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Hedera Op-Ed: A Critique of Crypto Winter
Natural selection is universally accepted as the way in which organisms evolve. Those who survive often have comparably superior genetic traits over those who perish. These survivors have adapted to their environment through a trial by fire and will be better equipped than their predecessors to persist because of it. The thinning of the herd, although painful and unpleasant, is ultimately for the benefit of the species.
Near the end of 2016, a crypto winter began, markets plunged, exchanges shuttered, and many blockchains shut down for good. Objectively, this did not seem like good news for those in the industry as they saw holdings obliterated and projects canceled. But through all of this, the space is better off. It was no secret that there was a ludicrous amount of scam projects in the area, and somehow even more people pretending to be Vitalik. But, when the winter hit and cryptocurrencies plunged, many of these scams went up in smoke. With their means of exchange at such low rates, it was no longer worth their time to pretend they were the next big thing, so they left the space. VC firms who were burned by nonexistent blockchains started to do are their due diligence and understand how to read red flags. All of this meant that since the beginning of the crypto winter deserving projects have persisted while the fraudsters have gone off to chase their next snake oil. Pundits like to remark the billions of market capitalization that cryptocurrency has lost in the last two years. What they fail to realize is that loss of market capitalization is a direct result of underserving firms, who were sucking the air out of the industry, shuttering. Crypto did not lose its viability; it lost the fat. The forest became better off from the fire. Now the real growth can begin.
This is a remarkably similar situation to that of 2000. When the dot-com bubble popped people thought it would be the end of the internet, but it was just the beginning. Just like with the internet in 2000, the vast majority of the public cannot yet see the value of crypto and believe that the tech is overhyped. Analogous to the dot-com bubble, the crypto bubble was brought on via a euphoric mania when the public first learned of the technology. In the 1990s all you needed was a dot-com address to get funded, in 2017, ‘blockchain’ just needed to be somewhere in the deck. The most comical iteration of this was when the Long Island Iced Corporation, a publicly traded company, legally changed its name to Long Blockchain corresponding to an almost a 300% price movement. Immediately following the name change, the brand was subpoenaed by the SEC and NASDAQ threatened to delist the security. DLT tech, like the internet, was heralded by the loudest voices in the room as the technology that would immediately change our lives forever. From there the speculative investor crowd took over the airwaves and the markets, believing that they were about to make a killing on the next big thing. Soon enough, and in both bubbles, after about a year people begin to listen to the experts in the industry and not just the Joe Rogan esq. characters who joined the movement at the beginning of the bubble. The experts warn that infrastructure is not in place to scale and that the majority of the companies are scams. The frenzy would continue and eventually reach a boiling point where the good projects would be burned and the bad ones absolutely fried. But after a fire can be the best time to grow. Good companies take time to build, and often the innovators who will do the building are not the first movers with the technology, but rather those who take time to understand and thoughtfully apply the technology to their industry. Rome was not built in a day, and neither was Amazon. It took years of outspending rivals and delaying profitability to make Amazon the juggernaut it is today. Right now, Hedera and other crypto companies are biding their time, strengthening their teams and products as competition dies out just as Amazon’s did in the 90s. Between 1997 and 2019 Amazon’s market capitalization grew from $483M to $857.1B. Expect the innovative crypto companies to follow a similar trend.