Internet vs Blockchain Revolution: Are we in 1994? What to expect Next? (Part 5)by@remi.gai
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Internet vs Blockchain Revolution: Are we in 1994? What to expect Next? (Part 5)

by Remi GaiApril 4th, 2019
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<em>This article is part of the Internet vs Blockchain Revolution Series. If you are interested in reading the other articles, </em><a href=""><em>check out this&nbsp;post</em></a><em>.</em>

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This article is part of the Internet vs Blockchain Revolution Series. If you are interested in reading the other articles, check out this post.

Are we in 1994?

Interestingly, when Marc Andreessen, the founder of Netscape, found himself in Silicon Valley in early 1994, he thought that he was too late and missed the whole thing as the short recession of 1990–1991 hit the technology industry hard. The current stage of blockchain and cryptocurrency development is most analogous to the Internet Revolution in 1994, in which we have invented TCP/IP, HTML, and FTP, and out of these will lead to the development of Netscape (1994) and much later Facebook (2004), and Airbnb (2008). In blockchain, we are still inventing the building blocks and tools that allow us to distribute compute, preserve privacy, manage identity, and allow scalability, etc. — the breakthrough dapps have yet appeared and will emerge in the coming years.

Perez Technological Surge Cycle from Technology Revolutions and Financial Capital

Despite the negative press during this cryptocurrency market downturn, we are still early in the industry, and the bubble came prematurely due to 1) The possibility of early liquidity with tokens despite the fact that a lot of the products and technologies were not released 2) The world is a lot more connected now, thanks to the Internet and social media, which could have accelerated the propagation of hype and formation of the bubble globally in a way that wasn’t possible before. However from a technological perspective, we are still in the “gestation” phase in the Perez Technological Surge Cycle, and the “installation” period has yet appeared because the previous market frenzy didn’t produce the outcomes that are necessary to reach a turning point, which include “significant infrastructure improvements and replicable business models that can serve as a roadmap during the deployment period” (check out this great post by Daniel Heyman).

The Growth of Internet users vs Growth Projection of Cryptocurrency Users in the World

The current user adoption of cryptocurrency is most similar to the adoption of the Internet in 1994, in which 24 years later, more than half of the population on the planet live their daily life connected. We can expect a similar growth trajectory happen in the cryptocurrency space, perhaps at a faster rate since the world is more connected now and there’s a general trend for new technologies to be adopted at a faster pace over the past centuries. For example, it took 46 years for electricity, 35 years for telephone, 14 years for TV and 7 years for the Web to reach 25% of global market penetration. Therefore, we estimate that it could take another 15 years for cryptocurrency to reach the level of adoption that we have today with the Internet.

From a capital perspective, the magnitude of the fundings invested during the Internet and Blockchain Revolutions is also very different, with $35.6B of venture capital flowing into US Internet startups in 1999 (according to CNN Money) versus $1B of venture capital and $5B from ICOs going into global blockchain companies in 2017 (according to CB Insights). At the peak of the Internet bubble in 2000, Nasdaq had a market cap of $6.5T (inflation-adjusted) compared to a global market cap of $800B in cryptocurrency in early 2018. Despite the fact that the Internet bubble only took place in the United States, while the cryptocurrency bubble was global, the former had a higher magnitude of capital invested because 1) The Internet bull run was coupled with the existing long term stock bull run, in which Wall Street and the retail investors were already “warmed up” to jump into the new high returns dot com IPOs 2) A large amount of capital came from the accumulated wealth of baby boomers, who were around their 40s, managing their own retirement savings, and not familiar with economic crisis during their life. In contrast, the cryptocurrency investors were mostly dominated by Millennials who had less capital than the older generations (Millennials: 41%, Generation X: 24%, Baby Boomers: 18%). Additionally, the amount of capital invested in cryptocurrencies from institutional investors was relatively small and didn’t include the participation of countries with large populations, such as China and India.

Blockchain Revolution: the evolution of the market, technologies, and companies

From these perspectives, we should expect another bubble or bubbles to appear in the years to come, as “successful and replicable business models” (Carlota Perez) will be found in decentralized applications, with a larger magnitude of institutional capital flowing into the industry, similar to what happened during the Internet Revolution in 1999–2000. We can expect the total market cap to eventually surpass $10T as it would combine protocol tokens (which capture value from dapps), equity tokens, utility tokens (if the model still proves to be viable in the future), and cryptocurrency (as a store of value — in which Bitcoin could reach a market of $7.8T if it reaches the equivalence of digital gold). Overall, we believe that we are still early in the technological cycle of Blockchain, similar to 1994 during the Internet Revolution and we should expect more market cycle or cycles happen in the upcoming years.

What to Expect Next? :

Consensus 2018: Debate around the adoption of decentralized applications between Joseph Lubin, Founder of ConSensys and Jimmy Song, Venture Partner at Blockchain Capital

With this current market downturn, the cryptocurrency and blockchain industries need some winning use cases to re-instill confidence in the tech. After the Internet bubble had burst, people were gradually willing to believe in Internet again as a new wave of web startups started to find their footing, and the successes of Netflix and PayPal began to reduce some of the uncertainties and bad memories. In the cryptocurrency and blockchain world, we are still looking for successful use cases that can prove the value blockchain technology and decentralized applications to help the industry regain confidence. One of the prominent leader in the dapp development space and founder of ConsenSys, Joseph Lubin, recently claimed that “peeking into 2019, if you could see the landscape through my eyes, you’d have to wear shades”. Joseph Lubin takes a strong position that the future will be decentralized, while other figures such as Jimmy Song from Blockchain Capital remain skeptical around the decentralized applications being used in the upcoming years. So far, the unicorns in the space are centralized companies with traditional business models that benefit the cryptocurrency ecosystem itself (COINBASE, Binance, Circle and Bitmain). We have yet seen popular decentralized applications that are replacing traditional companies.

The previous and future phases of the Blockchain Revolution

We are currently transitioning into the fifth phase of the Blockchain evolution, in which the application of Blockchain across different industries, and Blockchain scalability solutions are being explored. During the first phase, between 2009–2012, Bitcoin was released as a new type of digital currency and proof-of-concept, and the first users were composed of hardcore techies, cryptographers, and cypherpunks, who were mining and promoting cryptocurrency in various mailing lists and forums (, Reddit, etc.). During the second phase 2013–2014, with the increasing media coverage (although many of them were negative press), infrastructures such as exchanges, wallet, custody, and payment solutions started to increase. The third phase 2015–2017 was more focused on real-world applications around financial use cases, such as remittance, micro-payments, cross border payments. With the emergence of smart contracts with ethereum, we have entered the fourth phase in which use cases beyond finance are being explored, and the new fundraising vehicle, ICO, became a killer application during this phase. In the fifth phase, we are expecting the emergence of successful dapps and use cases, reinstalling confidence about the technology, and improvements in blockchain scalability, privacy, data storage, interoperability, custody and user experience. Much later in the sixth phase, we are expecting to see dapps disrupt and compete against centralized monopolies such as Dropbox, Facebook, Youtube, Airbnb, etc., allowing consumers to participate and gain more power in the digital economy.

On a side note, successful dapps could take some time to be rolled out because the decentralized application ecosystem received a lot less capital than protocols. During the Internet bubble, most of the capital fundings went into building applications (Yahoo, Netscape, eBay, Amazon, etc.) while the protocol developers (TCP/IP, HTML, FTP) were researchers who got paid almost nothing and non-profit organizations often handled the subsequent iterations of the technology. However, in the blockchain space, we have witnessed the opposite in which the majority of the capital went into private companies that handled the protocol development (ethereum, NEO, ICON, Ontology/The Ontology Team, etc.) and a lot of the blockchain tools did not have access to capital from ICOs. The disproportional amount of funding could slow down the overall development and release of decentralized applications.

Crossing the Chasm, a term created by Geoffrey Moore

Overall, in terms of global adoption, the adopters of cryptocurrency and blockchain remain within the 2.5% “Innovators” bracket. To put into perspective, there are about 4B users of the Internet, which in which we are entering the “Late Majority” phase of the adoption. The next Blockchain bubble could bring in the “Early Adopters” of cryptocurrency and the “Chasm” could be crossed with the help of large consumer-facing corporation (Starbucks, Facebook, Walmart, etc), and financial institutions (Fidelity, Nasdaq, Goldman Sachs, etc), who are already starting to explore opportunities and have an existing large user base and an influential reach to more traditional players. For instance, Facebook is currently working on a solution that could allow for stablecoins payment on its messaging app Whatsapp. The potential for the company to make a move in financial services is very large, with more than 200 million users, and a large user base in India (which leads the world in remittances — people sent $69 billion home to India in 2017 according to the World Bank said this year). We have also seen recent announcements from Samsung and HTC, who are already evolving their hardware and preparing for the next wave of adoption by introducing built-in cryptocurrency wallets in the Galaxy S10, and Exodus.

Additionally, we have seen a shift of mentality on the institutional side, notably with the participation of endowments such Harvard, MIT, Yale and Dartmouth universities, who are starting to invest into the cryptocurrency space and recently, Cambridge Associates, a leading pension and endowment consultant advising on almost $400 billion capital, beginning to recommend their clients to consider investing long term on the digital asset space. Moreover, a recent project Bakkt, created by the Intercontinental Exchange’s (ICE), an operator of several global exchanges including the New York Stock Exchange, just raised over $182.5M in funding to enable consumers and institutions to buy, sell, store and spend digital assets. Such initiatives will further drive the global adoption of cryptocurrency from the institutional side, helping bridge the adoption chasm.

In sum, we are still early in the technological cycle of Blockchain, similar to 1994 during the Internet Revolution, and we expect more bubbles with bigger capital flowing towards the dapps ecosystem. Additionally, we expect to see more dapps being released in the upcoming years, in which some of them will become breakthrough projects, gradually re-installing more confidence in the space. Large corporations and financial institutions are starting to get more and more involved in the space, and have the potential of bringing a large crowd of consumers and investors, helping bridge the adoption chasm and opening doors for mass adoption. We remain bullish on the development of the industry and are excited to see what will come into the in the upcoming years. This concludes our article series about the Internet vs Blockchain revolutions and hope we provided you some valuable perspectives and insights.


The Internet Revolution facts are based on the book “How the Internet Happened”, written by Brian McCullough. Mark Twain once said, “History doesn’t repeat itself, but it does rhyme”. We are attempting to draw some similarities between the Internet and Blockchain Revolutions, to help entrepreneurs and investors better understand technological life cycles. Please leave your thoughts and comments below, and hope this article series will have provided some valuable perspectives about the Blockchain industry.

Author: Remi Gai

**Source:**“How the Internet Happened”, written by _Brian McCullough_