On Development Period of Bitcoin Industry
Recently Bitcoin community are all keen on POOC’s inspection on China’s major exchanges and exchanges responded by limiting or closing margin trading services, which is welcomed not only because the deleverage will greatly decrease price hype from speculators but also because PBOC’s move will likely bring a more standardized and regulated bitcoin trading market.
This reminds of the development roads of world-changing technological revolutions including telegraph, radio and encryption, noted by Debora Spar in his book Ruling the Waves. Debora then summarized the typical development period that is suitable for all commercial technologies.
The development period of technology industry
Development period comprises four phases according to Ruling the waves:
Phase one: innovation. There are very few commercial activities only the exploration efforts from some aficionado.
Phase two: initial commercialization .As Commercial interests of the innovation becomes apparent, smart businessmen, both good and bad, become keen on making money out of the innovation. This is a chaos time.
Phase three:disorder with innovation. Based on the developments on phase two, rules will be set for the technology industry. Entrepreneurs, seeking long-term development, begin to build barriers of techniques and industry rules with special emphasis on ownership.
Phase four: Rules-settled. Entrepreneurs will seek the help of government to set related laws and regulations for the sustainable development of the industry. From this moment on, the industry will become be on an on-going development track that excludes the participations from rogues.
This period highly matches the development histories of many innovations including ocean navigations, telegraph and internet.
Bitcoin’s development period
I feel like Bitcoin, an invention that will certainly change the human society, is just suitable for the development period noted by in the book.
Phase one: Few people were active when Sotoshi invented Bitcoin. The Bitcoin founded by Satoshi is just geek-style that one can only post words and simple emoji. If you go through the posts of 2010 and 2011, you will see the performance of the bitcoin aficionado who contributed extraordinary ideas for Bitcoin. But few people wanted to make money by running a business.
Phase two: from 2011, large number of smart businessmen, especially those who are interested in mining and exchanges, began to notice Bitcoin. Commercial promotions and competitions overwhelmed the technological discussions. The industry was in chaos. This period witnessed the success of companies that are still alive today and collapsed ones whose bosses have even run away, resulting serious losses to many people.
Phase three: It’s just recent years that are within this phase. As the increasingly cost for entering the industry, the old companies have benefiting from its early efforts by forming a barrier. In Recent years, veteran entrepreneurs do not squabble with each other but lecture and participating academic and industrial discussions all around.
Now with landmark issues like BitLicense, a list of rules and regulations proposed by New York and for New York-based Bitcoin businesses and the inclusion of Bitcoin into ETF, the financial aspect of Bitcoin seem to be seek to enter the Phase four. The exchange part of Bitcoin is also doing the same thing by deleveraging of China’s major exchanges as a friendly response to high-level on-site inspection by PBOC.
Still, except some financial-related sectors of Bitcoin, others are all in phase three or even phase two. Like in mining industry, companies are just competing with each other with few regulations. Cooperation with government must be in the same of cloud computing. Bitcoin media? It is in phase two (editor: 8btc feel sad for hearing this). Bitcoin development are even more in a chaos status. Core’s developers are from Blockstream while BU’s seem to be freelancers accepting donations.
Will the industry rules and barriers hamper the decentralization feature of Bitcoin?
It is a question worth enough consideration. I think the answer is no at least until now. The decentralization of Bitcoin is mostly displayed in hash power, nodes and development. However, what the government concerns is the taxation and stability.
Wish: Government can be softer in regulating.
As an anarchist, I wish Bitcoin could develop via free will of the market. Though I know entrepreneurs will turn to government as this is the best way to set up industry barrier, regulations that are too stringent will greatly hinder the development of a certain industry. Again, the advent of any commercial new technology will go through the four phases: 1) those who want to avoid the regulations from the government promote it 2) chaos when good and bad people are involved 3) entrepreneurs come to make the technology into an industry 4) governments are introduced to set rules and legitimize ownership and thus a regulated and standardized industry.
It seems that for Bitcoin, the government factor has already be introduced. It is still unknown how much the government will get involved in the industry.
The original article is written in Chinese by Huang Shiliang, opinion leader in Chinese community