What we learned at Fintech Week: Blockchain Conference.

An all-day event that included Bitcoin enthusiasts, Blockchain startups, Venture Capital, Bankers, Hedge Funds, and former (Insert any Tech/Financial Profession here) who are starting to dip their toe into the space. There was a mix of panels and pitches ranging from “Blockchain 2020” to a very interesting panel on regulation. In addition there were pitches from upcoming ICOs (it doesn’t matter if we call it an ICO or a token sale). Some brief highlights and thoughts:

1.      We are at the point where people want to include the word “Blockchain” with anything and everything in their business model.

2.      The talent level is being diluted by people who want to be part of a bubble.

3.      The focus has shifted to investing in tokens rather than building a technological infrastructure.

4.      The grown-ups are coming and will take over.

1.      We are at the point where people want to include the word “Blockchain” with anything and everything in their business model.

Jason Kelley, General Manager for IBM Blockchain Services had an interesting way to open up his talk, “Blockchain Trailblazers.” He toyed around with the word Blockchain, eventually landing at “Blockshame.” The point was well taken; we are at the point in this technological revolution or as Charles Kindleberger in his famous book, “Manias, panics, and crashes,” put it where outsiders are looking to replace insiders. “Investors rush to get on the train before it leaves the station and accelerates. If the eagerness of the outsiders to buy is stronger than the eagerness of the insiders to sell, the prices of the assets or securities continue to increase. In contrast if the sellers become more eager than the buyers, then the prices will decline.” One thing that is true in this bubble is that the insiders are extremely ideological and unlikely to sell quickly. If you are buying crypto today, you are not an insider. The point Jason was trying to make is that the days of claiming Blockchain is a solution for everything and will cure cancer are over. It is time to deliver and show how this exquisite technology can leave the world better off than it was before.

2.      The talent level is being diluted by people who want to be part of a bubble.

Unfortunately for anybody who has studied or worked in an environment that applied rigorous analysis and/our research into evaluating companies, yesterday was discouraging. It is quite clear that new entrants in the space are claiming to be experts and understand the crypto market with little to no data analytics, strategic frameworks, or personal background to qualify their claims. My fear is that this nascent industry, full of thought leaders and innovative people is being diluted with former bankers, traders, and anybody else who missed the tech and housing bubble. You can smell the greed in the room and the emphasis on technological advances is being drown out by “pre-pre ICOs”, “75% discounts” and “investment.”

3.      The focus has shifted to investing in tokens rather than building a technological infrastructure.

Not to beleaguer the point but it is quite interesting how much the focus has shifted to investment in crypto vs the community and projects advancing the technology. All who claim to be “technical analysts” and investing savants in crypto look pretty smart in a bull market (even though its not a security and/or investment… got it). The point is maybe nostalgic but this is a continuation to observation #2 and just highlights the dilution in the space and how greed has invited all types of people looking to stake a claim to some part of this booming industry. There is still so much work to be done and the problem with the ICO model is that when there is money to be taken and it is easy to secure it, people will focus their attention on doing that. There is an inherent moral hazard here.  As revolutionary and self-sovereign as the token model is, the ICO is the opposite.

4.      The grown-ups are coming and will take over.

It’s clear with the entry of companies like IBM, Walmart, JP Morgan, and others that the enterprise solutions are coming and are substantially more advanced than some of the start-up projects raising large sums of money. Consensys may be the outlier and is contributing to the space significantly with enterprise Ethereum and other projects such as Open Law. Blockchain is an innovative and sophisticated technological advancement, but it is not different this time. Just as we were told that the internet caused a new ‘plateau in economic activity’, and valuations would need to be substantially higher than well… forever (forever is a long time by the way), we are now being told that it will all be different, life will never be the same, and “you need to get in now.” When we all realize that this technology will increase productivity, cut costs for companies, create cool products, but not cure cancer and not defeat death is when it’s over and that has not happened quite yet. When that happens, the grown-ups will be there to pick up the pieces and build business models around blockchain, until then enjoy the ride. 

Please contact me at [email protected] to discuss further.

Luigi D'Onorio DeMeo

These opinions are my own and not those of the firm.