A Multi-Trillion Crypto Market or Just a Bubble? BEF2017 Opening Panel Highlights

The potential future of cryptocurrencies is still uncertain. This year total crypto market cap has surpassed $200 billion, which is a major step forward from the $40 billion capitalization we saw in the beginning of 2017. But are there fundamental economic reasons for this growth, or are we witnessing another bubble formation? What applications can bring billions of new users onto blockchain, and when can we finally witness blockchain’s “Netscape moment?”

LAT Blockchain Economic Forum gathered Reese Jones (founder of Singularity University, advisor to Facebook), Miko Matsumura (Limited Partner, Pantera Capital), Jalak Jobanputra (founder of Future\Perfect Ventures) and Alex Mashinsky (Founder of Governing Dynamics) and Valentin Preobrazhenskiy to search for the answers together.

Blockchain is the New Internet

There are parallels in the way the Internet has developed and how blockchain can develop, the panelists agreed. “It’s going to feel like some slow movements, and then one day we’re going to wake up, and we’re all going to be touching blockchain just like we all touch the Internet without necessarily knowing that we’re utilizing the technology,” Jalak says.

The reason for that is that complex systems, for example, commerce, have evolved past their own limitations and inefficiencies, but the changes are often resisted by those in control. At the same time “Newer, better and more efficient systems appear, explains Reese. “Invention of the Internet wasn’t intended to disrupt music, or TV, or Publishing industry, it wasn’t the goal, the Internet just happened to be a more efficient way for the information to flow. And the publishers who didn’t switch to the Internet saw some consequences. This may be happening to tokens, blockchain and distributed systems that are trying to make things better,” he clarified.

Miko in his turn has pointed out that proof of work is an exceedingly expensive way of registering transactions. “Checking everybody’s work constantly is very expensive and slow. So why are we paying this much expense? Because we don’t trust anybody. Because we shouldn’t trust anyone with our money.”

Looks like there’s a fundamental reason for the growth after all. And probably “the slow blockchain can replace the slow bureaucrats”, as Valentin puts it.

$5 trillion by 2025 is a conservative scenario

A total valuation of $200 billion may seem like a lot, but it’s still a drop in the bucket when looking at traditional companies and instruments. To put it into perspective, Apple alone has a cap of $897 billion.

The same goes to a $5 trillion market cap estimates, made by LAToken Research team. Five trillion dollars seems like a very big number, but not when it’s put in a context, says Reese. “Real estate is worth about $200 trillion whereby all the gold ever mined is estimated to be around $7 trillion worth. New market is emerging for tokenized markets and tokens of only $5 trillion isn’t necessarily as outrageous as one might think in terms of global economy,” he explains.

Jalak adds that we’re going to see every sector impacted by the blockchain. “We’re still in the early days, and tokens and tokenization are just one business model, and one element of this technology. But there’s a lot of other business models, that are going to emerge out of this,” she says.

Even Miko, who believes that we are currently in a bubble, cites Elon Mask. “When he was asked about the colonization of Mars, he said that it’s better to be optimistic, then not. Many of us in this room think that what we’re seeing in cryptocurrency is a global class reserve currency at the very least, atop of which we will see derivative instruments and the formation of a new economy. If that is the case, we’re talking about $10 trillion or more,” — Miko estimates.

The “Netscape Moment” is Still Needed

Alex’s main point during the panel was that we’re still waiting for a “Netscape moment”, that one explosion that will change everything and bring billions of people onto blockchain.

“If you think of the Internet, what did we get in 20 years? A bunch of monopolies, bigger than any other company that ever existed — Apple, Amazon, Alibaba and so on, and they’re just getting bigger and bigger,” — he reminded. Some of the blockchain companies have even bigger opportunities, he assures.

“The promise with the blockchain is that the incentive system in the ‘token generation process’ is completely separate from the transaction itself. You can have a protocol that effectively provides zero friction, zero cost to the community, and all of the incentives are separated and provided in a complete mechanism, which allows both adoption and value creation, but does so on two separate platforms. The opportunity is tremendous,” — Alex explains. In his words, the question is just “which one of the thousands of flowers that are blooming right now are going to survive, because the ones that are going to survive will be used by billions of people”.

The killer app is still to be found, but, as Miko thinks, the ones to really pay attention to are end user gateways: consumer payment, e-commerce, lending, the things that the next billion Netscape-type users will be using, “because that’s the real economy”.

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