Blockchain & Gartner’s Hype Cycle: is the age of disillusionment approaching?

Blog article / Wednesday, February 28th, 2018

I know this picture is from 2017, don’t worry.

What’s interesting here is that blockchain was going to through Gartner’s ‘Peak of inflated Expectations’ roughly half year a back (July 2017). By now, you think it reached a phase of ‘disillusionment‘? See how it’s right up there with Cognitive Computing and Commercial Drones. Two technologies of which – I believe – we indeed enter a phase of that “I expected a bit more than I have seen until now” – phase.

And the funny thing is, if we overlay the overall crypto-currency global market cap, we do see that the last 2 months indeed have shown an overall decrease (from a January high of $830 billion, to an ultimate low of $333 billion and now back to $450 billion):

A coincidence? Maybe. Or is the disillusionment approaching? I don’t know. What I do know is that the list of ICOs is growing by the week and that major banks are now finally getting heavily involved in the crypto space, such as Goldman Sachs who just announced it will back a $400 million deal in which FinTech Circle will acquire crypto exchange Poloniex.

The European Central Bank & blockchain

Next to this, the Central Bank has taken a position (link opens PDF) towards crypto in which they close off with a rather cumbersome conclusion:

“In conclusion, while cryptocurrencies may pretend to be currencies, they fail the basic textbook definitions. Most would agree that they do not function as a unit of account. Their volatile valuations make them unsafe to rely on as a common means of payment and a stable store of value. They also defy lessons from theory and experiences.

Most importantly, given their many fragilities, cryptocurrencies are unlikely to satisfy the requirement of trust to make them sustainable forms of money. While new technologies have the potential to improve our lives, this is not invariably the case. Thus, central banks must be prepared to intervene if needed. After all, cryptocurrencies piggyback on the 10/10 institutional infrastructure that serves the wider financial system, gaining a semblance of legitimacy from their links to it. This clearly falls under central banks’ area of responsibility.

The buck stops here. But the buck also starts here. Credible money will continue to arise from central bank decisions, taken in the light of day and in the public interest. In particular, central banks and financial authorities should pay special attention to two aspects. First, to the ties linking cryptocurrencies to real currencies, to ensure that the relationship is not parasitic. And second, to the level playing field principle. This means “same risk, same regulation”. And no exceptions allowed.”

Strong words, strong opinion. Typical case of pushback from ‘the antibodies‘ when the body is threatened? Maybe. Interestingly, the document also shows the following Venn-diagram, giving away the Central bank’s view on Bitcoin:

As you can see, the difference between Túmin and Bitcoin, is that Bitcoin is electronic and widely accessible and Túmin is not. In case you’re now wondering: ‘what the hell is Túmin?’ I got the answer for you:

‘El Túmin’ is a local Mexican valuta in Veracruz. It’s a very local currency that is mostly used by farmers and indigenous people. They use it stimulate the agricultural economy. As such, it’s a local, cash, P2P economy. Bitcoin is also P2P, but also electronic, and (thus) widespread. Cash at the other hand, is issued centrally and is not electronic. This diagram is interesting because shows the ‘unique position’ of each type of currency, and basically literally saying that Bitcoin is ‘electronic cash’- which makes perfect sense, although one could argue it’s much more than that.

So what will it be?

So, what shall we see the coming time? Will the Gartner hype-cycle once again fulfill its destiny? Will we indeed see a period of disillusionment, like we are facing with commercial drones and cognitive computing? Are the bitter words of the Central bank reason for investors to lose faith? Or will crypto revive and prove the everyone, including Gartner, wrong. Goldman Sachs’ $400 million investment, and the recent snowballing effect of Blockchain ETFs opening globally, certainly strengthen the latter notion.

Interesting times to be alive, Frankly.



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