Entrepreneurs all know the applicable buzzwords: from cryptocurrencies to distributed ledgers and smart contracts to decentralized value.
But what do these terms mean in the real economy today? And what does the future hold for these widely lauded blockchain technologies?
NOTE: If you’re new to the lexicon of cryptocurrency and blockchains and haven’t heard these terms before, check out our quick explainer here first.
Recently, Founder Institute CEO Adeo Ressi sat down to discuss the future of blockchain technologies with Anthony Di Iorio, the Co-Founder of Ethereum and Decentral, and the discussion shed light on many of the common questions we hear from entrepreneurs across the globe. Below we have highlighted some of the key points from the conversation.
You can view the complete Future of Blockchain webinar video here, or listen to the conversation in full on the Founder Insight Podcast.
The Biggest Misconceptions about Blockchain Technology
The most important thing to understand is that Blockchain DOES NOT equal Quick Dollars.
Once rabid with bullish enthusiasm, this sentiment appears to have finally trickled down even to the most amateur crypto-investors. The speculative bubble that powered the 2017 cryptocurrency craze appears to have been corrected: at the time of this publishing, 2018 markets have wiped out more than three-quarters of Bitcoin’s value from it’s early January high point trading above $16,000 USD. Other cryptocurrencies have followed suit with market valuations generally reflecting a similar skepticism.
Given its current slump, some investors even believe bitcoin is now trading below its “support level” (a price reflecting the real costs incurred in computation and electricity that it takes to “mine” one bitcoin), and indeed expect the cryptocurrency to collapse completely if it cannot rally closer to the range of $5,000 - $6,000 USD that reflect a coin’s true cost of production.
Despite all this, it is critical to understand that price of Bitcoin has no relation to the value of blockchain technology.
In fact, Anthony Di Iorio emphasizes again and again that the real value inherent in blockchain technology has nothing at all to do with cryptocurrency speculation.
Instead, he emphasizes,
We're moving from an Age of Information to an Age of Value.
The "Age of Value"
Declaring an emergent "Age of Value" might strike some as more than a little dogmatic, so it helps to take a step back first, and look at the preceding/current era defined here as the ‘Age of Information’ to better understand what Di Iorio means by this.
Today, we are living in an "Age of Information" where finding or sharing information, regardless of the topic, is extremely cheap and easy via tools like social media and search engines. The barriers to finding and sharing information have fallen almost to zero.
To Di Iorio and other crypto-technology evangelists, blockchains are the logical next step in the evolution of the internet, and are the harbingers of a newly emerging "Age of Value."
In this new "Age of Value", blockchains will help users create more than just information (or “content”) online, and instead help people contribute real value that is meaningfully integrated into the internet economy. What's more, you will be able to do this with the same ease of use and traceability currently used for sharing text, pictures, and videos through social media.
Basically, blockchains will allow us to move from a centralized to a distributed economy.
How Value is Created through Blockchain
To truly understand the value of blockchain, we need to rewind back to 2009 and briefly talk about Bitcoin, and where that initial innovation led.
- Bitcoin was the first non-duplicable digital currency. This digital asset eliminated the need for transactions fees and other third party controls, regulations, and restrictions typically associated with moving currency.
- Shortly afterwards came Ethereum, which created digital contracts ("Smart Contracts"). These self-executing agreements eliminated the need for third party intermediaries, holding accounts, or escrow.
- Since then, countless new blockchain technologies have been created, and almost all of them share one central theme: to get rid of the middleman and distribute the services they typically provide across a network.
- This is all a process of decentralization, where value is created by removing the intermediary.
Or as Di Iorio eloquently puts it;
The blockchain essentially creates a house that has no edge.
Less Middlemen Equals More Opportunity
When you understand the power of decentralization, the next logical question centers around what business models will emerge without a middleman in the future.
Di Iorio believe the second wave of blockchain value creation will come from the ability to appropriately incentivize members of a network to perform services. This includes early users who contribute meaningfully on a new platform, where coins or digital assets will create a mechanism through which more than just early employees are able to share in the upside of something that they had a hand in helping to create.
The Investment Opportunity
A third wave of blockchain value creation is the technology’s demonstrated impact on investing, although this comes with a big caveat regarding the future of government cryptocurrency regulation.
Through the ability for companies (or even individuals) to sell Initial Coin Offerings, new and alternative mechanisms have emerged through which some founders will be able to capitalize new project ventures without turning to the traditional players in the investment landscape like angels and venture capitalists.
But for now, a heated early 2017 ICO landscape appears to have cooled significantly. "Peak ICO" may be yet to come, but it will likely look quite different from the heated 2017-2018 speculatory ICO cryptocurrency markets.
The Industries Ripe for Blockchain Disruption
Due to the power of blockchain to decentralize relationships, any industries that act as ‘middlemen’ are logical first targets for blockchain disruption. Prime examples of these include the insurance, fintech and banking, and real estate industries, which will all suffer from blockchain's ability to provide:
- Direct peer connectivity (eliminating intermediaries & associated service fees across a variety of services and industries)
- Widely distributed stakeholder incentivization (the ability for people across many sides of a transaction to provide value and share in the collective upside)
- Distributed investment landscapes (lower barriers to entry and the ability for anyone to invest, even without investor accreditation)
- Unique digital assets (assigning value, or contracts, to digital assets in ways not done before)
More esoteric industries cited are perhaps less likely to be disrupted than to be created outright or otherwise expanded through the growth of blockchain.
These include unique digital assets (such as unique items in online gaming, as an early example), smart contracts as the medium of value exchanges more broadly, and using blockchain unique keys as a potential mechanism for stronger control of our digital identities, or other kinds of credentials.
The Larger Blockchain Vision
Ultimately, the ethos behind crypto pioneers like Anthony Di Iorio lies far beyond today’s cryptocurrency markets, and strongly connects to a libertarian spirit of both rugged individualism and connected idealism.
By using blockchain technologies to build decentralized and competing platforms, blockchain enthusiasts hope to create an increasingly competitive ecosystem for direct peer-to-peer connectivity and exchange.
They are chipping away at the margins of the old institutional intermediaries who have forever skimmed off the top of economic activity, digitally ever-striving for greater personal freedoms to do and share as they please.
Di Iorio sums up the ethos well himself,
Fear and control doesn’t win out. I think freedom, liberty, and choice are all the things that are eventually going to win out down the road.
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