OKX Blockchain 60 Lectures | Episode 49: 2018, The Blockchain De-bubbling
As we previously mentioned, by the end of 2017, with Bitcoin's market capitalization surpassing the 2 trillion mark, the blockchain wave was thoroughly ignited. Blockchain emerged as a hot topic on major media websites, and mainstream investment institutions began to focus on the underlying technology behind Bitcoin.
The most famous event was undoubtedly the "3 AM Sleepless Group" discussing blockchain in the early hours of the third day of the Lunar New Year. The group covered figures ranging from local blockchain tycoons Li Xiaoai and Shuai Chu, to internet giants Xu Xiaoping, Xue Manzi, and Luo Yonghao, to well-known actors Huang Xiaoming and Tong Liya. The combined net worth of everyone in the community exceeded trillions, covering nearly half of the domestic capital circle.
Massive amounts of capital and internet elites flooded into the blockchain industry. The outside world compared blockchain to the next internet era, hoping that blockchain technology would become the next growth point as the internet industry as a whole faced growth bottlenecks.
But as a hot trend, it also meant the influx of many speculators. As capital fueled the market, there were numerous air projects with no application value, and many people even used the banner of blockchain to engage in fraud. Bad money drove out good. At this time, blockchain was full of bubbles.
On January 23, 2018, the China Internet Finance Association issued the "Notice on Preventing the Risk of Overseas ICO and 'Virtual Currency' Trading," pointing out that behaviors such as providing payment and other services for "virtual currency" trading faced policy risks. Investors should proactively strengthen risk awareness and remain rational. Domestic policy began to regulate one of blockchain's important use cases—cryptocurrency.
By June, EOS, touted as blockchain 3.0, arrived as scheduled. However, the network efficiency after the mainnet launch did not meet the expected million TPS. Blockchain still could not solve the contradiction between efficiency and decentralization. Due to efficiency issues, the highly anticipated decentralized applications Dapps had no advantage over traditional apps. Dapps did not meet market expectations, and the curtain fell on the hype.
Furthermore, the development of new technologies such as cross-chain and sharding encountered bottlenecks. People began to realize that blockchain is not omnipotent. The market gradually turned rational, showing a massive de-bubbling movement, and the bear market winter began.
In the second half of 2018, market funds shrank at a visible rate. By the end of 2018, the overall blockchain market capitalization had shrunk by nearly 90% from its peak of $829 billion. Among newly listed projects, the break rate reached 98.8%. A large number of air projects were eliminated by the market. Of course, many entrepreneurs were also affected and did not survive the sudden winter.
In August 2018, many media outlets involved in blockchain and cryptocurrency were banned by WeChat. Previously, People's Daily had pointed out that many "crypto media" outlets were engaged in paid coin recommendations to induce investors, and promoting ICOs in the name of "private placement." Although these "media" outlets made huge profits from this coin speculation wave, due to their inherent flaws, doubts grew about how long their野蛮 growth could last.
In addition, the mining industry also suffered its biggest blow in history. As market prices fell, mining returns continued to decline. Many mines closed down, and there were even phenomena where mining machines were sold by weight, with 20,000 yuan mining machines being sold for one or two thousand yuan with no buyers. The entire mining industry faced reshuffling.
In this de-bubbling process, only projects with real value, such as Bitcoin and Ethereum, survived. But it was this de-bubbling movement that laid the foundation for the subsequent entry of international giants. Blockchain moved from virtual to real, possessing practical value that could be implemented. As for how the giants entered, let me keep you in suspense—we'll talk about that in the next lesson~
Thanks to Teacher Xiong Yue for his help and guidance with this episode.
Sina Weibo: @熊越Xiong Yue
"OKX Blockchain 60 Lectures" is a blockchain science animation video co-produced by OKX & Sina Tech, targeting blockchain beginners. Through series articles, science animations, and other forms, it explains blockchain concepts vividly from perspectives of concepts, technology, and applications through 5 major sections and 60 knowledge points. The content of this episode was completed under the guidance of Teacher Xiong Yue.
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