Are Bitcoin and Crypto Really Like the First Internet?

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Bitcoin and Crypto are like the first Internet, or not?

In case you haven’t seen it already, here is the Global Macro Investors chart, which Raoul Pal posted on June 21:

Source: Twitter / Global Macro Investor / RaoulPal

If you take this chart at face value, it looks incredibly bullish for cryptocurrency and Bitcoin. According to the sources used – data from Crypto.com, the World Bank and own data from Global Macro Investors – cryptocurrency adoption is apparently increasing at a faster rate than internet adoption in 1997 .

Many figures within the broader cryptocurrency community have responded to this graph with enthusiasm, using it to imply that Bitcoin, cryptocurrency, and / or blockchain represent the most significant technological breakthroughs since the internet. Here’s Bitcoin Core developer Jonas Schnelli, adding his voice to the chorus:

Source: Twitter

And here’s another popular crypto-Twitter account, @BTC_Archive, with an almost identical tweet:

Source: Twitter

These aren’t the only recent tweets comparing Bitcoin or cryptocurrency and the internet (you can see more here, here, here, and here). However, as excited as the crypto community is for such a comparison, it is arguably a bit misleading.

For starters, it’s a bit misleading to say that crypto has as many users as the internet had in 1997. Of course, it’s true that there are now over 106 million unique cryptocurrency addresses ( according to a February report from Crypto.com), but is it correct that these addresses represent users?

Do such addresses use cryptocurrency on a day-to-day basis, much like these early Internet users regularly used the web for convenience? This is highly unlikely, if only because the vast majority of cryptocurrency is not used for practical purposes (e.g. as a means of payment), but held for speculative reasons. In other words, there are currently over 100 million cryptocurrency traders, in the sense that people hold a certain amount of crypto in the hope that it will rise in value.

Research supports the claim that most cryptocurrency holders are investors or traders rather than users, with Deutsche Bank recently estimating that over 70% of bitcoin transactions are related to trading, speculation or to investment. Likewise, a survey released in June by the UK’s Financial Conduct Authority found that the main motivations for buying cryptocurrency are all related to investing or trading.

Source: FCA

So it is wrong to say that just because people invest in crypto, cryptocurrencies have the same number of users as the early internet. By analogy, it’s like inflating the number of Internet users at the turn of the century based on the number of people buying stocks in companies linked to the Web. (By the way, about 100 million individual investors lost $ 5,000 billion in the stock market in 2002, when the dot-com bubble exploded.)

Similarities and differences

That said, there are some interesting parallels between Bitcoin and cryptocurrency, on the one hand, and the early internet, on the other.

There is, of course, the obvious fact that the early internet caused a stock market bubble, just as Bitcoin and cryptocurrency brought about what many see as a bubble as well.

In fact, the market capitalization of companies listed on the (tech-driven) Nasdaq peaked at $ 6.7 trillion in March 2000, before plunging to $ 1.6 trillion in October 2002. This is a drop of around 76%, de has fallen 44% since May 12 – still has a way to go before it really begins to compete with the boom-and-bust of the dot-com era.

Second, it’s worth pointing out that many people claimed back then that the internet was useless technology, in the same way many now argue that cryptocurrency is useless (beyond speculation). A New York Times article from March 1997 is full of quotes as hilarious as, There were only a few hundred million dollars in transactions [on] Internet last year. If he takes over, it’s a fairly small number. Better yet, the same person – a founder of a software company no less – also said: Putting newspapers and magazines out of business? That will never happen. I like to read on Sunday [New York] Times, because I don’t know what I want to read. The web is here if you know exactly what you want.

At the very least, such quotes underscore the futility of trying to predict the future, including the future impacts and ramifications of new technologies. This is part of the reason why it takes faith (rather than knowledge) to claim that Bitcoin or crypto will be as important as the internet, but at the same time, it is also the reason why it takes to faith to believe that Bitcoin or crypto will never reach such a scale of importance.

That qualification aside, this author’s opinion is that cryptocurrency will not be as crucial as the Internet. Partly this is because the internet allows Bitcoin and cryptocurrency, so you could potentially argue that crypto is an extension of the web, and any impact the former ends up having will only make the latter even more so. impactful.

But at the same time, comparisons between crypto and the dot-com bubble reveal that, even in 1997, the internet was already more useful than cryptocurrency is today.

Take a look at any list of the biggest dot-com flops. While we can all laugh at companies like Pets.com, Webvan.com, and eToys.com now, they were offering real products and services and had real customers. Can the same be said for 99% of the 10,000+ cryptocurrencies currently in existence? Probably not, and that forgets the big dot-com companies – Amazon, Google, and eBay – which have since had a massive impact on the world.

Yet the future is not written. And while Bitcoin and cryptocurrency may not be proven to be of significant utility, it has not been proven that they will not be useful.

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