BitCoin: Alien, Dismissible, Dangerous, Greedy, True

Bitcoin prices are on a tear, and so is blockchain and ICO hype. Are you as confused as I am? Let’s figure out why.

“This is the Internet in 1993!”

I heard this statement several times at an industry conference I attended earlier this month, and it had been ringing in my ears for any number of reasons well before then. It all feels so familiar, and yet this time, it also feels utterly foreign.

Here’s the thing about “the Internet in 1993.” I was there. As a matter of fact, many of the people at the conference were also there. The conference, which operates under a collegial “don’t talk about it” rule, is more than a decade old, and features founders and VCs who made their names in the Web 2 era — post dot com crash, back when Facebook, Twitter, and Wordpress were breaking out. This was the Web’s heady coming of age — 2003 to 2010 — when us “oldsters” were proven right: This Internet thing really was a revolution, and here’s proof!

We were in our 30s and 40s then; we’re in our 40s and 50s now. And when the Internet first broke out — what I’ll call the Wired era (because, well, we launched Wired in 1993) — most of us were in our 20s. Kids. But now, we’re….well, most of us are Doing Quite Well, Thank You Very Much. These folks are my colleagues, my peers, my peoples. And a increasingly vocal minority of them are convinced we’re on the precipice of another Internet Breaking Out Moment. A Revolution. A Game Changer. And of course, a Huge Opportunity To Make Shitloads of Money.

The foundation of this revolution? Blockchain, naturally. And its first killer app, cryptocurrency, the best known variety of which is bitcoin.

Here’s a price chart of bitcoin since 2013:

If you purchased $1,000 of bitcoin back in January 2013, you would have netted about 66.66 bitcoins (the price was roughly $15). Those same bitcoins are worth nearly $440,000 now — a return of roughly 440X. In less than five years.

That’s insane. Right?

Well, yes and no. Or maybe. I honestly have no f*cking idea. And that’s deeply disturbing to me. I mean, I’m an original Internet revolutionary, no? I was part of the crazy crew waving my hands and running naked in the streets, claiming that Everything Was About To Change and Why Aren’t You Paying Attention?!! I rolled my eyes and thumbed my nose at the corporate oldsters who Didn’t Get It, the clueless Man who didn’t even know enough to secure his own set of domain names. Hell, at Wired, we bought nearly every domain we could that was a swear word. Back in the mid 90s! Why? BECAUSE WE COULD, DAMMIT! And guess what? Those domains minted money for us!

But the simple truth is, I don’t really understand blockchain, and I don’t understand bitcoin, and I’ve read at least 150 articles about them (and published another 15 at least). I have a deep suspicion of anything that smacks of “easy money,” and I recoil at the froth and fraud that cloaks nearly everything I’ve read about ICOs lately. It all feels utterly off base. It all feels poised to crash. And yet…I can’t shake the feeling that this time, I’m the old guy on the porch, chasing the crazy kids off my lawn. And those kids know something I don’t.

I’ve heard all manner of utterly unbelievable statements about the impact of blockchain on the world. It’s going to destroy governments, make corporations irrelevant, crash our financial systems, bring about world peace. It’s nearly impossible to separate fact from fiction, truth from fantasy.

But maybe a bit of historical context would help. Here are a number of things that were true about the Internet in its early years that are also true about blockchain today:

Alien. The Internet was a difficult, foreign concept. Back in the 90s, trying to explain the impact of a distributed information network to non-technical folks was nearly impossible. It required faith — belief in things that were not readily provable in the real world. And it required technical chops: One had to deeply understand how computers and networks worked, which most “normals” did not possess. Plus, one then had to be able extrapolate to a future state where all things were connected. It was a stretch, which led to…

Dismissable. Nearly everyone thought we were crazy back in the mid 1990s. The fact that we were from California, for the most part, only added weight to the argument that the Internet was yet another hippie fantasy. It was at best a nice way to send messages, at worst, it was…

Dangerous. The early Internet was subject to fraud and criminal activities.The subset of people who deeply understood the impact of the Internet were not limited to well-meaning idealists. As with any new technology, there were opportunists who took advantage of the information asymmetry inherent in this new world. For the early Internet, that meant domain squatting, email scams, child pornography rings, and as the advertising business took root, massive traffic fraud.

Greedy. As more and more people began to realize the possibilities of the Internet, and in particular the burgeoning World Wide Web, legions of opportunists flocked to the platform. There were riches in them thar digital hills! Silly, unsustainable ideas were launched on a daily (hourly!) basis. This led to an unsustainable boom in venture funding of startups, which led, of course, to the dot com crash.

True. After the boom and bust, the Internet did indeed end up becoming a massive game changer — likely bigger than even the most wild eyed pundits believed it would be back in the early 1990s.

When it comes to blockchain, it’s this last point that bothers me the most. It has the first four characteristics in spades. But will it have the last?

I want to believe. But something about this cycle feels … off. With that contradiction in mind, I’m committing myself to figure this out. I know I’m late to the game — but if we’re really only in 1993, well, it’s still early. Over the next six or so months, I’m going to head on a learning journey of sorts, meeting with respected colleagues who are deep in the space, and reading everything I can that truly feels useful. I’ll report back as I do. And please, if you have resources you think would help, add them in the responses below.

Here we go again!

** I don’t honestly know how to back into this subject, so I’m just going to throw myself at it, and hope what I write makes sense. I’m not sure it will. But hell, stay with me. I’m writing in the morning, so I won’t ask you to pour a bourbon. Then again, if you’re reading this in the evening, by all means do.