Bubbles. And The Dutch Golden Age


Bubbles. And The Dutch Golden Age

We have to distinguish the 'bubble hysteria' the 'tulip mania' syndrome, and the blockchain .

Tulip mania was a period in the Dutch Golden Age during which contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels and then dramatically collapsed in February 1637. It is generally considered the first recorded speculative bubble.

tulip mania.jpg

Early adopter, Crypto guru and author Clem Chambers believes it is a bubble, which has some way to run before it bursts.

During the dot-com boom, investors in start-ups like e-toys, Webvan and FreePC regarded market share as as practically the only significant metric of business success. Captivated by slogans like "Get big fast" and "Get Large or Get Lost" they urged companies to spend lavishly to lure customers in hopes of achieving insurmountable market share advantage. The companies responded: for example, via by discounting and couponing, they created price effects. Attracting customers through extraordinary low pricing – as low as zero in some cases – is a foolproof way of buying market share, at least temporarily.

Wired magazine preached the gospel of the giveaway, positing a steady climb from "free" to "premium" to "freemium" (free+premium) pricing of the product or service.

The problem is that price effects are evanescent. They disappear the moment the discounts end or another firm offers a better price. Typically between 1 and 2 percent of customers convert from free to premium services. You therefore need to reach millions of customers before the giveaway model becomes profitable. Freemium models also create freeloaders that can be hard to monetize (that is, to profit from), as FreePC discovered in 1999 when it gave away Pentium PCs in exchange for viewing ads and the prospect of online sales.

dotcom bubble.jpg

Brand effects are stickier. They arise when people come to associate a particular brand with quality. But brand effects, like price effects, are often difficult to sustain. They can also be extremely expensive. EToys spent millions trying to compete with Amazon and Toys R Us. Kosmo, an online company that promised free delivery of food, books, coffee, and other basic goods in major U.S. cities, hired actress Whoopi Goldberg as a spokesperson and paid her in stock, only to have the business collapse soon after.

This is far removed from blockchain technology. Price effects and brand effects have their place in startups growth strategy. But only network effects create the virtuous cycle cryptocurrencies do, which leads to the building of long-lasting network of users – a phenomenon we call – lock in!

John McAfee says that cryptocurrency will soon be the only form of payment people will use. Central banks will be a thing of the past. He sees Bitcoin reaching a value of $100,000,000due to the users increasing and mining equipment advancing.

Bitcoin is following Moore's law

The rule, which was devised in 1965 by Intel co-founder Gordon Moore, describes the exponential improvements of digital technology.

"Moore's law specifically applied to the number of transistors on a circuit but can be applied to any digital technology," Porto wrote in an email to Business Insider. "Any technology that is growing exponentially (i.e., 'following Moore's law') has a doubling time."





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