Have you heard about the Hype Cycle? This term can be applied directly to blockchain technology.
In 1995, research company Gartner proposed the Hype Cycle, a technology maturity curve that graphically represents the maturity and adoption of technologies and applications, and how they are potentially relevant to solving real business problems and exploiting new opportunities.
Moreover, this concept is a kind of basis for the high-tech industry. It offers a standard model of the path that new technologies go through before reaching maturity.
1. Innovation Trigger
This is the phase of the emergence of innovation. First it is discussed by some nerds, and then by a fanatical public; the hype is gradually growing. At this stage, usable products are often not available (sometimes only early proof-of-concept stories), and the commercial viability of the technology has not been proven.
In the cryptocurrency market, this is the time of the WhitePaper of Satoshi Nakamoto and the first crypto enthusiasts, the purchase of pizza, and the birth of altcoins (NameCoin, Litecoin, Opencoin, Dash etc.), the emergence of the modern cryptocurrency industry.
2. Peak of Inflated Expectations
The technology becomes popular and becomes the subject of wide discussion in the community. Public excitement leads to excessive enthusiasm and unrealistic expectations. Successful application of technology is possible, but usually there are more failures than successes.
In the cryptocurrency market, this is the time of the appearance of ICOs, smart contracts and dApps on Ethereum, a huge number of projects and startups, scams, conversations in top-tier media, an unprecedented increase of the price of cryptocurrencies, the widespread FOMO and FUD, as well as memes about ‘crypto Lambo’, ‘HODL’ and ‘to the moon’.
3. Trough of Disillusionment
The stage of getting rid of illusions; interest is weakening since the tests and commissioning are not implemented. Disadvantages of technology are being identified, and interest in it is declining.
Investments continue only if surviving suppliers refine their products to the needs of early adopters. Technology fails to meet expectations and quickly dampens enthusiasm.
We are just at this stage: the prices of many cryptocurrencies have sunk significantly, many projects have failed, the ICO mechanism has lost its popularity, and people are not sure whether technical problems related to scalability and practical applicability that prevent the mass use of technology can be solved. The real areas of application have not yet been determined, and publicly available blockchain solutions are relatively small in comparison with the level of hype that surrounds the technology.
4. Slope of Enlightenment
More instances of how the technology can benefit the enterprise start to crystallize and become more widely understood. Second- and third-generation products appear from technology providers. More enterprises fund pilots; conservative companies remain cautious.
Blockchain technology and cryptocurrencies are gradually moving to this stage. This period lasts from 2 to 4 years. However, I would like to note that there is no guarantee that technology will overcome this stage. There are many examples of innovations that have remained at this stage, for example, Ultrawideband and RSS Enterprise. Some technologies have taken decades to mature, for example, speech recognition.
We can define the transition to this stage by improvements of surviving products, the emergence of pilot projects (f.e. IBM blockchain solution), products 2.0 and 3.0, the emergence of national digital currencies, the introduction of blockchain by banks and large corporations, the emergence of futures and regulated platforms for digital assets, the emergence of closed and corporate blockchains, the emergence of regulation, the emergence of programs at universities, the demand for specialists.
5. Plateau of Productivity
The onset of technology’s maturity, the community perceives technology as a given, aware of its advantages and limitations. The technology is stable and evolves into the second and third generations. The final height of the plateau depends on how widely the technology is applied.
Thus, a careful look at the last decade shows that so far, the blockchain is making a journey typical for new technologies along the path to maturity and mass adoption. And this way characterizes many other innovative and breakthrough technologies.
Everything is a cycle in this world and we should not forget about the third principle of technical analysis, which extends far beyond the boundaries of financial markets - "History trends repeat itself ..."