Blockchain — the most poorly adopted platform in recent history?
In this rant I’ll try to take a fair and measured look at how things are going in the blockchain universe. Before you form an opinion on my inflammatory premise a little about me:
- I’ve had two successful nowhere-near-blockchain technology startup exits — Star2Star Communications and Voalte.
- My rants from a past life can be found on my old blog.
- I’ve been involved in the blockchain space for over four years. Starting in 2017 I ran a medium-scale (200 GPU) cryptocurrency mining operation. I ran my own nodes, had non-custodial wallets, experimented with smart contracts, etc — pretty much every aspect of the space from mining up. I’ve attended NFT.nyc, etc.
- I sold all cryptocurrency the day I was diagnosed with Bipolar Disorder in January 2021. It occurred to me that highly volatile asset + bipolar probably wasn’t a great combination (but that’s another rant for another day). It wasn’t a meaningful amount to me — I didn’t care about the sell price and I’ve never really thought about it since.
- I think blockchain is one of the most interesting technical advancements in my lifetime. My current endeavor Tovera uses smart contracts on the Polygon Ethereum L2 blockchain (along with IPFS) to store copies of user asset verification data.
- I currently hold only enough blockchain-related assets (crypto) to conduct research and experiment with blockchain functionality. The total value of everything I own is less than $1000. I’d probably have more (just for the lolz) if it wasn’t so potentially detrimental to my health (see fourth bullet).
- I don’t have any financial positions hedging or otherwise betting against anything blockchain/crypto related (and blockchain is actually tremendously useful to my company).
The good news with all of this is I feel like I’m in a unique position to have a fair and reasonable take on what’s going on in blockchain. I’m very interested in the space and have spent a lot of time working on it but for health reasons (really!) I don’t have any holdings that could influence my thinking or public position with a self-serving purpose or profit motive. I’m also not some jealous “hater” who “missed the train” (see third bullet) as I don’t need life changing money (see first bullet).
For many people reading this if it wasn’t for my health concerns I would be HODLing longer than you.
What are we talking about anyway?
Any new technology struggles with terminology, accepted definitions, and just generally wrapping your head around it. For many people all things blockchain-related in 2022 resembles grokking the internet in 1995 as hilariously demonstrated by this classic highlight reel:
So let me start with a few of my definitions (and understanding) for clarity:
Blockchain — A many decades old (in concept) technology with the first publicly available implementation launched as the fundamental enabling technology for Bitcoin as described by Satoshi Nakamoto. Throughout this rant I’ll use “blockchain” to refer to any public blockchain -or- anything technically or philosophically related to or built on it.
Bitcoin — The first implemented “peer-to-peer version of electronic cash” (taken directly from Bitcoin whitepaper) built on a blockchain.
Cryptocurrency — Bitcoin or any coin, token, etc built on blockchain technology or variants of it.
NFT — A class of smart contracts implementing one or more standards. On Ethereum and EVM compatible chains these would be ERC-721 and ERC-1155. Other smart contract capable chains have equivalents of these standards. Essentially this all boils down to a program written for a computing platform (in most cases the “Ethereum Virtual Machine”). Note I said computing platform, because that’s what blockchains are positioned to be at this point.
Web3 — Not right now.
Metaverse — Definitely not right now.
Throughout the rest of this rant it may seem like I’m using the first three terms interchangeably. Here’s the thing — blockchain is generally considered to be decentralized. Satoshi understood that for people to want to dedicate time, resources, real cost (power, etc) to running and powering a decentralized network there needed to be some form of incentive. Enter Bitcoin. This is why the currently understood blockchain definition is so inextricably linked with cryptocurrency. Without blockchain, no cryptocurrency. Without cryptocurrency, no blockchain.
While the technology, implementation details, etc vary widely this general linkage between a blockchain network (and all it provides) and some kind of token/cryptocurrency largely holds true for any publicly run blockchain network (with Ethereum being the second most popular).
Between payments and the ability to write software (smart contracts), extensions, etc blockchain is many things but one of them is certainly a platform.
Blockchain Platform Adoption
The success of a platform is usually measured by adoption — how many people are using it, how often, and at what rate of growth. Using this standard for success let’s look at blockchain.
Bitcoin was first released by Satoshi in January 2009. At this point Bitcoin had one user — Satoshi themselves. Using Google Trends let’s look at Google searches for Bitcoin to gauge general interest:
Admittedly a bit of a slow start for Bitcoin with nothing really registering on Google Trends until early 2011 . I think being essentially invisible to the Google-using population (at least 64% of web users at the time) for two years is quite telling (Google did 88 billion searches per month in 2009 and roughly 100 billion per month in 2011). First real question I ask — why did it take Bitcoin two years to register in Google search activity?
My repeated focus on Bitcoin hitting the internet in January 2009 isn’t a coincidence because if you haven’t heard — Bitcoin is officially 13 years old this month. Happy Birthday BTC!
Now that blockchain is officially in the angsty teenage years (and the hype cycle is raging like teenage hormones) I thought this would be a good time to take a step back and look at the real numbers in terms of blockchain adoption and then compare them to various other technology platforms in recent history.
Problem is, with blockchain networks being decentralized it can be very difficult to get user and usage metrics that compare directly to the things you’ll find from public companies such as MAU (monthly active users) and DAU (daily active users). For all things blockchain I’ll have to estimate much of this but whenever possible I’ll try to use real usage metrics (which the public nature of blockchain generally makes very easy to get).
Thirteen years in (as best as I can tell) this is the current state of Bitcoin blockchain platform:
- All time high of 500,000 transactions per day.
- All time high of 1.2 million unique to/from addresses in use per day (users often have and use more than one).
I use Bitcoin here because it was the first and therefore represents a “Genesis” date for blockchain — but what about the other networks, Layer 2s, etc? Ethereum is the next most popular blockchain platform and Polygon is the most popular Layer 2. Let’s add their numbers in the mix:
- Ethereum all time high of 1.2 million transactions per day.
- Polygon all time high of 9 million transactions per day.
Again because of limited time let’s take these numbers, add them together, and multiply by two (to include the other top blockchain platforms). If anyone out there really wants to tear into all of the chains or has a better method to estimate users I’d love to see it. Also, does anyone know how to get usage stats on the Lightning Network? I know the architecture makes that difficult/impossible but I’d like to factor them in if possible. It’s also a good time to note that these transaction numbers represent ALL of the activity on the chain — everything from buying more coin on Coinbase to flipping NFTs on OpenSea is included in these numbers.
With this sloppy model we land on the following best-case blockchain usage rates — 24 million daily active users. In terms of overall “users” lets go with 4x that and round up — 100 million.
Note that this “wild-ass guess” aligns quite well with various other sources. For example:
- Coinbase has approximately 9 million daily active users.
- Coinbase has approximately 11% market share.
There you have it — roughly 100 million daily active users in the entire exchange space (although there are other much lower published Coinbase numbers). Unsurprisingly self-interested blockchain companies like TripleA estimate 300 million crypto users worldwide (no mention of daily, monthly, etc). They describe their methodology and from a first glance basing everything on numbers from a report issued by the Central Bank of Canada seems a little… Strange. My methodology isn’t any better but I’m also not trying to sell my products and services to merchants so they can accept crypto payments. “Of course the crypto market is huge, buy our stuff so you have access to it!” to me it seems a little brazen considering public blockchain data is just that — public.
In regards to TripleA let me be absolutely clear — I’m not accusing them of any wrongdoing. Maybe they’re right on. In any case as you’ll soon see whether it’s 30 million, 100 million, or 300 million users it doesn’t really matter…
Blockchain Platform vs Web Platform Adoption
Many people call blockchain/crypto/web3/whatever “the next internet”. Many people also consider “the internet” to actually be the World Wide Web. I wonder — what did the first 13 years of the World Wide Web look like in terms of adoption?
The WWW was “released” in April, 1993. For reference lets time travel back to 1993:
- I turned seven years old.
- “I Will Always Love You” by Whitney Houston topped the Billboard charts. (The #2 Whoomp! (There it is) was more my style #B96.)
- Jurassic Park (the beginning of it all) was the top grossing movie.
- Bill Clinton was sworn in for his first term as US President.
- Windows 3.1 was released less than a year before (for $300 in 2021 dollars).
- 23% of US households had a computer.
- 35% of those computers had a modem.
On release of the web the entire potential user base in the United States was essentially 8% of the US population — 21 million people (and likely much lower virtually everywhere else in the world). Even if you add in corporate and academic users in terms of user adoption things are not looking good for the World Wide Web…
Kids these days may not understand what the early years of the web/internet were like. You needed at least several thousand dollars (in 2021 money) of computer hardware that you had to order from a catalog and wait weeks for and/or be close enough to a store that sold computers. You needed a phone line (back when you paid for even “local” calls) and not to mention an ISP (my first ISP in 1995 was a long distance phone call)! If you don’t know what long distance is back in the day you had to pay per minute when you had to call outside of your local area. When you were on the internet your whole house couldn’t get phone calls unless you added another phone line at great expense.
Then once you got this far you had the fun of Hayes modem commands (potentially IRQ conflicts and jumpers), CHAT scripts, getting a TCP/IP stack to work, etc, etc. Yet, somehow, people saw the value and potential of the web and jumped through all of these ridiculous hoops. My first internet connection was basically 1.5KB/sec — all for very ROUGH web pages that in many cases took literally minutes to load (assuming your modem didn’t randomly drop the connection).
It didn’t take long for things to get better. Internet speeds got faster. More applications were developed. More users got online. All because the internet was delivering so much value and growing so rapidly people (companies) were digging ditches around the world for fiber and dispatching ships across the world’s oceans to lay submarine fiber — all to support the rapidly increasing functionality and use of the internet (web) and laying the groundwork (literally) for all things to come.
Just how much use? Let’s look at some web statistics from 2006 (13 years after the release of the WWW):
Daily usage statistics are hard to come by — again if someone can find them I’d love to take a look.
User adoption after 13 years between blockchain and the web:
Blockchain: 100 million users (2022)
Web: 1 billion users (2006)
Web wins — 10x the user adoption rate of blockchain.
Blockchain Platform vs Facebook Platform Adoption
Now that we know how the web was doing when it hit 13, what about platforms built on the web? Facebook was released February, 2004. Let’s take a look at 2004:
- I was turning 20 that month (Happy Birthday to me)!
- The internet was up to 745 million users worldwide.
- MySpace was launched only seven months prior.
Many people reading this were either around for it or heard tales of it from elders such as myself. Facebook rolled out slowly — only to select groups until being available to the general public in September, 2006 (two years later, similar to when Bitcoin showed up on Google Trends).
You can guess where this is going — how was Facebook doing in terms of user adoption 13 years later, in 2017?
User adoption after 13 years between blockchain and Facebook:
Blockchain: 100 million users (2022)
Facebook: 1.5 billion users (2017)
Facebook wins — 15x the user adoption rate of blockchain.
Note that a more accurate analysis would factor in all social media platforms just as the blockchain analysis attempts to encompass all disparate blockchain platforms. As you can see in this case it’s not necessary because Facebook alone blows away the entire blockchain space.
Blockchain Platform vs Mobile Platform Adoption
What about other “platforms”, generally? Lets look at mobile. The iPhone was released June, 2007. The first Android device was released in October, 2008.
Where, I wonder, were user adoption rates in 2020/2021, 13 years after the introduction of the iPhone?
- There were over 1.5 billion active iOS-based devices in 2020.
- There were over 2 billion active Android-based devices in 2021.
Between the two leading mobile platforms there are at least 3.5 billion users worldwide (and you know they’re all daily users).
User adoption after 13 years between blockchain and mobile:
Blockchain: 100 million users (2022)
Mobile: 3.5 billion users (2021)
Mobile wins — 35x the user adoption rate of blockchain.
Don’t tell me, show me
If you’re a cryptocurrency proponent/advocate by now you’ve identified significant issues with my analysis and have plenty of criticisms. Let me admit to the big problems even I’m aware of:
- “Users” is very broad and can mean almost anything.
- “Users” can’t be compared to daily active users or monthly active users.
- For blockchain there’s really no way to calculate either.
- These are all wild guesses anyway with potentially dubious sources.
As sloppy and potentially “unfair” to blockchain as my methodology may be let’s look at how generous I am towards blockchain:
- I used all time highs (not averages) for transactions and other blockchain activity.
- I rounded up whenever possible.
- I multiplied out to 100 million daily active users (which doesn’t feel right to me, btw).
- Blockchain has the incalculable advantage of building on every other extremely successful platform I listed (that’s why I chose them). Compare how I described getting on the web in 1993 to being considered a blockchain user. Since at least 2017 you could hear about blockchain-something at a bar, pull your phone out, and be counted as a “user” in minutes.
- With the exception of Facebook the other platforms listed required serious expense for user adoption. Thousands of dollars on a computer in 1993 and hundreds of dollars on a phone in 2007/2008 for something that was guaranteed to depreciate in value. The vast majority of the users involved in blockchain are there because they at least think it will MAKE them money — coins, NFTs, startups, whatever.
- Even if you use the very optimistic TripleA numbers and divide the usage multiples by three blockchain adoption still takes a serious beating.
Yet, even with all of these advantages, as best as I can tell, in the grand scheme of things actual user adoption of blockchain/cryptocurrency/etc is pathetic. Let me say that another way— don’t let the news coverage and hype fool you. In reality all things blockchain are used by a tiny profit driven, self interested, and LOUD portion of the population — literally 1.25% of people on the planet.
For all you HODL “to the moon” people out there take that in context. I like blockchain. I think using cryptocurrencies to power a decentralized platform makes perfect sense. I’ve spent a lot of time working in the space and I really want it to be successful. I’m just trying to ask the question every blockchain proponent should be asking:
Why has blockchain user adoption been so terrible and what can we do about it?
Looking at the rates above one thing is very clear — with each advancement in technology comes increasing rates of user adoption. Factoring in internet access, social media, and mobile devices blockchain adoption rates should be at least 20x what we’re currently seeing.
People use things that make their lives better. The Diners Club card was introduced in 1950 and by 1970 51% of US households had a credit card — in the 1950s and 1960s! My dad was born in 1949 and he remembered getting a telephone line... Meanwhile 13% of US households traded crypto last year. Will blockchain get to 51% seven years from now?
The answer to that question will depend on what blockchain and the ancillary technologies can do that people actually want or need. For blockchain to finally be successful this needs to be the focus — not schilling your coin on Twitter, not hyping the next NFT drop, and certainly not regurgitating some jargon-gibberish of “a Web3 DAO DeFi platform for the metaverse” or whatever. This hype cycle can only exist for so long; if blockchain doesn’t deliver (and relatively soon) the masses will eventually figure out it actually is internet Beanie Babies after all (or maybe they already have).
If improving the lives of people doesn’t become a focus then the blockchain haters are right — this entire space is nothing but a get rich quick scheme. Cash out now because if you’re not answering the questions I’m asking (and coming up with actually usable implementations— not a website, not a whitepaper, not a Discord, not a tweet thread) then you’re just in the Ponzi somewhere — all you can do is hope you time it right.
My dad’s side of the family is from Missouri — the “Show me State” so I say again:
Don’t tell me, show me
“But but but”
…or my favorite crypto retort — “LOL”
If you’re still reading and not already blasting me in the comments, on social media, etc let me try to get ahead of a few rebuttals I can think of:
“It’s still early. It was just payments until we had smart contracts, NFTs, DAOs, XYZ”. Thank you, I’m glad you brought this up! Why did it take six years for Ethereum to show up? Why did it take six years after that for this other stuff to show up? If blockchain were so immediately and clearly useful (like any of the other platforms compared here) all of these uses would have arrived long ago and the blockchain adoption rates would reflect that. Six years after the launch of the web we already had Amazon, Google, eBay, PayPal, etc — and a total of 3.1 million other websites. Look at the WHOIS domain registration dates for the Fortune 500 — as one example toyota.com was registered in 1994. A massive car company ($95 billion in sales that year) saw the value of the web 18 months after it was released. This would be like using Bitcoin to buy a car (which Tesla won’t even do anymore) in 2010 or having your car purchase executed via smart contract in 2016. Yet here we are, 13 years later, and neither of these uses are even on the horizon.
“But apps”. Twelve years after the release of the iOS App Store there were 3.4 million apps on the platform, used by 1.5 billion people. Where you at blockchain?
“There’s so much venture funding now things are really going to take off”. This is true — throw enough money at anything and there are bound to be some successes (90s web has entered the chat #fellowkids). However, this raises another interesting point — why did it take so long for venture capital to embrace blockchain? The infamous story of pets.com is perfect — six years after the launch of the web they raised $10.5 million. In January 2000 they raised another $82.5 million — pretty large numbers for that era. Their entire business model was selling pet supplies to people over the internet. Let’s just say no one today is buying their dog food on pets.com. 13 years later blockchain is just beginning to see that kind of ridiculous (dubious?) money flow into the space. Why did the web do it in half the time (in the stone age) by comparison?
“Consensus with disparate stakeholders takes longer. That’s part of decentralization”. Well yeah, but isn’t that a huge problem? Decades after the web shouldn’t we be able to progress faster, not slower (as Facebook, mobile, and countless others have demonstrated)? Are the yet-to-be-realized potential advantages of blockchain and decentralization worth slowing progress and innovation for the first time in recent history? Before you tell me blockchain and decentralization speeds up innovation I’ll point you to a reference: literally this entire rant.
Wrapping up the rant
As I said in the introduction this isn’t meant to take on blockchain, hate on cryptobros, call people idiots, hurt crypto values, etc. I truly want the space to find its rightful place in technology and history.
One final story — when you raise equity at a tech startup it’s very interesting. In the due diligence process the entire company is picked apart and questioned (or should be #theranos). After all, people are giving you a lot of money and:
- They need to get an idea of what they’re buying and what it’s worth.
- They need to figure out how much they’re willing to put in it.
- They need to make sure it’s not a scam or shitty company that will cause them to lose all of their money.
The process I’ve undertaken in this rant and the questions I’ve asked about blockchain make due-diligence when raising capital look like a friendly chat between old friends.
If you’re a blockchain maximalist you should be able to answer these questions with responses based in reality and delivered in a thoughtful and respectful manner.
If I responded to a potential investor asking these kinds of questions with “LOL”, some delusional rant, or personal insults I wouldn’t get very far — and neither will blockchain.
