A 15-Year History of Cryptocurrency: Seeking Mature Applications on a Path Accompanied by Bubbles
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A 15-Year History of Cryptocurrency: Seeking Mature Applications on a Path Accompanied by Bubbles
Speculation and Ponzi schemes will always be the most significant aspects of cryptocurrency, and this situation will continue in a wave-like pattern.
Navigating Web3 tides with focused insightsAuthor: polynya
Translation: TechFlow
As we approach the end of 2023, media outlets and institutions are rolling out their outlooks and expectations for the coming year.
But while looking ahead, we must not forget the path we've already traveled.
At this year-end moment, revisiting the brief history of crypto might yield new insights.
Cryptocurrencies have now existed for 15 years and have become a valuable, mature field. Across different market cycles, crypto has explored various domains—in this article, I’ll share my personal perspective on each of these cycles.
2009–2013: Payments, Reserve Assets, and Value Storage
Bitcoin’s initial driving forces came from two directions. The first was digital payments or digital cash; the second was as a new reserve asset. The latter attracted anarchists, anarcho-capitalists, doomsday preppers, and “Austrian economists.” These groups harbored grand fantasies about Bitcoin becoming the new global standard asset—fantasies as absurd as those of Japanese imperial soldiers in the 1960s who still believed the war was ongoing and had to fight for the emperor. The world has moved forward. Modern monetary policy has played a crucial role in guiding humanity into its most prosperous and innovative era. Indeed, these incredible advancements made Bitcoin itself possible.
However, the larger issue is that today’s global monetary system requires significant subjective intervention—something incompatible with the objective exclusivity of public blockchains. The COVID-19 pandemic serves as a perfect example: when the global economy shut down overnight, a so-called “Bitcoin standard” would have triggered a complete economic collapse, plunging everyone except the wealthiest 1% into poverty. It’s commendable that globally, people weathered the pandemic relatively well—far better than during past pandemics that took decades or even centuries to recover from. Of course, it wasn’t perfect—the inflation of 2022 was severe and may take years to stabilize back to pre-COVID levels—but overall, our macroeconomic management continues to improve.
On the other hand, payments attracted more tech and internet pioneers. At the time, digital payments remained a massive untapped market. However, Bitcoin faced major challenges—high volatility, lack of scalability, and poor user experience. Meanwhile, fintech rapidly evolved. Asia led the way, and today, numerous payment apps offer free, instant transactions with flawless user experiences. India, in particular, has an ideal solution combining a global standard (UPI), enabling seamless interoperability across hundreds of apps and thousands of banks. In fact, UPI is now being adopted beyond India. Cryptocurrencies still hold a niche in payments, but we’ll discuss that in the next section.
By the end of this era, most realized that neither global reserve assets nor payments were realistic—but another use case emerged as viable: alternative, non-sovereign value storage. You could call it digital gold for a new age. This proved highly successful and remains Bitcoin’s primary use case to this day.
2013–2018: Exploring Crypto Applications
Around 2011–12, most “altcoins” under development were “Bitcoin killers.” But a new category was emerging—what if blockchains could be used for more than just money?
Initially, this led to application-specific blockchains. The first I remember was Namecoin. In 2014, we launched BitShares, pioneering several new technologies and features:
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Delegated Proof of Stake
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Decentralized exchange
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Memes and NFTs
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Algorithmic stablecoins
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User-issued assets
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High transaction freedom and TPS; at the cost of high system requirements, thus lower verifiability and decentralization compared to Bitcoin
Later, the BitShares codebase was forked into Steem, which extended blockchain into social networking. Of course, this proved unsustainable.
However, the breakthrough innovation of this era was Ethereum’s 2014 whitepaper. It outlined nearly all applications that would eventually achieve lasting product-market fit. The main problem with application-specific blockchains was sustaining durable economic security. In fact, almost all L1s from 2012–14 have since devalued and offer minimal economic security. The only reason they aren’t constantly attacked is because there’s nothing of value on these ghost chains to attack.
Ethereum offered an elegant solution: instead of launching their own blockchains with their own security budgets, application developers could deploy on Ethereum. This led to an explosion of blockchain ecosystems, far exceeding the scope envisioned in Ethereum’s 2014 whitepaper.
This culminated in the ICO frenzy of 2017–18, but it turned out that 99% of blockchain applications were meaningless.
During this period, Bitcoin solidified strong product-market fit as an alternative value store. Perhaps the most important event was the “block size war.” Ultimately, “small-block” Bitcoin won, emphasizing the necessity of end-user verifiability. By then, major players realized Bitcoin’s primary use case—alternative value storage—didn’t actually require scalability. Therefore, not compromising decentralization and security was the right choice.
2018–2021: Seeking Product-Market Fit Beyond Alternative Value Storage
Although 99% of crypto projects during the ICO frenzy proved useless, some areas beyond alternative value storage did find product-market fit. Unsurprisingly, all were described in Ethereum’s 2014 whitepaper.
By this time, fintech payment apps had become ubiquitous in many countries—especially across Asia, where most of the world’s population lives—and the COVID-19 pandemic accelerated this trend. Yet, stablecoins still saw strong demand, becoming the second most useful crypto application. Key use cases included: 1) easy access to USD in countries with unstable currencies and limited dollar availability; 2) cross-border payments to nations with weak financial infrastructure or strict capital controls; 3) storing USD or transferring between exchanges. There were smaller niches too, but these were the three primary ones.
DeFi applications proved valuable. Though limited and inefficient compared to traditional finance, they captured markets worth billions. Identity applications also found traction, especially ENS.
NFTs were long considered a major use case, but discussions from 2014–15 and the Ethereum whitepaper underestimated the rise of collectible NFTs. If Bitcoin is digital gold, then collectible NFTs are artworks used as alternative value storage by the ultra-wealthy. Their overall financial impact may be relatively small and relevant only to the top 1%, but they remain a persistent use case. There were other areas too, but most ultimately proved to serve very small markets.
This was also the era when we effectively “solved” scalability—or at least research suggested so. New technologies like validity proofs, fraud proofs, and data availability sampling promised near-infinite scale, making scalability no longer a bottleneck.
As Bitcoin matured, it saw strong growth, though returns significantly declined. Meanwhile, Ethereum matured as a genuine alternative value store, driven by comprehensive economic reforms and expanding utility.
2021–Present: Market Divergence into Maturity and Decay
In reality, starting from 2022, we’ve seen countless L2s and L1s launch, yet nearly all remain underutilized. While usage is growing, it lags far behind actual potential scale. I expect that in the coming years, new technologies like validity proofs and data availability sampling will enable near-infinite scaling—something monolithic blockchains cannot achieve. Conversely, this is also the first era where we’re seeing stagnation at the application layer. It’s unclear what will saturate the upcoming near-infinite capacity. Something always will—but will it be valuable and meaningful? Or just more spam and bloat?
We’ve also witnessed a clear market split. One segment has doubled down on decay. Previously, speculative bubbles were masked by narratives, but from 2021 onward, they shed their disguises—Ponzi schemes became blatantly obvious everywhere. This continued through 2023 as speculation returned to the market. Despite crypto maturing, the loudest narratives in the space remain transparent Ponzi schemes.
Yet behind the scenes, an industry has entered maturity. Bitcoin and Ether have been established as alternative value stores worth hundreds of billions. Over $30 billion in stablecoin transactions settle daily across Ethereum/L2s and Tron. Decentralized finance, Web3 identity, and NFTs continue to find sustainable markets. Despite speculation dominating current narratives, it remains a multi-billion-dollar market.
Looking Ahead
While no one can predict the future, crypto’s evolution has actually been quite orderly. All product-market fits were outlined in Ethereum’s 2014 whitepaper and discussed in 2014–15. Some things succeeded more than expected (collectible NFTs), others less so (payments, prediction markets), but overall, the industry has achieved strong product-market fit in several areas and is entering maturity.
Of course, speculation and Ponzis will always dominate crypto, recurring in waves. If that’s your interest—enjoy it. If not, shift your focus away from the noise and toward the maturing aspects of crypto.
What I hope to see is a future integrating product-market fit with mature, sustainable scaling solutions like validity proofs, and more applications with smooth user experiences built around thoughtful use cases—not vague ambitions and empty hype. I wish the market had less noise and speculative bubbles, but let’s face it—that will never happen.
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@apolynya
