I’ve often sung the praises of blockchain technology, which I truly believe has the potential to create great efficiencies across many industries.
Probably the most visible application of blockchains right now isthe virtual currency Bitcoin – which has often hit the news for rapid gains in value – but in fact there are over 2,000 other tokens and currencies based on distributed, cryptographical technology.
Collectively they are known as cryptocoins or cryptocurrency, and each one claims to fill a role or solve a problem in some way, better than other solutions which have come before it. The unifying factor among them all is the concept of blockchain, and its ability to establish identity and ownership, record transactions and enforce “smart contracts”.
Currently, the collective worth of these cryptocurrencies is between $150 to $200 billion (it fluctuates wildly) so there is big money involved – but many are convinced this is just the start. As the technology and infrastructure around coins matures, cryptocurrencies which provide a genuinely useful solution to a problem could find themselves rapidly increasing in value, just as Bitcoin has done. This makes them very attractive to investors.
There’s a problem though, and it’s a big one. A huge proportion of those 2,000-plus currencies and tokens have no practical use, or no chance of gaining mainstream adoption. This is probably (part of) the reason why the latest trend involving using crypto currencies to raise money – initial coin offerings (ICOs) have just been declared illegal in China. Other governments, particularly in the west, have been less eager to regulate with a heavy hand.
Initial Coin Offerings
ICOs have become increasingly popular as a form of crowdfunding – by effectively allowing trading and recording ownership of shares, or stock, using a trustless, unforgeable, public and encrypted blockchain.
Roger Bryan, founder of the Digital Currency Index, told me that he believes greater regulation will be needed before the cryptocurrency markets attract the scale of institutional investment that many of these projects will need to reach their full potential.
“This industry is only going to become its best self when there is a semblance of regulation. I know a lot of the people who were founders of the first crypto currencies would shy away from that – seeing it as moving away from the ultimate goal of decentralization.
“Blockchain is going to change the way that data is processed and the way investments are handled – we’ve got to work with regulators to get this done correctly.”
Currently, would-be investors wanting to stake their claim in the future of a particular blockchain currency, project or token, can do so via the plethora of ICOs – which can often require a significant initial buy-in of $10,000 or more. Alternatively, they can trade tokens, coins and currencies (which all fall under the collective label of cryptocurrency) on several online exchanges.
Bitcoin is the “gatekeeper coin” – you usually need Bitcoin to invest in other crypto currencies – and this is one of the genuine uses of that particular currency, and one which no doubt has played a part in its sustained rise in value.
Bernard Marr is a best-selling author & keynote speaker on business, technology and big data. His new book is Data Strategy. To read his future posts simply join his network here.