Thirteen years out from its conception, cryptocurrency stands in a peculiar place — several iterations of creativity and sophistication beyond its original form, and many more removed from its most valuable promise: a decentralized, permissionless online universe owned and governed by its users.
Not unlike the dotcom boom in the late ’90s, crypto has a lot going for it. DeFi, NFTs, and DAOs continue to inspire the imaginations of leading developer teams and enthusiastic communities alike.
The Human Side
And the tap of innovation shows no signs of drying up: powerful and disruptive decentralized applications are rarely more than a year of development away. On the human side, technical know-how and efficient fundraising methods are well-established.
But there remains one major obstacle that separates development teams and their platforms from adoption: critical infrastructures like Ethereum and other Layer 1 blockchains to serve the computational demands of DeFi.
Scalability: The Hard Truth
As many of the loudest and most colorful voices in the web3 space would have you believe, none of us can imagine the kinds of on-chain tools and applications that will take form in the years ahead. We are just that early.
In the history of innovative technology and nascent industry, there is hardly precedent for such a supposition. The not-so-sexy truth is that the development of technical infrastructure inevitably lags behind human imagination and ingenuity.
Most of cryptocurrency’s groundbreaking ideas and use cases already exist. Whether in crypto or any other nascent industry, a large percentage of a technology’s use case potential is often conceived in its initial stages.
The most popular websites and online services users enjoy today were mapped out in impressive detail in the early days of the Dot-Com boom.
Webvan.com was one of the internet’s earliest heavy-hitters, developing a promising online grocery delivery service. In 1999, Webvan’s IPO raised $375M, and the company announced plans to expand to 26 cities within two years. But by the time 2001 came around, Webvan found its share price down 98% and subsequently shuttered its operations. By and large, Webvan was the rule — not the exception.
A Digital Native
Setting out to be the world’s first social media website, theGlobe.com fetched an $842 million valuation on the grounds that it would allow internet users to design their own webpages, Pets.com pulled in $82.5M to undercut shipping prices in the pet food supply chain industry, and kozmo.com raised $232M on the premise of free, 1-hour deliveries of virtually anything.
But none captured the ethos nor the potential of the internet quite like Flooz.com, which secured $35M and the endorsement of Whoopi Goldberg with the ultimate venture into the avant-garde: a digital native, online currency and virtual wallet that could be used at participating retailers across the world. A full decade ahead of Satoshi Nakamoto, Flooz.com and its unrivaled digital currency went bankrupt in 2001 alongside the vast majority of their fellow Dot-Com start-ups.
It was not until years later that the next iteration of innovators arrived on the scene to pick up the pieces where their predecessors left off. In the mid-2000s and early 2010s, Instacart built a robust online grocery delivery service, Facebook curated a vibrant social media scene, and PayPal capitalized on digital payments.
When the dust settles, it won’t be difficult to see what separates the second wave of innovators from their bankrupt dotcom counterparts. Advancements in internet infrastructure and a more internet-friendly public are paving the way for successful adoption. By and large, the failures of first movers were instrumental in the successes of the innovators that followed them.
Except, of course, for the internet giant that formed in the heat of the dotcom boom and survived its 2001 turmoil to champion the internet age decades later.
Amazon had grand visions for what the internet could become and how it might be integrated into the social, cultural, and economic fabric of the human experience. But the company also lived and operated in the present, establishing viable revenue streams by attending the needs of reachable markets and internet-ready consumers.
Determined to become the ultimate online retailer, Amazon launched its website in 1995 as “Earth’s biggest bookstore” – with paper copies only, and multi-day delivery times. Pragmatic and calculated, Amazon leveraged the internet in its current form to undercut prices and provide a superior customer experience for a single market vertical – and it worked.
As internet infrastructure evolved and more potential customers entered the space, Amazon adapted and expanded. In 2004, a time when most dotcom originals had long since dissolved, Amazon’s consumer electronics sales segment surpassed its book sales for the first time, and the company began to further grow its service offering.
In 2022, Amazon’s successes as a leading online retailer, hardware developer, and digital service provider can all be traced back to its calculated, pragmatic approach to keeping one eye fixed on the internet in its present form, and a second on its future promise.
Lessons of the Dotcom Boom
Wherever crypto stands on its own journey to adoption, the lessons of the dotcom boom cannot be overlooked: First movers face just as many perils as they do opportunities, and operating two steps ahead of the market is just as dangerous as lagging one step behind.
Developing the next line of cutting-edge decentralized applications in a nascent environment — one where technical innovation and creativity must be tempered with proper infrastructural support — requires the ultimate balance of imagination and pragmatism, perseverance and restraint, belief and objectivity.
Make no mistake: there are indeed a select few in cryptocurrency’s pioneering class that will go the distance. Wise, grounded, and above the seduction of glitz and glamor, the innovators that leave cryptocurrency’s legacy — the Amazon’s of the Web3 paradigm –— will be those that hold onto their visions of community-owned decentralized networks resolutely, while championing realism and patience as advancements in Layer 1 scalability unravel over the course of two decades.
Alex Shipp is the Chief Strategy Officer at Offshift.