The 2018 blockchain bubble is a major breakthrough in the technology of 1998.

The blockchain has become the hottest word in the past two years. The reason is that the digital currency, including bitcoin, derived from blockchain technology has created one after another rich myth. But now this myth is becoming a bubble. Countless people and projects are about to come to the fore.

Morgan Stanley’s research report shows that “the price of bitcoin is rising about 15 times that of the Nasdaq Composite.” The price trend of Bitcoin in 2017-2018, and the period during the Internet bubble in 1998. The Stark Composite Index looks very similar, but the rise and collapse are much faster on the timeline. Morgan Stanley analysts believe that "the history of Nasdaq is being repeated." After a lapse of 20 years, will the bubble in the blockchain ICO repeat the mistakes of Nasdaq and explode?

How similar is 2018 to 1998?

When American Business Week commented on the Internet boom, what is the definition of the new economy: the core of this concept is a higher level of efficiency (or productivity) driven by new digital technologies. Now with this concept, this definition also applies to blockchains.

As an emerging network technology, the blockchain will bring about subversive changes in the fields of smart contracts, supply chain finance, and information traceability. Bitcoin is an application of blockchain technology. Referring to Bitcoin, ICO (issuing tokens) has developed into a low-threshold crowdfunding and financing method.

However, in the moment, blockchain has become a popular term in the relevant circles of Internet users and Internet practitioners, investors and media people. However, the user of the blockchain has a low penetration rate among the overall Internet users, because the technology of the blockchain is still far from everyone. At this stage, the user penetration rate of the blockchain is basically equivalent to the user penetration rate of the digital currency. According to Cambridge research, “There are about 5-6 million people in the world who are using digital currency wallets. The number of Internet users worldwide is 3.7 billion, and the penetration rate is about 0.12%. User penetration rate in comparison with the development of the Internet, 0.12 % corresponds to the level of the Internet in 1992."

The Internet has developed rapidly since 1994. In this year, there were 2,738 Internet companies related to the global website. By 2000, this number had grown to 17,087,182, an increase of 624,000%. The entire industry has expanded to the point of madness.

Blockchains and digital currencies are repeating similar fanaticism. According to statistics from the CoinMarketCap. website, as of December 17, 2017, the global market capitalization of digital assets has reached $600 billion. On December 31, 2016, this figure was only $17.7 billion. In less than a year, the scale has expanded by nearly 3,300%.

So far, according to public statistics, there are more than 6,000 ICOs in the world, and there are more than 10,000 digital currency exchanges in the world. When Bitcoin was first launched in 2009, the issue price was about 3 cents, about equal to 2 cents. By the end of 2017, the maximum was close to 140,000 yuan. It has risen by 700,000 times. Ethereum is the first blockchain project issued by the token. In 2015, Wanxiang Group purchased 416,000 Ethereum native currency ETH for US$500,000. The project has increased by more than 3,000 times and the highest point has exceeded 10,000 times.

According to Babbitt data, from May 2017 until November, 584 companies ICO raised a total of 2.52 billion US dollars. But in January 2018 alone, 254 projects ICO raised a total of $1.83 billion. A total of $12.8 billion was raised in the first half of 2018. In 2017, there were 1,069 projects in the world. In the first half of 2018 alone, there were more than 2,131 projects ICO.

Excessive financialization triggers a similar bubble explosion

Regardless of whether it is the Internet or blockchain technology, the real improvement in the production relationship in the early days was not large. On the surface, it was a technological change, and in fact it was more beneficial to the financial industry. The technological changes that should have acted as the protagonist gave way to finance and speculation.

Over-financial bubble

What is a bubble? The value that externally gives to this company has far exceeded the true value of the company and economic fundamentals.

In the 1998s, when companies such as Microsoft not only had new technologies, but also earned real money, they spurred investors' enthusiasm for technology stocks. By the end of the 1990s, the .com frenzy on Wall Street broke out, as long as the stocks with .com in the website were blindly chased by investors. Between 1994 and 2001, a large number of Internet companies, the concept of frenzied packaging hype, introduced venture capital and absorbed huge amounts of money. At the time, many Internet companies did not establish a benign business model, but all focused on how to improve market valuation and financing. In many countries around the world, as long as it is technology and Internet-related stocks, it is rising sharply. On March 10, 2000, the Nasdaq index reached the peak of the high of 5132.52.