If you were unable to reach the computers holding your private keys to nearly $4 million worth of bitcoin, you might be feeling a little anxious. So when Canadian officials reunited Dominic Lacroix with his computers last July, he should have felt relieved. Unfortunately for him, Lacroix was sitting in a courtroom, the computers had been seized by the police, and a judge was ordering him to relinquish all of the bitcoins in his possession. He had 420 of them.
Lacroix also had a reputation for violating securities law. The previous summer he had planned an ICO. His Plexcoin aimed to "broaden the possibilities of uses and to increase the number of users by simplifying the process of managing cryptocurrency to the maximum." Buyers who got in early could expect to see 13-fold returns in less than a month, Lacroix promised. Regulators, who recognized a Ponzi scheme when they saw one, ordered him to suspend the project. He ignored them, raised $15 million, was arrested, and sent to jail.
Lacroix was a crook but he's not the only cryptocurrency entrepreneur to deliver less than he promised. A report from the China Academy of Information and Communications Technology in May this year, found that of the 80,000 blockchain projects launched, only 8 percent were still in operation. The average life of a business fueled by an ICO is just 1.22 years.
You can compare that collapse to the fall of dotcoms when the bubble burst. At the start of the millennium, the 280 stocks in the Bloomberg US Internet Index lost $1.7 trillion of market value. But the Internet survived. The infrastructure was fine. The problem was that so many of the products built on that infrastructure turned out to be based on poor ideas.
That's what's been happening to the blockchain.
The blockchain is a piece of technology. It's a way of tracking the movement of an asset and keeping an unchangeable record of that movement. It brings all sorts of advantages. It's secure. It's decentralized. It can be anonymous. It can underpin automated processes, functioning as a kind of automatic escrow service. It can power the sharing economy and it can make international borders irrelevant.
It's ideal for supporting a digital coin but it can do a whole lot more.
Banks are experimenting with digital tokens to make international transactions faster. Sharing economy companies are looking for ways to keep track of the locations of bikes, cars, and other assets. Shipping companies are trying to figure out whether the blockchain can speed up delivery services.
But the blockchain can't a replace a properly run economy as Nicolas Maduro hoped to do in Venezuela. There are much easier ways to rack up loyalty points to get a free burger, as Burger King tried to do in Russia.
And if someone is offering you a digital currency that will give you access to something called "unobtanium" then you might want to hold tightly to your fiat.
The blockchain is a tool, and you can build all sorts of things with a tool.
Some of those things will be good. Many won't be. Ignore the silly ideas. Assess the interesting ideas. And trust entrepreneurs to come up with smart concepts to use the blockchain in ways that really do benefit everyone.