Bitcoin & other cryptos are mooted to be the next big thing since the internet in 1990s. In this article, we attempt to dissect the hypothesis by drawing parallels from both eras and analyzing events that triggered paradigm shifts. At AI, we will keep you two steps ahead in this space with our insights around evolving disruptions and important events. To read our previous articles on bitcoin, please click here & here
On a side note, we are pleased to announce that our MultiCAP Multibagger portfolio continues to do well & has hit half century (50% return in 2017). Details will be shared in November report.
Rise of the Internet
In 1993, America Online (AOL) was offering dial-up connections for people to connect to ‘world wide web’. It was one of the first internet service providers (ISP) at the time when less than 1% of communication was on the internet. By 2000, 51% of two-way information flow was through telecommunication networks. And by 2007, 97% of the information exchange was over the internet. AOL was one of the early movers to take new technology to the masses. AOL reaped handsome reward** for being an early mover in its heydays.
But what exactly caused widespread penetration of internet in the space of 14 years? Laying of cables across the ocean beds played its part, but these were primarily used for telephony at the time. Seismic shift was undoubtedly the email. What is today’s de-facto mode of communication, was new & hep in the 1990s. It was the first real life application of the internet which was made available to the masses. Internet and Email were almost synonymous in the 90s. Businesses aligned themselves to this faster way of communication, a spurt of ‘cyber cafes’ came to life all over the world and postal services died a slow death. From Hotmail of 90s to Gmail of 2017, internet (i.e. technology itself and its associated businesses) has transformed our lives in ways unimaginable over 25 years. Curiously, it was the application that drove scalability and not the technology itself.
Rise of Cryptocurrencies?
Fast forward to 2017, and we stand at the crossroads of another technology disruption as cryptocurrencies. Foundations are being laid, first applications are popping up and businesses are watching; albeit skeptically and anxiously. But are we at the ‘Email moment’ for cryptos yet? There are 3 essential tiers for large-scale transformations to happen:
- Infrastructure: In context of the internet, dial-up connections, laying of the internet cables and installation of telecommunications towers were the primary enablers. In context of cryptos, internet is the basic enabler. Second is the algorithms that run on the networks. Thirdly, adoption facilitator like exchanges and wallets are the infrastructure.
- Primary Applications: Like the email, the first applications around cryptocurrencies have to be easy to use and cheaper than existing solutions. The first mass applications of cryptos will be ones which leverage on its fundamental features i.e. decentralized network, global reach, faster transaction speeds and lower fees. Startups are already innovating on cryptocurrency based cross-border remittances, small value peer-to peer transactions and micro-lending solutions. ‘The email moment’ is around the corner.
- Secondary and Tertiary Applications: Complex offerings tend to evolve after primary applications mature. For example, high-speed internet alone will not have been enough to have today’s YouTube. Significant strides in social networking and photography had to be made before YouTube was relevant. It wouldn’t be much fun to watch pixellated videos of random people, would it? With cryptos, the possibilities are infinite and we can’t think of what the future can be. But a tsunami of innovation seems certain to hit us in the coming decade.
Crypto Watch (Recent Updates):
As of Oct-30, bitcoin (BTC) price has touched record highs of $6,300 with market cap of $101 billion. Surge in bitcoin price is due to easing of regulatory fears in China, increased focus by governments/central banks to explore crypto solutions and rise in overall public awareness. Google trends for “bitcoin” & “bitcoin price” is also at all-time highs showing rising awareness.
Ether (ETH) has been range-bound in the month of Oct trading at $306 and market cap of $29 billion as on Oct-30. This is following a successful tech upgrade (Byzantium hard fork) on the Ethereum network. Ethereum is adjusting after the upgrade with mining time increasing to 1 min/block from 25 seconds previously.
As a closing note, we will leave you with an imaginary conversation reflecting the state of media industry and a reminder that while attention to detail is crucial in decision-making, it is easy to miss the big picture. Happy Investing!
Two executives from rival TV companies are locked in a room with each projecting higher viewership numbers than the other. Both are proclaiming to be ‘The Number 1 Channel’. A gigantic shadow of someone called ‘YouTube’ emerges over the two gentlemen and obnoxiously whispers, “Hello!”
** AOL debuted on NASDAQ in 1992 listing at $11.50 and surged to $90 (7x) by 1999. Since 1998, AOL was involved in a series of merger and acquisition deals which lead to criminal investigation for unconventional advertising. They were found guilty and the saga wiped out most of the gains. Stock traded at $15 in 2003.