Crypto Vaporware
This photo illustration shows a Vietnamese cryptocurrency investor looking at the latest Bitcoin values on a smartphone in Hanoi, April 12, 2018. NHAC NGUYEN/AFP/Getty Images

It is no secret that the last few months have seen tremendous volatility in crypto markets. The downturn and attendant apprehension on the part of investors — dubbed “crypto winter” by some — are the inverse of the near-euphoria we saw as bitcoin approached $20,000 in late 2017. Indeed, many self-described crypto-skeptics seem ready to declare the bubble has burst and blockchain was nothing but a fad whose time has come and gone. However, that is not the case: the continued success of strong projects amid the market tumult shows the space is not collapsing. It is maturing.

Globally, ICOs raised over $6 billion in the first six months of 2018, according to statistics website ICOData. These soaring highs were driven in large part by genuine speculation. Projects with little more than a white paper raised millions of dollars, a level of funding that is impossible to achieve through traditional venture capital without a demonstrated team, product, and roadmap at the very least. Sure enough, many of these projects failed to follow through on their promises. They were what the market terms “vaporware.”

Investors noticed, since January of this year, total market capitalization for all cryptocurrencies and “altcoins” had fallen from over $800 billion to just over $200 billion. In October 2018, some $60 million was raised by all ICOs globally, representing only 1 percent of the figure from the first half of the year.

Clearly, investors are no longer willing to commit funds to projects that lack the hallmarks of successful startups. Naturally, tighter purse strings have dampened overall market activity, but they also reflect rapidly increasing maturity on the part of participants. What’s more, the worst predictions that blockchain technology itself is a mirage have not been borne out. Indeed, quality projects with demonstrable momentum and working products have continued to raise impressive sums in the midst of the market turmoil. In short: this isn’t crypto winter. It’s vaporware winter.

Blockchain technology remains new and emergent. It may be unprecedented in the way its transformative power has been heralded at such an early stage in its practical adoption. Furthermore, the very nature of the blockchain itself has allowed an entirely new method of fundraising — the ICO — to burst onto the scene. True believers in the technology’s ability to reshape the way business is done quickly lined up behind this seemingly democratizing phenomenon.

Then, just as quickly, came those jumping on the bandwagon. While many talented teams worked hard to use the blockchain to overhaul various aspects of business and commercial activities, the sum of their efforts amounted to a tiny fraction of global economic activity. That is only to be expected from a new, powerful technology that is understood by few and still largely unimplemented. However, what made the emergence of blockchain so different was the excitement surrounding it. Many groups saw the opportunity to raise large sums of money quickly, and did so with promises to tokenize everything from iced tea to banking. Most of these opportunists were peddling vaporware.

These vaporware projects swelled the total market activity in the crypto space to monumental proportions. Increased activity surrounding the numerous ICO projects in 2017 and early 2018 also inflated the values of the main cryptocurrencies, bitcoin and ether. This surge caught the attention of the global media and the hype grew.

Inevitably, though, people came to recognize vaporware for what it was. As the rush to invest in all things “crypto” morphed into the realization that many of these projects had little chance of moving beyond the conceptual phase, euphoria turned to disillusionment. The resulting drop-off in ICO activity caused the price of bitcoin and ether to fall, generating further negative publicity. And so, many people began to declare a “crypto winter.”

In reality, though, the small but growing cohort of teams using blockchain to build real solutions has been constant. In fact, the number of crypto platforms that are live and that have active customers and user continues to increase exponentially. Groups such as Chain, Ripple, Celsius Network, Steem and more — including Caspian, a trading platform of which I am CEO — continue to make good on their technical promises. These growing teams, representing the vanguard of functional blockchain businesses, are at least as robust as Facebook and Twitter were at the dawn of social media. What has changed in crypto is that they no longer represent a minority among a myriad of projects marketing themselves in the space.

Investors have grown more savvy and will no longer be content with blue-sky promises. Vaporware winter may be here, but, for blockchain, spring has only just arrived.

Robert Dykes is the CEO of Caspian, a full-stack crypto asset management platform tying together the biggest crypto exchanges in a single interface.