Joe Pindar is the director of strategy in the office of the chief technology officer at security firm Gemalto.

In this opinion piece, Pindar argues that the recent token craze is a blip, and that blockchain technology remains more important in the long term than any currency.

If you attend investment conferences or talk to long-time industry analysts, it’s clear that that the general cryptocurrency market bubble is unsustainable.

There were 30 initial coin offerings (ICOs) in July, each launching new cryptocurrencies. Then, in August, there were more than 50, with marketing and investors ranging from Floyd Mayweather to Paris Hilton.

Now, part of this mania is based on speculation. But it’s also clear that we’re departing from the fundamental assumption of what a cryptocurrency originally is – a scarce digital commodity where the value derives from that scarcity.

Select winners

Simply put, if more than 100 new sources of this digital commodity have been launched since the summer, then the entire concept of scarcity, and therefore value, begins to erode. In fact, many of these new cryptocurrencies will need to fail in order to maintain the viability of the best-known currencies, bitcoin and ether.

Ether, the second-largest cryptocurrency by market cap, has been around for two years, so it’s a relatively known quantity. Most of the recent ICOs are based on the ERC-20 ethereum token, and the primary purchasing mechanism for new cryptocurrencies has been ether, the currency of the ethereum network.

Therefore, an investor often needs to buy ether in order to buy into any of the new ICOs.

But the crypto bubble of lesser-known currencies will pop at some point, leaving some people in a bad spot. Even so, the core technology behind it, blockchain, will provide value as a hidden infrastructure underlying future applications.

A small number of currencies – likely bitcoin and ethereum – and utility tokens where genuine value is created, will remain viable over the long term – although not necessarily at the current prices.

The fundamental premise of cryptocurrency, if it’s not a scarce digital commodity, is that it is a token that allows access to a utility service. One of the few valid tokens that have been launched recently is IOTA, which is targeted at the Internet of Things market.

However, it’s hard to justify building an IoT application using IOTA when surging token prices mean the cost of doing blockchain transactions doubles in seven days or increases by 500 percent over the course of a month, as it has recently done.

While IOTA has a strong long-term future, the ability to use it for IoT applications depends upon removal of the speculation-driven volatility. This shows the disconnect between the value proposition of utility tokens and the trading prices.

Tokenless blockchains

This is also a reminder that it’s essential to separate blockchain technology from cryptocurrencies.

It is entirely possible to run a blockchain without a cryptocurrency, as demonstrated by Metrognomo, which predates and takes a similar approach to IOTA, but uses a subscription payment for nodes publishing to the network.

Another example is Quorum, JPMorgan Chase’s permissioned, minimally-forked ethereum network, designed to promote private transactions for the enterprise.

So, even though a blockchain can be very useful for securing distributed systems and businesses, it does not justify the fundamentals of any cryptocurrency.

Blockchain’s future is bright, just maybe a little less glamorous without the get-rich-quick investment aspect.

Frozen bubble image via Shutterstock