At the height of the cryptocurrency hype, proponents proclaimed that it would solve every problem under the sun. Artur WidakNurPhoto/Getty Images
In November 2001, the New York Times declared: Dot-com is gone, and with it the dream. Three years later, Mark Zuckerberg launched Facebook from his Harvard dorm room.
The rise, fall, and eventual resurgence of the internet hold an important lesson for today’s cryptocurrency skeptics: Technological innovation often follows a predictable pattern, and the golden days of cryptocurrencies may be just ahead.
Public response to new technology often follows a predictable hype cycle, defined decades ago by the consulting firm Gartner. It begins with a snap of inflated expectations, the clamor that new technology will transform everything. But when new technology is inevitably abused by bad or fringe actors, public opinion quickly plunges into a depression of disillusionment.
Eventually, innovators and policymakers work together to promote the good uses of technology and limit abuses and excesses, reaching a productivity plateau.
Working at the Lime company, I watched politicians struggle with this cycle just a few years ago with the introduction of e-scooters to cities. After the initial uproar about their introduction, I’ve seen many local lawmakers jump to ban them after the first crash or first scooters thrown into the local river. It’s a tempting reaction, but an unwise one considering the cycle of technological innovation. What politicians have failed to see is that the adoption of new technologies is never linear and that the inevitable small number of bad actors are manageable.
Likewise, the early days of internet politics were littered with bad ideas that were the precursor to better ideas. Kozmo.com failed but resulted in the more durable Doordash and Grubhub model. Napster and Kazaa violated copyright laws but proved that consumers wanted a better way to consume music, thus iTunes and Spotify were born.
Cryptocurrencies are no different. While clear regulation is needed, policymakers need to be cautious lest they overreact to the recent recession or risk missing out on the next Doordash, iTunes or Spotify.
A year ago, crypto ads dominated the Super Bowl and Web3 was the buzzword of the day. Proponents of a decentralized banking system proclaimed that the emerging industry would solve every problem under the sun, from bridging global wealth disparities to unifying the Internet of Things. Optimism about the growth of the digital asset sector has even spurred a rare bipartisan crypto caucus in Congress.
That was the peak of inflated expectations. Alright then. Techno-optimists should get excited about the potential of the next thing.
But it is now clear that the industry has entered a difficult time. Bitcoin’s value has plummeted, the industry has suffered major layoffs, and the arrest of FTX founder Sam Bankman-Fried has captured global attention.
However, that doesn’t mean we have to throw in the towel.
Even the cryptocurrency industry can recover and emerge better than before. Like the rise of Facebook after the dot-com bubble burst, the killer app for Web3 may not have been invented yet. Mastodon, which was created in 2016 as a decentralized alternative to Twitter, has only recently caught on.
In the case of scooters, cities that weathered the depression of disillusionment and eventually learned ways to regulate the use of these vehicles, built scooter parking areas to clear sidewalks and found a balance where e- scooters now provide essential transportation for residents and the negative effects are mitigated.
Likewise, we shouldn’t yet be conducting an autopsy on the cryptocurrency industry. We should focus on developing the necessary regulations while avoiding over-correction of policies. Some policymakers are already preparing to crack down on the cryptocurrency industry and must be careful not to overregulate to the point where cryptocurrencies are prevented from maturing.
So, we punish bad actors harshly. We promulgate new rules to promote accountability. And we maintain a sense of optimism about the new services that decentralized technologies will eventually bring about.
Adam Kovacevich is the founder and CEO of the Chamber of Progress.
Opinions expressed in Fortune.com comments are solely the opinions of their authors and do not necessarily reflect the views or beliefs ofFortune.
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