From the perspective of the history of the internet, I have been thinking about whether the bursting of the bubble in internet technology stocks in 2000 offers any enlightenment on our view of blockchain technology.
The real standardization of the internet was in the early 1990s. Before the establishment of standardization, the internet was very complex and had many forms. When the world defined the internet as a TCPIP network (Transmission Control Protocol/Internet Protocol), the unified standard of the internet appeared. Internet standardization was very important to the large-scale use and popularization of the internet.
The emergence of several things was crucial to the development of the internet. The first one was the emergence of browsers. Browsers are very important, without which we can't get on the internet. The second one was the Windows Operating System. The maturity of these technologies led to the large-scale use of the internet, the emergence of various businesses and the development of the entire industry. At the same time, because the usability of the internet was greatly improved, the commercial applications could be developed on a large scale.
However, many great internet companies were born around the time of the bursting of the internet technology stock bubble. When the bubble removed speculation from the market, it provided a very broad space for the growth of companies with real technology, ideas and practical abilities. Now, blockchain technology is in a phase that resembles the internet in 2000.
In fact, the research on blockchain or electronic cash did not start in 2008. The paper on intelligent contracts was published in 1994. At the 4th World Blockchain Conference held by Wanxiang Blockchain this year, David Chaum, founded a company aiming at studying electronic cash in the 1970s, spoke. Papers on electronic cash and Byzantine fault tolerant algorithms were published in the 1970s and, even earlier, mathematicians were exploring other algorithms like cryptography.
The theoretical discussion of blockchain technology did not emerge suddenly in 2008 but after a long precipitation process. There is no new technology on the blockchain invented by Satoshi Nakamoto, but he integrated many technologies together and launched the blockchain and digital currency system which are exquisitely designed.
This process reminds me of “The Essence of Technology,” written by an American professor from Stanford University who studies complex systems theory in the U.S.
In his book, he summarized the transformation of human society and commercial society brought by new technologies. One of his conclusions was that any disruptive innovation to tradition came from the combined evolution of a group of technologies, and no single technology would bring disruptive innovation to human society and business. Blockchain itself is a combination of technologies. Apart from ICT (information and communication technology) and distributed network technology, it also includes mathematics, cryptography, game theory, economics, mechanism design theory, organization theory and a series of other technologies related to social science, natural science and IT technology.
Why is blockchain technology in a phase that resembles the internet in 2000? There are several reasons:
Blockchain Technology Is Gradually Maturing
Blockchain technology will gradually mature in the next year. So-called “blockchain 3.0” technologies include cross chain, fragmentation, partitioning, side chain, sub chain, etc., all of which are expected to become mature and go online by the end of 2019. Cosmos, for example, is making a big improvement in its performance and security, as well as usability. A large-scale commercial application may be available in a blockchain by 2020. This is the path of technology development.
The Legal Regulatory Framework of Blockchains Is Gradually Becoming Clear
The development of a legal framework for blockchain technology has gradually become clear, such as through a series of regulatory statements issued by the U.S. Securities and Exchange Commission (SEC). With the continuous holding of congressional hearings in the United States, the regulatory authorities are gradually clarifying their regulatory framework followed by a degree of law enforcement. The United States has taken many enforcement actions against previously improper blockchain projects.
When I was discussing this with a law professor in the United States more than half a year ago, he said that, although there is no clear law, there are two final results of innovation in the United States: one is reconciliation of a fine, which fines a sum of money when American law becomes clear; the other is imprisonment, which is the result if you only want to use technology to cheat rather than to innovate. Then, when the new interpretations of laws are finished, we will act in accordance with them.
The SEC has taken many regulatory measures, which demonstrate its belief that the legal framework is clear. But American law is very different from Swiss law. Switzerland divides tokens into many categories: payment, securities, function, etc., but the SEC never divides tokens in this way.
I am very concerned about the evolution of legal policies in various countries. Japan's Financial Services Agency recently discussed whether tokens could be divided into several categories. There are payment tokens, functional tokens and security tokens. Singapore recently divided them into several categories, all of which originated from Switzerland. But I don't think the Swiss way of classifying is necessarily going to be recognized globally in the future, and the American way of classifying is probably the most popular one.
The reason is that it is very difficult to classify a token as strictly within the functional, payment or security category. Since the boundary is difficult to demarcate clearly, it is better to classify them into categories so that they can be strictly abided by. Only in this way can they truly comply with laws and regulations.
This is the bigger reason why I think blockchain technology has entered the second decade. The recognition of law and the maturity of technology will certainly lead to the third reason.
Mainstream Institutions Are Coming In
Mainstream institutions began to enter the blockchain industry and the "players" of blockchain began to change from technology geeks to mainstream institutions. All technology is not invented and innovated by mainstream institutions, but by technology geeks. Likewise, without the involvement of mainstream institutions, all technologies would not have such huge business opportunities and a market of $10 trillion or $100 trillion.
The people who invented internet technology are still alive today. Did they start Google, Tencent, Alibaba and Facebook? No, they're still professors. The mission of technology geeks is to invent, but industrializing and commercializing it is the business of others.
Blockchain technology is the same. As mentioned earlier, the development of blockchains’ core technologies is actually nearing its end, although the development will certainly continue. Laws have also started to catch up. Countries are making efforts to regularize, legalize and normalize the blockchain. Next, mainstream institutions enter the market to commercialize and productize blockchain technology in order to make a huge economy.
Mainstream Funds Begin to Enter
Mainstream funds started to enter the market a year ago. The earliest investors in digital currencies were mostly engineers, individuals and speculators who dared to take huge risks. But a year ago, some families started to invest in digital currencies. Three months ago, several major U.S. universities began allocating tens of millions of dollars to digital assets, from MIT to Harvard and from Yale to Stanford, which is the second phase. The third stage is the entry of hedge funds and private equity funds. Perhaps 20 million engineers are not enough to support the market, but if mainstream financial institutions can gradually step in the market over the next decade, there will be a $1 trillion, $5 trillion or $10 trillion market.
Technology Usability Is Improved
The recent Devcon in Prague held by Ethereum in 2018 is the only one with thousands of developers discussing technology for the public blockchain, so I am very concerned about the topics Devcon discusses each year.
This year, I suddenly found that they were discussing a new topic that had never been discussed in the past three years: customer experience. This means that developers are starting to focus on and solve the application problems of blockchains. For example, today's digital wallets need to remember so many mnemonic words. Therefore, it is easy to raise problems in self-management. The development experience of the internet tells us that it is crucial to make products that can be used by people aged 60 or 70 easily, which means that blockchain technologies have a lot of room to develop.
How far does the internet need to go before everyone really has anything to do with it? When the internet bubble burst in 2000, there was no mobile internet or smartphones, no WeChat or Facebook and there were probably only 100 million people in the world who were connected to the internet. At that time, people over 50 in China had little to do with the internet. But now 80-year-old people have a relationship with the mobile internet because of WeChat. The usability can make the internet accessible to three billion people.
Blockchain technology is not yet available in this way. Previous Devcons have been all about performance, smart contracts, storage and cross chains, but this year a lot of developers are talking about customer experience, which is a very important trend. If developers are willing to deal with technical problems, it is just a matter of time. The usability of blockchain products will be improved in the future. We look forward to that day.
Like the time when the internet bubble burst in 2000, I saw this huge drop in the price of digital money as a market mechanism that automatically removes harmful things, allowing healthy things to get bigger.
These are the five development trends which will enable us to look forward to the growth of business projects like Facebook, Google, Alibaba and Tencent in the next decade.