A sharp drop in the value of virtual assets last week, has revived the ghosts of the past. And skilled analysts, and idle commentators remembered “the dot-com bubble,” which for five years has rapidly swelled and burst within one day. Even Bloomberg has not bypassed this theme party. But can you compare these two phenomena? And in General whether the juxtaposition of these two economic phenomena?
A bit of history. The phenomenon of the dot-com (the name comes from domain name extensions .com) was founded in the mid 90-ies of the last century, when the word “Internet” had magical properties to open the doors. XX century — from the Titanic to the world trade center towers is remembered for undying faith in progress. And the world wide web was introduced at the time of his top. The one who mentioned IT, unconditionally received money for development. It was absolutely no matter exactly what the owner was going to do. Didn’t matter nor the material base of the company, or the employees and their qualifications, no technology (at the time few people were familiar with Internet technology), any business model — it was, in a word, “garage” company. These firms readily took to IPO and collected millions of dollars. It is estimated that at the peak of the dotcom market was estimated at $6.7 trillion.
It was not until 10 March 2000. Then the NASDAQ Composite topped 5132 points. And then began to fall. And the total for the year decreased by five times — up to 1100 points. Thousands of companies went bankrupt. The bubble burst.
At the moment the value of virtual assets also falls. With the beginning of 2018, the most popular digital coin lost about 80% of the price. And now some experts like to attach to each other charts and say, look, this has already happened!
Graphics are really similar, but one should not jump to conclusions.
What is the fundamental differences of the Internet from the many projects of virtual property?
The first projects of digital assets is not as homogeneous. Without exception, all the dot coms were businesses with their business schemes, or without them, but the purpose was to extract Fiat profit. But with virtual assets is not so. Some of them actually can be perceived as a kind of joint-stock companies. For example, the second virtual payment unit is a whole ecosystem with its own DLT-registry, many technical decisions, options, and applications. In this case, to a greater extent kapitaliserede platform and in many ways the personality of its Creator Vitalik Buterin.
The main digital coin is the final product. Its infrastructure is, of course, evolving, changing, but all the improvements are a third-party character, not relevant to the creators.
In other words, in the first case we are really dealing with the business model, the second — most, with a replicated piece of art IT technology with recognized value. It turns out that on the same exchanges, the same conditions are traded in totally different institutional nature of the assets. We can say that they are subject to different market laws.
The second difference. The dotcom and projects of virtual property exists in a fundamentally different economic models. Garage company is a product of the industrial and innovative economy, the main value of which was production technology and scientific and technical developments. Digital live of the financial system in the economy of social capital. The importance of this phenomenon can be well illustrated by a simple example. The market value of Samsung is around $773 billion, Apple is about $1 trillion. At the same Korean industrial giant combines at least 23 brand, which produces everything from smartphones to tankers and food. Apple only 13 under these brands are produced exclusively electronic gadgets. The same smartphones Samsung sells a third more — 308,5 million units to 215,8 million units from Apple. And unprofitable brands from the Korean company as a percentage less. So why is it cheaper? Where are all the tankers, steel mills and other businesses? It’s simple. The lion’s share of Apple’s cost is social capital, the loyalty of the fans, immersed in a digital reality. They bring the company billions of dollars buying various services. Millions of people live and work in order to buy something new from Apple.
Samsung might be the same, do not give it its social platform at the mercy of Google.
Today, the world lives a different economy, where the love and the trust of consumers is many times more expensive than the most technologically advanced production, best sale and the most effective trading scheme. Do you have a virtual asset of social capitalization? Sure, there is.
The third difference is the state of society. The crisis of confidence in Vietnam currencies has caused the need for new values. The U.S., EU, China, Russia and so played in the geopolitical game that the financial authorities of these countries ceased to notice or pretend not to notice the rapidly approaching global economic crisis.
Digital coin is conditionally independent alternative to the current monetary system.
And finally, the fourth is the main reason why virtual payment system will not be in the same bubble, what are the dot coms. The fact that the dotcom bubble was not. After all, the depreciation of garage companies was relevant only for the NASDAQ stock exchange and its traders, but not for the global economy. After the collapse in 2000-2001 went bankrupt only 50% of companies, but the other 50% survived and formed the Internet, which we see now. Google, Amazon, eBay, and many other giants of the market, was once a dot-com. If today calculate the total cost of the existing companies whose shares then fell, and those who started later, but on the same lines, it will block a lot of $6.7 trillion. Simply put, the dotcom won. But representatives of the traditional economy does not want to admit it.
It is likely that virtual currency projects will not lose. Moreover, it is possible to make a very heretical thought: the more volatile today, with the digital coins, the better for them and for the global market.
Of course, speculation is a problem. But not so serious as it might seem. Speculators still less-than-honest investors, and the scammers will determine the future of digital means of payment. And those masses of people that will be included in digital assets at the bottom.
All of the above is not a discovery in the field of economy. The Nobel prize for it will not. Why is the mouthpiece of the traditional economy, Bloomberg, raises the panic? The answer is simple. The new digital economy broke into a traditional economy, without asking permission, and undermines the financial tradition. First of all, we are talking about the United States of America.
“Recently, the US has been charged mantra “failure is not an option”, this idea is toxic arrogant error, — writes one of the brightest representatives of the new economy investor Andreas ANTONOPOULOS. — In the 1970s the US developed a policy of forestry, which supported the absolute prevention of forest fires; let’s call it “fire is not an option.” This policy has led to the systematic extinguishing of small fires and, ultimately, to the emergence of a very unbalanced forest ecosystem. Where’s the fire at the moment would be not just ideal but inevitable and good. Our financial system has become very similar to a poorly managed forest, hiding in all probability the most systematic and destructive fire.”
It is hard to disagree with the expert. All the talk about risks, a reference to the previous crises similar to extinguish small fires. But this practice gave rise to a skewed financial system where 50% of the wealth owned by 1% of the population. Correction is inevitable, and the emergence of digital assets independent of the monetary authorities, is an integral part of this correction. And Bloomberg is not wrong, it just protects the interests of the traditional economy.
People all over the world, not just in the suburbs of new York or Boston, want to have a right to happiness. “As said by Marshall McLuhan, the world is a big village, — said in an interview with Russian visionary and venture investor Alexander SHULGIN. — Now, if you live in a friendly village, what the money is for, when you have everything? You’ll get more happiness, if your basic problem is solved, fears removed. That’s when you have more time to be happy. Technology is going to that they be released.”