Why are the Best Minds in the World Working on Blockchain?
In 1995, I was interviewed by “Business Week” for the cover story The Future of Money in which I was infamously quoted- “Anonymous digital currency is a threat to every government on the planet that wants to manage its currency.” I’ll wait while you list those governments (central banks) that do not want to manage their currency.
Similar to Mao’s Hundred Flowers theory, the explosive proliferation of cryptocurrency ICOs will continue unabated (SEC involvement notwithstanding) until the banking powers decide which of the features across the spectrum of cryptocurrencies from BitCoin to RichCoin are of value to harvest and consolidate. The rest will adapt their smart contract model to the centrally controlled currency that evolves from the fury of the marketplace or be relegated to the scorched earth that will follow this explosion.
Hint: One of the governors of the Federal Reserve Bank recently publicly declared that- “BitCoin will be the last man standing.” Although undoubtedly repeating something he had heard in a meeting rather than expressing true understanding, we ignore these apparently impromptu ejaculations from the Fed at our own financial peril. Recall that shortly after John Reed, Chairman of Citicorp declared, “We will never let a software company come between us and our customers, no less than Microsoft withdrew from the Internet payment software arena. The utopian dream of the free thinkers from Santa Monica to Riga and Tel Aviv of an anonymous community Digital Autonomous Organization, DAO currencies, managed by the membership will not happen on any significant scale while central banks exist.
Everything else that is good and right about blockchain enabled transactions will transform the world as we know it, even if those ICO issuers don’t know what they will be used for. Thankfully, the nebulous vision and limited business experience of most of the issuers have not hampered their ability to raise capital. Just as in the early Internet development days, eyeballs matter not revenue. Right now we are in the “invest in technology for technology sake” phase of blockchain and cryptocurrency application development and this is how it should be. Those developers should not read my articles.
The best minds in the world are working on the blockchain. The SEC has thrown a wet blanket on the creative fires of these minds here in the US of A. This is their purview. Yet there is good news- the value of the applications for smart contracts will far exceed the value of universe of speculative cryptocurrencies sooner, rather than later. Look at IBM and JP Morgan. JP Morgan, despite Mr. Dimon’s remarks, is actively trading BitCoin and developing blockchain applications. JPM has filed numerous patent applications for the blockchain, reportedly at last count 175. Any time a trader trashes a trade, he is a player on the opposite side. If he says sell, he is a buyer, if he says buy, he is a seller. To a trader, the fundamentals do not matter, not even a little bit.
Investor trade in the basket of the most liquid and deeply capitalized cryptocurrencies. Be nimble and exit on the upside. The market always tells you what to do.