Mark Twain once said: "History doesn't repeat itself, but it does rhyme". In 1994, Kevin Kelly, the editor-in-chief of "Wired" magazine, wrote the book "Out of Control: The New Biology of Machines, Society, and Economy", which is a "prophet" about social evolution, especially the development of the Internet. A must-read for the stars of The Matrix. 25 years later, 8D Capital tries to capture the parallels between the Internet and blockchain revolutions to help people better understand the technology life cycle and the future of the blockchain industry.

part5: Are we in 1994? What's the next step?

Internet and blockchain revolution:

part1: Early successful products

part2: The origin of disruptive companies

part3: Early challenges

part4: new concept, valuation and timing

part5: Are we in 1994? What's the next step?

This article is the third part of the entire series:

In the early stages of emerging technologies, there are often formidable challenges in scalability, cost, and market education, which limit the development and mass adoption of breakthrough applications. However, these challenges are usually resolved over time. We have witnessed the development of the Internet, and we also expect to see similar progress in the blockchain.

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Congested Ethereum transactions after the launch of CryptoKitties in 2017

While current internet connections are fast, in its early days the internet was not very scalable and costly. On August 7, 1996, the Internet service of AOL (America Online) crashed because it could not bear the number of Internet users, and it was not repaired after 19 hours. At that time, more and more Americans were going online every day, and AOL was the largest Internet service provider, and other competitors included Prodigy, CompuServe, and MSN. The internet itself isn't down, but the ability to access it is temporarily faltering, and that's a big problem for many people who have come to rely on the internet in their lives.

This is similar to what happened in the blockchain world in December 2017. CryptoKitties increased on-chain transaction volume on Ethereum, clogging the network. Most users cannot complete transactions on the blockchain. Unless they are willing to bid high gas fees, this has caused a lot of confusion and distress in the community.

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Average speed of Internet and wireless mobile communications in the United States

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Transaction speed of different projects

In the blockchain space, we are still in the early stages of the technology development cycle, and we are faced with scalability and cost challenges, which greatly hinder the use of more complex application scenarios and large user bases. Low scalability means that developers or users have to pay higher fees to outpace other transactions in the queue, reducing wait time. As of February 2019, the average transaction fee on Ethereum is around $0.13, with more complex DAPPs such as on-chain games soon to charge exorbitant transaction fees. While not every action needs to happen on-chain, we still urgently need to increase the scalability of the blockchain to support the growing number of DAPPs, as well as support all daily transactions on the same distributed ledger (VISA every 24,000 transactions per second). A number of projects are working on scaling the transaction speed of blockchains in different ways, with variable trade-offs between scalability, security, and distribution.

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1999-2010 Cost reduction of launching a startup 

Additionally, we expect the cost of launching a blockchain startup to decrease over time as well. During the Internet revolution, the average cost of starting a startup dropped dramatically from $5 million in 1999 to $500,000 in 2005 to $50,000 in 2010.

The reason for the first wave of cost reduction is due to open source Open Source (which means that licenses for UNIX, Web servers and Oracle databases are no longer required) and parallel computing Parallel Computing (which means that expensive Sun servers and EMC storage are not required to be purchased) . Then, the second wave of cost decline is due to the maturity of cloud computing Cloud Computing, popularized by AWS, cloud computing provides network storage (S3), processing power (EC2) and the ability to automatically expand or scale according to the traffic on the cloud .

According to Gartner, the starting cost of deploying a proof-of-concept enterprise-grade blockchain is $275,000 and can run up to several million dollars. The deployment and transaction costs of building simple DAPPs on public blockchains (such as Ethereum, Neo, EOS, etc.) may cost $30-85k, and the current blockchain talent shortage will cost a lot of money.

Similar to the development of the Internet, we hope that the cost can be continuously reduced when launching a blockchain project. In the future, blockchain transactions become more scalable and cheaper, more full-stack platforms at the enterprise level (BaaS hosting - Kaleido, AWS, Azure, Oracle, etc.), development platforms (NoOps - Esprezzo), middleware ( Omnitude) and developer tools (Mist, Geth, Remix, etc.) are emerging, and more talents will migrate to the blockchain field.

educate:

At one time, 50% of the world's CDs had the AOL logo

Education is an important enabler for the adoption and adoption of new technologies, lowering barriers to entry and helping to “bridge the divide” (a term coined by Geoffrey Moore). Technology is often viewed as an outlier until the cognitive gap is crossed, and once it is crossed, it is considered a safe consumer product.

In the early days of the Internet, Jan Brandt was hired as AOL's vice president of marketing, and her role was to expand the user base. During her market research, she realized that people didn't know how to use a computer because "somebody picked up a computer mouse and started pointing it at the computer like a remote control," so a "head start" was important. Instead of telling users that one product (such as a computer) is better than another (such as a TV), tell them exactly how to use a computer.

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Learn and get the 0x program from Coinbase

In order to advance the development of the crypto world, we have seen many initiatives to educate the next generation of crypto and blockchain technology users, including large conferences such as Consensus Consensus Conference, Enterprise Education, ConSensys Academy, etc. developed by Deloitte or IBM Personnel education and university education, such as the ConSensys Academy blockchain education network.

Many companies also try to give away tokens or cold wallets through events and marketing campaigns. Recently, Coinbase launched a Learn and Earn Crypto Program that offers cryptocurrency rewards to users who complete their educational courses. At present, compared to traditional payment solutions (such as Venmo or Paypal), the use of blockchain still has many flaws and frictions, and requires users to have some basic knowledge (private/public keys, gas fees/transaction fees, etc.), Not to mention the irreversible risks associated with key management and transactions. We are still in the early stages of the industry, with less than 1% global adoption, and educating the general public about cryptocurrencies, blockchain, and key management is critical to the industry's growth. Large companies like AOL and Coinbase can give users additional incentives by giving away free trial CDs and cryptocurrency, which will help lower barriers to entry for users and drive adoption of the technology.

postscript

postscript

source:

source:

"How the Internet Happened," by Brian McCullough.

https://www.linkedin.com/pulse/reply-unending-chasm-how-survive-geoffrey-moore/

https://www.coinbase.com/earn/0x

https://bothsidesofthetable.com/why-has-seed-investing-declined-and-what-does-this-mean-for-the-future-6a9572357130

https://bothsidesofthetable.com/a-deep-dive-into-what-has-really-changed-in-venture-capital-f5d225f7f8

https://howmuch.net/articles/crypto-transaction-speeds-compared

https://ylv.io/how-much-does-it-costs-to-run-dapp-in-2018/

https://bitinfocharts.com/comparison/ethereum-transactionfees.html

Other research produced by Eight Dimensional Research Institute

Internet vs BlockchainRevolution: Challenges in the Early Days (Part 3) 

This article is part of the Internet vs Blockchain Revolution Series. If you areinterested in reading the other articles.

In the early stage of emergent technologies, there are often challenges around scalability, cost,and education, limiting the development of breakthrough applications and massadoption. However, these challenges are generally solved over time as we havewitnessed with the evolution of the Internet and we should expect a similar technological progression in Blockchain.

Scalability and Cost:

Pending Ethereum Transactionsafter CryptoKitties’ Release in 2017

Despite today’s fast Internet connection, the early days of the Internet faced challenges in terms of scalability and cost. On August 7, 1996, AOL’s Internet service failed from supporting a high volume of Internet users and went down for nineteen hours. At that point, Americans were increasingly living their online lives every day, and AOL was the country’s largest internet service provider, amongother competitors such as Prodigy, CompuServe and MSN. The Internet itself hasn’t crashed but the ability to access it temporarily stopped, and it was a big deal for many who started to get used to surfing the web in their daily life. This is similar to what happened in theblockchain world in December 2017, in which the of CryptoKitties spiked the on-chain transaction volume on Ethereum and clogged the network. Most users couldn’t get their transactions through on the blockchain unless they were willing to bid a high amount of gas fees, which caused a lot of confusion and distress in the community. While the Ethereum network jam made many of us realize the current lack of scalability of blockchain technology in servicing more complex use cases, both of these failures in scalability during the early days of Internet and Blockchain showed a validation of how important these technologies had become in a few years for the early adopters and the need for better scalability solutions to support the growing user base and demand.

Average Internet and WirelessMobile Telecommunication Speed in the US 

The high network fees and costs for launching a startup during the early days of the Internet and the current state of the Blockchain industry is also similar. Back then,the process of getting online required a modem and a phone line, in which all the online services maintained a network of local modems for people to dial in.The most popular online service at the time, AOL, charged $9.95/month for 5 hours of unlimited access with each additional hour costing $2.95, which by today’s standard, was very restricting.However over time, the broadband connections with DSL eventually came, scaling up the Internet speed, and by 2014,the Internet speed was 200 times faster and 90% cheaper compared to 1999. Similarly, we have also witnessed an increase of wireless mobile telecommunication speed over the years, from less than 1Mbps with 2G technology to 25Mbps with 4G technology, enabling new services to be viable and practical through the mobile phone, such as music and video streaming. Over time, the limitations around the scalability and cost were gradually removed, allowing for more complex and bandwidth-intensive applications to be practical and viable.

Transaction Speed of Various Blockchain Projects

 In the blockchain world, we are still early in the development cycle of the technology, in which the challenges around scalability and cost are preventing the practicality of more complex use cases and large user base. Low scalability means that the developers or users would have to pay higher fees to outbid the other transactions in the queue to reduce wait time. As of February 2019, the average transactions fees are roughly $0.13 for Ethereum, in which more complex dapps, such as on-chain games, would quickly rack up high transaction fees. Although not every action needs to live on-chain, there is still an urgent demand for blockchain to be scalable to support the growing number of dapps, and all the day to day transactions (Visa processes 24,000 transactions per second) living on the sameledger. Numerous projects are working on different means to scale the transaction speed of blockchain, with variable trade-offs between scalability,security, and decentralization. With the recent mainnet launches of EOS andTRON (4,000 and 750 TPS respectively), we have seen an increase of more complexdapps being released in the past couple months, and we expect this trend tocontinue as more scalable blockchains are being deployed in the space. Overall,the different scaling solutions being explored such as novel data structures(Sharding, Tangle, DAG, Coda etc.), layer 2 solutions (Sidechains, off-chains,hashed-time locks etc.), and more efficient consensus algorithms (POS, DPOS,Casper, Avalanche, Hashgraph etc.) will gradually increase the bandwidth and reduce the cost for transactions on the blockchain, enabling new use cases andservices over the years.

The decrease of the cost of launching a Startup from1999-2010

 Additionally, we expect that the cost of launching blockchain startups will also decrease overtime. During the Internet revolution, the average cost of starting a startupalso drastically reduced over the years, from $5m in 1999 to $500k in 2005, and$50k in 2010. The first wave of cost reduction was due to the appearance of open source (which meant no license for UNIX, web servers and Oracle databases) and horizontal computing (which meant no need to buy expensive Sun servers & EMCstorage). Then, the second wave of cost decrease was due to the maturation of cloud computing, popularized by AWS,providing web storage (S3), processing power (EC2) and the ability to scale upor down depending on traffic (auto-scaling) on the cloud. According to Gartner,deploying enterprise blockchain proof-of-concepts has a starting cost of$275,000 and can go up to several millions of dollars. Depending on theblockchain (Ethereum, Neo, EOS, etc), the deployment and transaction fees of simple dapps on public blockchains can cost you $30-85k (interesting breakdown here), and current blockchain talents are in shortage and expensive ($150k on average).Similar to the evolution of the Internet, we also expect a cost reduction inlaunching blockchain projects as the blockchain transaction speed becomes morescalable and cheaper, more full-stack platforms on the enterprise side (BaaShosting - Kaleido, AWS, Azure, Oracle, etc), development platform (NoOps -Esprezzo), middlewares (Omnitude) and developer tools (Mist, Geth, Remix, etc)are being released, and more talents migrating into the blockchain space.

Education:

At one point, 50% of the CD's produced worldwide had an AOL logo on it 

Education is an essential driver for the adoption of new technologies, lowering the barrier to entry, and helping "crossing the chasm" (a term created by Geoffrey Moore). Before the chasm,technology is usually treated as a foreign object, and once it has trulycrossed, it is perceived as safe to consume. During the early days of the Internet, Jan Brandt from AOL was hired as VP of marketing to growits user base. During market research, she realized that people didn’t know howto use the computer as “someone took a computer mouse and started pointing it at the computer like the remote control”, so it was important to go back to the basics. Selling consumers on the virtue of one online service over another wasnot as important as educating consumers on what an online service was. The marketing strategy implemented by AOLwas to send out trial disks and CDs for people to try out, and the resultsproved to be extraordinary, with people signing up and providing their creditcards. AOL re-invested so much into the strategy that CDs were found everywhere, in people’s mailboxes, on new computers, in magazines, given away with movie rentals, etc. so that at one point, 50% of the CDs produced worldwide had the AOL logo, leap frogging the competitors and growing its user basefrom 200k to 25M clients over the years. Overall, AOL’s campaign is a good example of a successful initiative indriving adoption by actively lowering the barrier of entry for the less tech-savvy crowd of early users.

Learn and Earn 0x program fromCoinbase

To draw a parallel with the cryptocurrency world, we have seen many initiatives in educating the next generation of crypto and blockchain adopters, with large conferences, suchas Consensus, corporate education,taken by Deloitte or IBM, developer education, such as ConSensys Academy, and universityeducation, such as Blockchain EducationNetwork. Many companies are also attempting to in give out tokens or cold wallets for free through events and marketing campaigns. Recently, Coinbase launched a learn and earn crypto program,offering cryptocurrency rewards for completing their educational courses.Currently, interacting with blockchain still has a lot of frictions, and require you to have some foundation knowledge (private/public keys,gas/transaction fees etc.) compared to traditional payment solutions such as Venmo, or Paypal, not to mention the irreversible risks that come with keymanagement and transactions. We are still early in the industry with less than 1% of worldwide adoption, and educating the general population about cryptocurrency, blockchain and key management will be very important for the industry to grow. Large companies such as AOL and Coinbase are well positioned to offer extra incentives through giveaway CD trials and cryptocurrencies to actively help lower the barrier of entry and drive further adoption.

Overall, it’s undeniable that the Blockchain industry has been making significant progress towards solving the challenges around scalability, cost, and education over the past few years. Although we are still early in this technological cycle, we are confident that Blockchain will mature in a similar fashion as the Internet,gradually becoming more scalable, affordable and practical for mass adoption.

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The Internet Revolution facts are based on thebook “How the Internet Happened”,written by Brian McCullough. MarkTwain once said “History doesn’t repeat itself, but it does rhyme”. We areattempting to draw some similarities between the Internet and BlockchainRevolutions, to help entrepreneurs and investors better understandtechnological life cycles.

Sources:

Book “Howthe Internet Happened”, written by BrianMcCullough.

https://www.linkedin.com/pulse/reply-unending-chasm-how-survive-geoffrey-moore/

https://www.coinbase.com/earn/0x

https://bothsidesofthetable.com/why-has-seed-investing-declined-and-what-does-this-mean-for-the-future-6a9572357130

https://bothsidesofthetable.com/a-deep-dive-into-what-has-really-changed-in-venture-capital-f5d225f7f8

https://howmuch.net/articles/crypto-transaction-speeds-compared

https://ylv.io/how-much-does-it-costs-to-run-dapp-in-2018/

https://bitinfocharts.com/comparison/ethereum-transactionfees.html

Internet vs Blockchain Revolution" Series 2: The Origin of Disruptive Companies

《Internet vs Blockchain Revolution Series Part 1: Early Successful Products

《Internet vs Blockchain Revolution" Series 2: The Origin of Disruptive Companies

Hard core technology: Do security tokens need a dedicated blockchain?

Enterprise Blockchain: Past, Present and Future

Medium:https://medium.com/@8DecimalCapital

8 Decimal Capital (8 Decimal Capital) is a cross-border international professional blockchain investment institution. It manages two funds, USD and Token, with a total capital scale of more than 60 million US dollars. The team partners come from first-line VC and PE, and the fund consultants include Chen Qing, the former CEO of UBS China, and Zhang Fan, the former founder partner of Sequoia China. Bawei focuses on blockchain track investment, and at the same time makes a strategic layout of upstream and downstream industrial resources. Bawei has invested in the top projects in the underlying technology, privacy, storage, Security Token, stable currency and other fields, such as EOS, Icon, IoTeX, Zilliqa, Bluzelle, IRIS Network, etc., and has laid out exchanges, media, consulting, and technical communities And other strategic synergistic resources, such as 0x, Fcoin, Kyber, Bibox, Mobilecoin, Dorahacks, Coin World, WXY, etc. In the U.S. Token Metrics list, Bawei’s investment return ranks among the top three among 50 international funds, and has also been rated as China’s Top 10 blockchain investment institutions by institutions such as 36 Krypton and Tsinghua x-lab.