Dr. K's Crypto-Corner
by Dr. Chris Kacher
The Revolution (Evolution) Will Not Be Centralized™
Only 36 of the top 100 cryptocurrencies have working products according to this study
And what does this say about the other 1500+ ICOs?
ICOs = dot.coms ?
As anyone familiar with this space knows, many have chanted that bitcoin/crypto has no underlying value. Furthermore, the Initial Coin Offering (ICO) space has been rightfully scolded for ICOs being built on vapor, perhaps somewhat akin to the dot.com boom of the late 1990s, during which most dot.com companies failed due to business models bereft of substance or logic. The number of worthless business models and scam artists in the ICO space has certainly left a negative imprint.
Nevertheless, I believe blockchain remains transformational across many industries. The current valuation of some $200 billion across the entire cryptospace should soar into the trillions over the next few years as regulatory law establishes a better foothold across jurisdictions. Switzerland and Estonia, being billed as the world's leading digital nation, are leading the way. Estonia's e-Residency legally enables companies across borders to transact business on their platform as it satisfies the KYC/AML regulatory requirements. Here's a forward thinking article by Kaspar Korjus who heads up e-Residency: https://medium.com/e-residency-blog/what-is-a-nation-children-born-today-will-grow-up-with-a-radically-different-answer-b31f14403c3c
Blockchain vs VCsMeanwhile, blockchain-based ICOs shall replace traditional venture capital as ICO capital raise is vastly more efficient and transparent than the arbitrary, intransigent, and oligopolous VC world. ICOs done right bring transparency and market forces while the cold light of day replaces the secretive elite, “behind closed doors” Venture Capitalists. Blockchain removes unnecessary middle men, thus capital raise can be done in a fraction of the time, and projects can be completed well under budget.
ABT ICOsAs a consequence of this, asset backed token (ABT) ICOs backed by hard assets such as real estate are being launched. The reliability of blockchain technology enables fractional ownership via a highly efficient distribution of value while greatly enhancing liquidity in what has traditionally been a fairly illiquid market. In the case of real estate, multiple investors will be able to own a piece of real estate, some land, an apartment, or an entire apartment complex. Of course, this analogy can be extended to hard assets of all types.
Blockchain provides a solid foundation where a far more efficient capital employs real banks, real attorneys, and real accountants all working together on a far more efficient platform. Indeed, a recently published paper from MIT, "The Impact of Blockchain Technology on Finance: A Catalyst for Change" recently stated, "Many financial services-related blockchain or DLT [distributed ledger technology] projects are justified on the basis of cost savings and efficiency gains."
Bitcoin ValuationMeanwhile, bitcoin continues to roughly obey Metcalfe's law where the value of the network is equal to the square of the number of users. 3 billion of the world's unbanked and another billion partially banked are creating bitcoin wallets via cheap mobile phones to transact goods and services for the first time. This is one of the many tailwinds coming at bitcoin which should help propel its value well beyond its old high of some $20,000.
Blockchain Built To Address 2008 Financial Crisis
History is no stranger to banking and financial sector crises. Tens of millions of people around the globe lost their jobs or their homes as a result of the 2008 financial crisis. Blockchain enables less reliance on centralized institutions, thus can help build a more resilient financial sector. Centralized intermediaries, ie the "middle men", concentrate risks and while collecting significant economic rents. Current methods for clearing and settling transactions remain costly with many reconciliation and counterparty risks.
One study showed for the top ten banks alone, blockchain infrastructure could reduce costs by 30%, translating into savings of between $8 and $12 billion. Of course, such infrastructure could be applied to all institutions within the financial system. This savings, however, does not account for additional savings from opportunity cost. Capital gets locked up from typically two days to weeks, depending on the asset class, until the trades are settled.
Those delays are imposed by the current system because it is not technically possible with the current infrastructure for clearing houses such as the Depository Trust and Clearing Corporation (DTCC) to settle transactions in close to real-time. This is the cost of trust in a cumbersome system of siloed, centralized ledgers.
The onboarding of various technologies to bitcoin and ethereum such as Lightning Network and Rootstock, among many others, will solve the scaling issue. While it has been argued that the utility of bitcoin is poor, mass adoption will occur once scaling is achieved. Scaling will enable speed, capacity, and instant bitcoin-to-fiat conversion bringing real-time decentralized efficiency to most payments use cases.
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