network forked to an updated version.
New Cryptocurrencies arise, Bitcoin becomes more accepted
Bitcoin’s open-source code became the basis for the creation of other digital currencies, leading to the emergence of the likes of namecoin, litecoin, peercoin, and others. In 2011, organizations started shyly accepting bitcoins in their operations, with pioneers such as the Electronic Frontier Foundation, WikiLeaks, and others. The year 2012 saw further acceptance, including by WordPress and over 1,000 other merchants through BitPay. The launch of the Bitcoin Foundation, founded by Gavin Andersen, Patrick Murch, Peter Vessenes, Jon Matonis, and Charlie Shem, significantly assisted in this growth.
The Growth Accelerates
In 2013, the list of entities accepting bitcoin continued to grow, including the Internet Archive, OkCupid, and Foodler. At the same time, Coinbase reported selling $1 million worth of bitcoins in a single month, priced over $22 each. This was the year when the first bitcoin ATM (in Vancouver, Canada) came into being - a product of Robocoin and Bitcoiniacs. The University of Nicosia in Cyprus started accepting tuition fees paid in Bitcoin. The following year welcomed more Bitcoin supporters, including Zynga, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino, TigerDirect, Overstock.com, Newegg, Dell, and Microsoft, along with a documentary film and a couple of songs about the cryptocurrency.
In Russia, bitcoin exchange BitPay became the sponsor of the St. Petersburg Bowl. The cryptocurrency was accepted for ticket and concession sales, as well as to pay for the sponsorship itself.
In February 2015, the number of merchants accepting bitcoin surpassed 100,000. The number of Google Scholar articles mentioning bitcoin also increased - from 83 in 2009 to 3,580 in 2016. The year 2016 saw the first issue of the academic journal Ledger, edited by Peter Rizun.
Exchange trade volumes continued to grow. Up until the bubble burst.
The ICO Bubble Bursts
In 2017, Wired wrote that the bubble in initial coin offerings (ICOs) was nearing its bursting point. A form of crowdfunding in which an amount of cryptocurrency is sold in the form of tokens in exchange for legal tender or other cryptocurrencies, ICOs became very popular at this time. They were especially popular among investors looking to accomplish financial gains similar to those accomplished by early cryptocurrency speculators. The predictions of a collapse were also made by numerous experts in economic and financial markets.
Their expectations became a reality in January 2018, when the price of bitcoin fell by around 65% in just one month, after its December 2017 all-time-high of $19,783. Soon after, the anticipated crash and sell-off of most cryptocurrencies followed, marking 2018 as the year of the cryptocurrency crash. This crash, which by September amounted to 80% for the majority of cryptocurrencies, was worse than the dot-com bubble burst of 78%.
The Netscape Moment
Despite the 2018 crash, the cryptocurrency market has reeled (the price of one bitcoin at the time of writing was over $61,000). And in October 2021, it has already reached what may be best described as its Netscape moment. The 1994 launch of the web browser that allowed regular people to easily browse the web was a turning point for the technology that had been around for years. It lit the fuse that sent the internet exploding into the mainstream in the late 1990s.
With cryptocurrencies, things haven’t been nearly as simple as launching a single, simple product. However, the user experience has reached the point where most users are able to figure them out. For cryptocurrencies, that Netscape moment entailed a series of developments, including the NFT explosion, millions of people coming to play blockchain games like Axie, and others, culminating with the first-ever Bitcoin ETF hitting the market.
Clearly, cryptocurrencies and blockchain are no longer in the early adopter stage. In fact, they’re already in the first stage of mainstream use, the stage which Geoffrey Moore calls the third stage in the technology adoption lifecycle - the early majority stage. In fact, the cryptocurrency market is already worth billions and is growing twice as fast as the internet in the dot-com era. As the mainstream grows warmer to this new technology, it will be interesting to see where it takes us in the future.