Blockchain Quo Vadis: Applying the Perez Surge Cycle

The Perez Surge Cycle provides a framework to predict the development of emerging technologies. Blockchain is in the “installation” stage; technological maturity and widespread adoption are still far out.


There are different approaches to predict the future development of new technologies. One way is to forecast the market size, based on current and future economic and technological growth drivers. The World Economic Forum (WEF), the technology firm Cisco, and the digital banking group Fiona have provided market forecasts for blockchain technology and came to similar conclusions: Both, the WEF and Cisco believe that 10% of the world’s GDP will be stored on the blockchain by 2027. Based on the WEF’s forecast, Fiona has run a market simulation of a global token market and projected a market size of $24 trillion by 2027.

The Gartner Hype Cycle provides another way to forecast technological development. INVAO CEO Frank Wagner has applied the framework to blockchain technology in his article “Look beyond Bear Markets: Why Crypto Is Here to Stay” on, where he explains the current market environment and provides a future outlook.

The following analysis will apply the Perez Surge Cycle to blockchain technology, another popular framework to predict the growth of emerging technologies.


The Perez Surge Cycle: predicting long-term technological development

In her book “Technological Revolutions and Financial Capital,” Carlota Perez analyzes how technologies develop over a prolonged time-frame of 50 to 100 years. According to her model, new technologies first take hold in society and then transform society by creating new business models and introducing a new “techno-economic paradigm.”

Source: Technology Revolutions and Financial Capital

The initial phase in the Perez Surge Cycle is called “installation,” during which new technologies are demonstrating new ways of conducting business and solving problems. During this phase, technologies reach a frenzy, a hype that drives bubbles and leads to intense experimentation and enormous investments in new infrastructure and innovative business models.

At one point the bubble bursts and a recession follows, which marks a turning point in which social and regulatory changes happen. These changes alter and leverage the newly created economic and technological infrastructure. If done successfully, a “deployment phase” follows during which technologies mature, merge with other technologies and eventually reach mass adoption.


Blockchain has not yet reached the turning point

Applying this framework to blockchain technology, one might believe the Bitcoin price peak in December 2017 marked the height of the bubble, and the following Crypto Winter might be the recession that leads to a turning point.

However, according to the Perez Surge Cycle, to reach a turning point, there needs to be significant infrastructure investment before the bubble bursts. During the “Railway Mania” in the 1840s, for example, the value of railway companies surged, and more and more railways were built. After the bubble had burst, many railway companies went bankrupt but the infrastructure built during the time laid the foundation for future economic growth.

There was no enormous build-up of blockchain infrastructure in the years before 2017. Even though the blockchain ecosystem has grown over these years, with more talent and investment flooding into the industry, and new business models emerging, both the token infrastructure, as well as the market size, were still early stage at that time. Even today, the number of crypto wallet users in the world stands at 31 million, not much considering the global population of 7.6 billion people.

Furthermore, the bubble was limited to the use case of digital currencies, but blockchain technology goes way beyond this single use case. There also was no shift in paradigm, and we haven’t seen any true creative destruction yet.


Exponential growth in the years ahead

Looking at the Perez Surge Cycle, blockchain technology is not at a turning point. Instead, it is still early in the installation phase. The amount and diversity of blockchain projects are exploding. Various use cases are emerging, firms experiment with the tokenization of a wide range of asset classes, businesses and governments are designing new processes for token offerings, and new protocols are being developed. Thus, we are just now starting to build up and “install” a blockchain infrastructure.

Mainstream adoption, however, is still far out. What we can realistically expect to happen over the next years is the emergence of new business models, increased investment in the blockchain space, a shift in paradigm, and significant disruption of various industries. All of that will eventually lead to a bubble that will burst at one point during the next 10 to 15 years, and create a turning point that will result in technological maturity, widespread adoption of the new technology, and a new techno-economic paradigm.

And what’s truly exciting about all of that: Being early stage means there will be an abundance of innovative projects launching over the next years. Many will fail, but those that turn out to be successful will have exorbitant growth potential.