At the end of 2017, as Bitcoin's market capitalization surpassed the 2 trillion mark, it completely ignited the blockchain wave. Blockchain became a trending topic, appearing on major media websites. Almost overnight, mainstream investment institutions began paying attention to the underlying technology behind Bitcoin.
One of the most notable events was the "3 AM No-Sleep Group," which was still discussing blockchain in the early hours of the third day of the Lunar New Year. The group included figures ranging from local blockchain giants like Li Xiaolai and Shuai Chu to internet moguls like Xu Xiaoping, Xue Manzi, and Luo Yonghao, and even celebrities like Huang Xiaoming and Tong Liya. The combined net worth of the entire community exceeded trillions, covering almost half of China's capital circle.
A large amount of capital and internet elites rushed into the blockchain industry. The outside world likened blockchain to the next new internet era, hoping it would become the next growth point as the internet industry faced overall growth bottlenecks.
However, being a trend also meant an influx of speculators. With capital fueling rapid growth, the market was flooded with worthless "air projects." Many even used blockchain as a guise to commit fraud, leading to "bad money driving out good." At this point, blockchain was riddled with bubbles.
On January 23, 2018, the National Internet Finance Association of China issued the "Risk Warning on Overseas ICOs and 'Virtual Currency' Trading," stating that providing payment and other services for "virtual currency" transactions faced policy risks. Investors were advised to strengthen risk awareness and remain rational. Domestic policies began regulating one of blockchain's key use cases—digital currencies.
By June, the EOS public chain, touted as "Blockchain 3.0," arrived as scheduled. However, the network's efficiency after its mainnet launch fell far short of the anticipated million TPS. Blockchain still couldn't resolve the contradiction between efficiency and decentralization. Due to efficiency issues, the highly anticipated decentralized applications (Dapps) offered no advantages over traditional apps. Dapps failed to meet market expectations, marking the end of the blockchain hype.
Additionally, the development of new technologies like cross-chain and sharding hit bottlenecks. People began to realize that blockchain wasn't a panacea. From then on, the market gradually turned rational, embarking on a massive de-bubbling movement, ushering in the winter of a bear market.
In the second half of 2018, market capital shrank at a visible rate. By the end of 2018, the total market capitalization of blockchain had plummeted by nearly 90% from its peak of $829 billion. The break rate of new projects listed on exchanges reached 98.8%, and a large number of air projects were eliminated by the market. Many entrepreneurs were also affected, unable to survive the sudden winter.
In August 2018, many media outlets involved in blockchain and digital currencies were shut down by WeChat. Prior to this, People's Daily had pointed out that many "coin circle media" were paid to promote coins, luring investors and disguising ICO promotions as "private placements." Although these "media" profited massively from the speculative wave, their unchecked growth was questionable due to inherent flaws.
Moreover, the mining industry suffered its biggest blow in history. As market prices fell, mining profits continued to decline, leading to the collapse of many mining farms. There were even cases of mining machines being sold by weight, with $3,000 machines being sold for a few hundred dollars unsold. The entire mining industry faced a reshuffle.
In this de-bubbling process, only projects with real practical value, like Bitcoin and Ethereum, survived. However, this very de-bubbling movement laid the foundation for the entry of international giants. Blockchain shifted from the virtual to the real, gaining practical, implementable value.
