The first time I ever logged on to broadband internet is a vivid memory. For several years up to that date, I (or more accurately, my dad) had undergone an iterative process of upgrading bandwidth (14.4 → 56kpbs) and computing power (x386, x486, Pentium 1, PureFX GPU). My father was a computer engineer, and I benefitted from his own fascination with technology in the form of personal computing products. Throughout this I cemented fond memories of discovering communities and content online (and what at the time I believe was the cutting edge of online multiplayer gaming). I can’t even imagine what it is like for kids and teenagers growing up today — there must be so much more.
When I logged on that night for the first time with a broadband connection, everything sort of changed (or at least, it should have). At the time I didn’t think too far past “wow, this is really fast”, and the various things where that speed would be relevant to me (pirating content, low ping times on Quake servers, and in general, faster content). It wasn’t just that it was fast — it was that the speed demonstrated the potential of networked computing in a manner that I had never imagined before.
I was not the only one to have this broadband “wow” moment of course — whether by first hand experience or media frenzy, many of us were beginning to learn that this “world wide web” thing was on the up and up. Investors flocked to anything dot-com, IPOs made bankers rich, and the underlying promises of entities like pets.com, geocities.com, yahoo.com, amazon.com and many others sent valuations through the roof.
I only know this narrative retrospectively — I would have been 15ish when the bubble started to pop in the early 2000s. I had no inklings towards investing, finance, or economics: I was a busy adolescent fascinated by the infinite content afforded by a newly faster and increasingly sophisticated internet.
Fast forward to today. Obviously, we were not wrong to be excited about the internet. Not all of the ventures made it. In fact, probably very few did in their original form (Amazon was originally for selling books; now it runs half the internet via AWS, never mind their growing logistics business). But in the wake of the dot-com bubble emerged a myriad of innovation that is all but ubiquitous and ingrained in to our lives today. The ones who made it through were those that charted their vision carefully, and navigated a challenging environment post-bubble to survive (they may have just gotten lucky too — doesn’t matter now).
Crypto
And so I just can’t help but draw this same comparison and timeline to what has gone on, and what is going on today with cryptocurrency. Some years after Bitcoin was deployed in 2009 people began to take notice, and we had a flood of individuals and entities rushing in to build their iteration and vision of a decentralized asset. Thousands of cryptocurrency tokens were released in to the wild, all promising some revolutionary application through blockchain technology. Many of these were designed and marketed in earnest; several were misguided, and some were intentionally fraudulent from day one.
2017 was my first real experience of having a stake in a bubble that popped. I did not have any cash left by the time crypto’s market cap exploded in late 2017 (BTC @ 21k). But I will admit that shortly after the height of the bubble, I wondered if I had missed my chance to cash out and get ahead. Maybe that was it? That was my chance? And I remember at the time thinking of people who might have thought the same after getting caught up in the dot-com hype just a decade prior.
Three years of staring at cryptocurrency post-bubble, I know now that no opportunity has been missed. We are still in the early innings, the pre-season if you will. Like the dot-com boom before it, the 2017–18 crypto bubble was a dramatic narrative of an industry falling flat on its face out of sheer excitement (and perhaps greed) for the possibilities promised by new technologies. And like the dot-com boom, once the dust settled it seemed like we had few winners, and a lot of losers. I personally have several friends that are still holding their crypto assets (begrudgingly) acquired at the height of the frenzy.
But what my friends don’t know, and what I gather many of us don’t know, is that in the years that followed the bubble, professionals quietly continued planning and building; just as they did after the dot-com bust a decade earlier.
The professionals are here now.
PayPal fired a shot across the bow of every final institution last week. PayPal now has exclusive access to manage fiat and crypto assets at scale across 300M+ accounts. The scale of access to fiat and cryptocurrency here is off the charts. Without having accurate data, I would wager all of the top cryptocurrency exchanges in the world don’t even approach 100M accounts, combined (Binance @ 15M, Coinbase @ 35M, so they say).
PayPal didn’t even ask anyone if they could. I’d wager their customers’ transactions run through every major bank in North America (and the world), and they didn’t even bother to check if we’d be okay with it (I’m a banker). They came up with a plan to leverage cryptocurrency technology, designed it, and went in to production. While we were getting all fluxed about what Facebook’s Libra was planning to do, PayPal quietly just did it anyway.
The impact of PayPal’s announcement remains to be seen. How might the banking industry react? I’ll be trying to convince my own bank to pay attention later this week.
To be continued
