There are two common patterns in technological invention and its subsequent commercialization. The first is a technological breakthrough that sparks interests in commercializing it. The invention of the transistor in the legendary Bell Lab in the 1940s (which later gained the three inventors the Nobel Prize in Physics) fits this pattern. It took a while to work out the commercial applications of the transistor, beginning with the radio, then, in a powerfully transformative way, in computers. The second is an existing demand waiting for a new technology to be invented to meet the need. The invention of the internal combustion engine in the 19th century fits this pattern. The industrial revolution led to proliferating demand for a machine that can provide rotary power to move mechanical devices, including powering land and water vehicles, and eventually aircraft. The internal combustion engine was the answer.
The technology of blockchain and its application called Bitcoin, however, came as a single package. It is a digital currency without a central bank, with transactions verified and recorded in a distributed ledger, the blockchain. Along with the package also came the libertarian utopian hype that this is the beginning of a revolution that will make government, and indeed, any centralized authority, obsolete. And it was this hype, not any commercial success of Bitcoin, that powered an investment craze, pushing up the dollar value of Bitcoin to the stratosphere, spawning a whole host of other cryptocurrencies in the process. In 2017, schemers launched the so called initial coin offerings that attracted over $20 billions of investment, mostly from retail investors, according to the website Coinschedule. Since the beginning of this year, the dollar values of cryptocurrencies have collapsed. The two leading cryptocurrencies, Bitcoin and Ether, collapsed most spectacularly, losing up to 70% of their dollar value, and it appears that the retail investors are also the ones who got hurt the most.
So, what’s next for cryptocurrencies?
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