The year ahead in Blockchain, crypto, FinTech….

I’m approaching my second anniversary working within the Blockchain and digital currency sector, but already it feels like a lifetime – such has been the pace at which the industry has grown and evolved.

The number (and size) of Initial Coin Offerings (ICOs) in 2017 was staggering. The cryptocurrency markets were equally breathtaking for their price gains (and corrections), matched only by the speed and extent to which some regulators responded. It was a rollercoaster ride, but by the end of the year, it’s fair to say this new asset class had finally arrived.

(For a round-up of 2018 forecasts and predictions for the sector, my colleagues at Brave New Coin have been publishing some handy guides.)

My personal (but far from unique) view on cryptocurrencies in general is that they represent a new asset class. As such we are seeing huge opportunities for investment and innovation, backed by Blockchain and other decentralized and distributed ledger technologies (DLT), as well as some truly innovative and disruptive solutions. There is still some hype, and considerable asset price volatility, plus pure investor speculation; but there are some great projects out there building solid business models; and sound investment cases for network protocols, industry utilities, scalable solutions and core platforms.

In 2018, I expect to see one or more of the following developments:

  1. A fully deployed, government-backed Blockchain project that will change the way citizens engage with public services
  2. A truly decentralized autonomous organisation that learns to make decisions for itself  (based on a set of dynamic, self-replicating governance rules) as to how resources are allocated, stakeholders are rewarded and participants are incentivized (for all its faults, the DAO was possibly the first new corporate structure since the joint stock company)
  3. Following Japan’s lead, more governments will recognise cryptocurrencies as legal forms of payment, while at least one Central Bank will issue a public digital currency as a form of legal tender (not just an inter-bank instrument)
  4. Traditional securities (equities, bonds, commercial paper, asset securitization) will be issued in the form of digital tokens (via a new form of Token Issuance Program) leading to wider distribution, fractional ownership and reduced cost of capital raising, plus streamlined share registry and custodial services, thanks to DLT
  5. Likewise, “traditional” digital tokens will be issued as formal securities, backed by new types of financial products, allowing for greater financial innovation and funding flexibility
  6. At least one crypto-backed ETF will list on a major exchange, along with more crypto-derivatives such as swaps and options.
  7. One or other crypto-currency will be adopted as a day-to-day payment solution for micro-payments

Only two or three years ago, none of the above seemed very likely, or at least not in the short-term. Today, there are multiple initiatives working across each of these trends. So this is not a case of “if”, but “when”.

Enjoy the ride!

Next week: Bring Your Own Change

 

Token Summit II San Francisco

While in the US this month, I attended Token Summit II in San Francisco, courtesy of Techemy, the parent company of Brave New Coin.

Apart from Bitcoin’s latest all-time highs (and of course, CryptoKitties), the main topics on Blockchain solutions, cryptocurrency trading, token issuance programs and digital asset management were:

Governance – bringing transparency, oversight and standards
Scalability – how to grow the technology in a sustainable way
Interoperability – compatibility and connectivity between chains
Regulation – especially of securities as tokens, and vice versa
Decentralized exchanges – making P2P trading truly viable
Metronome – the “first cross-blockchain cryptocurrency”
Messari – “EDGAR for cryptocurrencies”
Transaction computation vs verification – getting the balance/distinction right
Custody – what the institutional markets are looking for in this new asset class

Demonstrating the demand for access to industry thought leaders and information about the best and brightest projects, Token Summit could have filled a venue twice the size – a growth trajectory befitting the asset class.

Next week: MoMA vs SFMOMA

 

Consensus: Invest and Blockchain Expo

This week, some brief notes from the USA, where I am currently attending some blockchain and cryptocurrency events, courtesy of the team at Brave New Coin.

The first event was Consensus: Invest in New York. As one of my colleagues commented, every person and their lawyer seems to be doing an ICO – even while in the washroom, a hopeful issuer tried shoving a pitch deck into his free hand. This despite the ongoing regulatory questions surrounding, and noticeable investor indifference towards, some of these token sales.

The CME was prominent among the exhibitors, given their forthcoming Bitcoin futures. Not to be left out, NASDAQ managed to generate some noise in the Wall Street Journal about their own proposed Bitcoin derivatives. Separately, Bitcoin itself attracted headlines in the Journal and the Financial Times – on the back of fresh new trading highs.

Other exhibitors comprised cryptocurrency research providers and custodian services. More evidence that this new asset class is entering a new phase of maturity.

Across the country, in Silicon Valley, Blockchain Expo put on a major trade show and conference, in conjunction with the IoT and AI Expos. (If a similar event had been held say, 20-25 years ago, instead of Blockchain, IoT and AI the themes might have been servers, network connectivity and desktop productivity tools.)

A number of upcoming ICOs gamely pitched their wares, while several new flavours of distributed ledger projects were on display. Several of the latter claim to be addressing issues of scaling, interoperability and security – all topics that continue to keep blockchain experts busy.

Of course, in common with other FinTech and startup events of late, there was the usual smattering of presentations aiming to leverage AI, peer-to-peer, big data, distributed technologies, machine learning and decentralized solutions.

Next week: Token Summit II San Francisco

 

Token ring – a digital ID solution

The latest event organized by DIG ID (the Melbourne Digital Identity Meetup) featured a Q&A with Steve Shapiro, CTO of Token, moderated by Alan Tsen, General Manager of Stone & Chalk Melbourne. Given the current level of interest in solutions to address online fraud, ID theft, data protection, privacy and personal security, the discussion covered a lot of conceptual and technical topics in a short space of time, so here are some of the key points.

First off, Steve spoke about his start-up and tech journey, that took him from IM (Digsby, Tagged, Bloomberg IB), to cryptocurrency and digital wallets (Case), to digital ID with the Token ring. The pivot towards an ID solution came about after working on Case, where he realized that most consumers don’t understand private key management and the issue of permanence (as compared to the internet, where password re-sets are relatively easy, and often regularly enforced upon users).

If the goal is to provide fool-proof but highly secure end-user authentication, the solution has to focus on the “signing device”, by making it much easier than the status quo. Hence the combination of two-factor authentication (2FA) and bio-metrics to enable Token ring users to live key-less, card-less and cashless, and without having to constantly remember and update passwords. In short, the Token ring works with anything contactless, as long as the relevant permission/authentication protocol layer (challenge and response process) is compatible with the ring’s circuitry.

In assessing the downside risk, gaining consumer adoption is critical, to ensure that users see the benefits of the convenience combined with the credentialing power. Equally, success will depend on the ability to scale as a hardware manufacturer, and the potential to drive traction through virality.

There is still a lot of design work to do on the hardware itself (to enable assembly, customization and distribution as locally as possible). And the platform needs to bring on more partner protocols, especially in key verticals. At the end of the day, this is still a Blockchain solution, with a UX layer for the cryptographic component.

When asked about the future of ID, Steve felt that in the medium term, consumers will no longer have to carry around multiple cards or have to remember multiple passwords. Longer term, governments will no longer be the central authority on managing ID: unlike today, a driver’s license will no longer be the gold standard – instead, solutions will be based on decentralized, contextualized and user-defined ID.

This led to a discussion about Sovereign IDe-government and digital citizenship (e.g., Dubai and Estonia) – and the break up of big government in favour of more city-states. (Which could result either in a “small is beautiful” approach to self-governing and sustainable communities, or a dystopian nightmare of human geo-blocking, as in a film like “Code 46”).

For the tech buffs, the Token ring’s IC hosts a total of 84 components, including the main secure element (as with mobile phones and other devices), finger print reader, optical scan, Bluetooth, NFC, accelerometer, MCU, Custom inductive charging etc.

Finally, there was a discussion about the risk of cloning, mimicking or breaching the unique and secure ID attributes embedded in each Token ring. While it is possible for users to encrypt other knowledge components as part of their individual access verification and authentication (e.g., hand gestures), there is still a need to rely upon trusted manufacturers not to corrupt or compromise the secure layer. And while the public keys to core protocols (such as credit cards and swipe cards) are maintained by the protocol owners themselves and not stored on the device or on Token’s servers, it will be possible for other third parties to on-board their own protocols via a SDK.

Next week: Startup Vic’s EdTech Pitch Night