The Blockchain Industry is in a Tight Spot, How to Break Out of the Current Situation? | Part 1
Tags: Cryptocurrency, Progress, Bitcoin, Altcoins, Mining

BTC has risen steadily from $3k USD at the beginning of the year to more than $10k USD, and in October 2019, it dropped slightly to $8k USD. When I was chatting with friends from other industries, they all feel that the cryptocurrency industry’s returns this year is not bad.

October 2018–2019 Bitcoin Chart, CoinMarketCap

It is indeed the case if you look at BTC alone. However, it’s strange that the sentiments of the cryptocurrency industry became even worse, which is something that only people in the industry can relate to.

Reasons for the Perplexity

It appears that mainstream cryptocurrencies and other altcoins did not rise alongside BTC. A lot of altcoins even experienced huge declines. Other than exchange currency and IEO being on par with BTC, the model currency is starting to decline, which adds on to everybody’s anxiety.

Just as price is a manifestation of the economy, cryptocurrency price is also a manifestation of the state of the industry. Hence, for all practitioners, the falling currency price reflects a greater concern about whether the industry still has a future. We had a heated debate on this issue before. Interested readers can refer to “X-Order Debates: Will the Cryptocurrency Industry be Dead or Alive?”

Here, I would like to share some information about other industries in history, which includes the initial development of the cryptocurrency industry. By observing what industries will experience in the development process, one is able to better understand some of the stumbling blocks.

CoinTelegraph.com

Industries that Disappeared in History

From the macroscopic view of industry classification, many industries will last forever, because they meet real demands, some of which are intrinsic to human beings, such as clothing, food, housing, and transportation.

These industries that are evolving to higher dimensions will gradually cause the withdrawal of the lower dimensional forms. Thus, we need to lower the dimension to discuss some industries that are further classified within an industry.

We usually think that there are two driving factors for the evolution of an industry: the refinement of demand and the progress of technology.

Take the communication industry as an example:

Demand Refinement

Communication industry involved from ancient letters to contemporary telegraphs and telephones, to modern mobile phones, IM chat tools, e-mails. We are talking about the paradigm shift of the big industry.

In ancient times, in addition to letters, there was also a beacon, drum-beating communications and so on. However, compared with a single light or sound signal, letters were much superior in the richness and completeness of the information.

If drum beating and other methods meet the needs of single signal transmission, then letters meet the needs of the holistic transmission of information. This is actually the refinement of individual needs.

Additionally, in the earliest days, letters and words were used to record some transactions, mainly financial or debt relationships.

Most of the time, the information was recorded in a fixed location, such as stone, stump and other objects. In this case, words or letters only record information, they have not developed the function of information transmission.

Due to the high demand for information transmission, the existing technology was activated and evolved from simple recording to information transmission.

The refinement of demand led to the gradual withdrawal of historical communication methods that could not meet the demand, and only in a few cases (such as a lack of resources) can they be used again reluctantly.

Divyamohanspeaks.blogspot

Technological Progress

The progress of technology is more obvious.

Samuel Morse developed, commercialized and invented Morse telegraph in 1844, Antonio Meucci invented a talking telegraph in the 50–60’s, while Alexander Graham Bell experimented and invented the telephone in 1876, subsequently obtaining a patent.

Throughout the 19th century, people’s communication mode changed one after another. In the beginning, it was still through letters. Later, the aristocrats with capital strength could afford to use telegraph as a communication tool. At the end of the 19th century and the beginning of the 20th century, telephone gradually replaced telegraph as a means of communication.

In the 21st century, we entered the Internet era — the invention of mobile communication, e-mail, and other new technologies have replaced fixed telephones.

The revolution brought about by technological progress is even more cruel.

Can you imagine how many people are still using letters to communicate now? There is almost no one except for some who would like to retain the nostalgia of art and literature. This also led to the rapid decline of many letter related industries. The situation was even bleaker for the telegraph industry. Not to mention that Millennials have not used telegraphs, most of them have never even seen it. Telephones can still be found everywhere, but those once-popular phone booths, and some minimarts that could make calls to other provinces or countries, have almost disappeared.

The end of an industry will inevitably lead to the disappearance of industries within its ecosystem. In other words, an industry’s replacement must be driven by new technologies or refined demands.

After analyzing the development history of the communication industry, let’s take a look at the current blockchain industry. In order to meet the demand for decentralized value transmission, at least at present, there is no new technology that can match the existing relatively mature scheme (even if there is a new technology coming out, it needs to go through a certain period of maturity). There are also no new demands to motivate the improvement of existing ones. This is why I think blockchain still has runway to go further.

The higher demands and progress of technology will promote the development of the industry. Hence, the blockchain industry has great potential.

Difficulties in Investing in an Emerging Industry

The 10-year development history of Bitcoin is believed to be familiar to many veterans in the cryptocurrency industry. Here, we want to review an interesting past to help us look at the development of the industry more dynamically.

South China Morning Post

As early as 2011, when Wu Jihan had yet to establish Bitmain, Mr. Li Xiaolai had invested more than $600,000 RMB with his friends to build a small “minefield”.

It’s a bit exaggerating to call it a “minefield” since mining simply took place in a rented container with a pile of computers, equipped with some simple equipment such as air conditioning. At that time, there were no ASIC miners by Dr. Zhang Nangeng (“Pumpkin Zhang”) and “Fried Cat”. They only used purely video card to mine, which ended up in failure due to inefficiency.

They only managed to mine 100 over Bitcoins by the end of the mining experiment, which is about $20,000 RMB, based on the highest market price of $32 U.S. dollars in 2011.

Obviously, the gap between input and output is too large — a downright failed investment.

At that time, Mr. Li Xiaolai, in the capacity of an investor, reasonably abandoned the mining business. Naturally, he did not pay attention to the birth of the first ASIC miner in 2013.

It may be true that the mining industry before 2013 (temporarily considered as an industry, although it was not formed at that time) was not worth investing at all.

However, when the ASIC miner appeared in 2013, it became the best investment time period in the mining industry.

Is this feeling familiar? Does it feel especially like a certain target investment in the secondary market? When its price continuously declines, almost everyone thinks that it has lost its investment value. Therefore, it catches people off guard when its value reached an inflection point.