Like the dot-com bubble survivors, the crypto-crash survivors will change the world

The recent NFT.NYC conference in New York City revealed some interesting insights into the evolving nature of Web 3.0, cryptocurrencies, and their potential in Africa. While the consensus appears to be that crypto’s greatest contribution could be in revolutionising payment systems, wealth creation and asset finance in Africa, the continent isn’t on the industry’s radar in a serious way, yet. This leaves room for homegrown tech entrepreneurs to lead the continental revolution. Unfortunately, at a time when we should be filling this gap, many are pulling back from crypto, retreating into a pessimism that mirrors the pullback from tech after the early 2000s dot.com bubble. This reactionary impulse is well countered by a sober assessment of the dot.com crash and its lessons for now.

At its core, the dot.com bubble was caused by a large number of people buying into popular trends without the necessary caution. Many of these later buyers might have considered themselves investors, but they were in fact speculators – buyers in search of a quick buck. At that point, the internet was in its early days and just about anyone who registered a dot.com domain name could sell shares to na?ve buyers. Invariably, many buyers were fooled into ‘investing in’ ventures no knowledgeable investor would even consider. This investment bubble got bigger and bigger and bigger; and then it popped.

Almost everyone heard a tale of devastation, of retirees or widows or life-long savers who lost everything when the bubble popped, today the stories that remain are those of the companies that survived to reshape the world we know today: eBay, IBM, Adobe, Microsoft and Amazon. Many of the companies that survived went on to produce hardware, software and systems that changed the world, and have given investors a great deal of value in the process. Some of these survivors are amongst the most valuable companies in the world today. Amazon, for example, lost 90% of its value during the bubble, falling to less than $10 a share; prior to a recent stock split, the share traded well over $2,000.

Much like the internet in the 1990s, few people today have not heard about the potential of technologies and innovation linked to Web 3.0 - cryptocurrencies, non-fungible tokens ( NFTs) and blockchain technologies more broadly - to change the world again. It’s no wonder, then, that so many speculators have flooded into this space. And where speculators go, there you will find entrepreneurs, yes, but also chance-takers and fraudsters.

While it’s the spectacular crypto-era scams that attract the biggest headlines, the fundamental challenge facing this market is the proliferation of blockchain applications – some revolutionary, but many more of dubious value. The same is true of the variance in the quality and stability of cryptocurrencies, and the variance in the utility and value of NFTs. Moreover, as we wade further into new waters, it can often be difficult to distinguish the normal bugs that can be ironed out as a company develops from foundational flaws that cannot be remedied.

Much like the dot.com bubble, there have and will be many losers in the current market turbulence. Some blockchain applications will emerge triumphant; many will fade into obscurity. Yet much like prior bubbles, swearing off technologies and innovations which have inherent utility is not a reasonable option for forward-looking investors.

Perhaps the blockchain application with the greatest potential for future utility is fractionalised ownership of assets (sometimes called tokenisation) which the general public has never had access to before. The application opportunities of tokenisation are virtually limitless – from owning part of a sports team with a contract which regulates owner powers and obligations through to owning a portion of content creator’s revenue on a platform like YouTube. However, as with equities, there are no prizes for owning shares, only for owning the right shares. Investors therefore need to consider simple but important principles if they are to emerge from this crash unscathed. As in contract law, the operating principle must be ‘buyer beware’. Whether investing in equities or alternative assets, investors need to do their homework. Know what you are buying.

Despite the current slump, investors in Africa are looking at a continent full of promise. This was the widely held view at NFT.NYC - widely regarded as “the superbowl of NFT conferences” where experts including Rishabh Thakur, blockchain lead at PwC, outlined the growth prospects of the continent. Largely due to the gaps that still exist in critical services like banking on the continent. Blockchain has the potential to beat existing institutions to the punch with cheaper and simpler products that can catapult the continent forward. When the dust settles, it will be those Web 3.0 entrepreneurs who find and occupy these spaces, those with real utility, that will be left standing.

With every great innovation of the modern-era, scepticism has been the initial and reasonable reaction. But in every age a small band of savvy, future-focused investors and builders (I consider myself one) have seen the potential and invested early enough to reap the rewards when society caught up. While betting on the winners is not guaranteed, what existing and prospective investors can be sure of is the long-term future of Web 3.0 technologies. As with the dot.com bubble, the spoils will be shared by those investors who put in the work to find the real opportunities, then block out the noise and ride out the storm.