January 24, 2018

Blockchain & Cryptocurrency in Boston Tech - Part 4: “Newest Industry” - Future Predictions

If you’ve been following along, you’ve learned what the terms “blockchain” and “Bitcoin” mean in Part 1, and read several investors’ views on the blockchain and cryptocurrency space in Boston for Part 2.

In Part 3, ten companies were profiled on what they are doing with blockchain and cryptocurrency technology. It wasn’t an exhaustive list, but it was a collection of startups that are utilizing this growing technology in unique, and not to mention significant, ways.

And now, we’ve come to the final part of Blockchain & Cryptocurrency in Boston Tech.

In nearly every interview over the course of my research, I asked the interview subject, “What are your predictions for this space?” There were a handful of recurring guesses from investors and entrepreneurs, such as opinions on initial coin offerings (ICOs) to what kind of industries will be rising up through this technology.

I’ve compiled the interviews from various entrepreneurs, investors, as well as others involved with the cryptocurrency and blockchain sector on what they think will come next.

Industries taking advantage of the technology

Havell Rodrigues Adjoint
Havell Rodrigues, Co-Founder and CEO of Adjoint

Many of the startups featured in Part 3 are either working in, or trying to disrupt, a particular industry be it data storage, voting, or content distribution, among others. It may come as no surprise that incoming entrepreneurs will be looking into other industries where blockchain and cryptocurrency technology can thrive.

Adjoint Co-Founder and CEO Havell Rodrigues, whose company’s platform Uplink provides permissioned blockchains and smart contracts for enterprise markets, says larger companies are beginning to take advantage of blockchain technology.

“Enterprise companies are starting to utilize this technology,” said Rodrigues. “It’s savvy tech and there are lots of benefits of using the software in the enterprise market. There’s also a variety of use cases in banking, insurance and capital markets, such as treasury management, securities trade processing. custodial services etc.”

Rob Frasca Cosimo Ventures
Rob Frasca, Managing Partner at Cosimo Ventures

Cosimo Ventures Managing Partner Rob Frasca also shares similar thoughts when it comes to enterprise markets utilizing this technology, as he said financial system problems can be fixed through the blockchain.

“You’re going to see more and more ways that enterprise companies use the blockchain in old systems,” Frasca told me. Another industry Frasca predicts that will become more relevant is security, but more specifically security tokens.

“Security tokens are going to become more widely spread,” Cosimo’s Managing Partner said. “Professional funding instruments will be used as a type of security token. You’ll see a lot more in this space in regards to those.”

Investors, such as Pillar Founder Jamie Goldstein, are also taking note of what entrepreneurs are doing in this space with particular markets.

“We’re looking at dozens of companies right now, and there are a lot of standouts,” Goldstein said. “One big idea is real estate. Using blockchain technology for real estate deals can create a more fluid market. When you add that kind of liquidity to a market, it brings business in.”

“Blockchain can revolutionize industries across the country,” added Goldstein. “I think blockchain represents an opportunity and a threat. I hope that there are going to be successful companies in Boston.”

Bitcoin v Ethereum: Dawn of the Dominant Cryptocurrency

Boris Revsin Game Theory Crypto Group
Boris Revsin, Partner at Game Theory Crypto Group

Boris Revsin, Partner at Game Theory Crypto Group, a cryptocurrency and blockchain advisory and media organization, believes Ethereum has the potential to overtake Bitcoin not only as the number one cryptocurrency but also as a blockchain solution.

“Bitcoin is the most important out of the cryptocurrencies, since it was the first to come to prominence and it had a massive adoption rate. That cannot be understated,” said Revsin. “That being said, Bitcoin is just one of the many use cases with blockchain, and Ethereum can solve 999 other use cases.”

During my one-on-one chat with Revsin, he detailed how a hybrid Proof-of-Stake/Proof-of-Work model, which is (to simply put) a way to verify transactions while putting an amount of Ether at stake, works with Ethereum and how it can create a new model for running a blockchain.

Neha Narula, MIT DCI
Neha Narula, Director of the MIT DCI

While Ethereum does have some great properties to it, Bitcoin still has its fair share of users in the Boston blockchain and cryptocurrency scene, such as the MIT Digital Currency Initiative (DCI). The DCI is a research enterprise that is creating projects utilizing Bitcoin technology that can be applied to several industries. 

“We are thinking practically with our projects,” said MIT DCI Director Neha Narula. “We have people working on various ones related to Bitcoin, such as discreet law contracts.”

Narula adds, “What’s getting people excited about this space is Bitcoin. There is a lot more you can do with Bitcoin than you would think. It’s great to have lots of experiments and people to work on them.”

A change in Initial Coin Offerings (ICOs)

As stated in Part 1, one of the more controversial parts of the cryptocurrency and blockchain space are Initial Coin Offerings (ICOs).

Although, as the U.S. Securities and Exchange Commission (SEC) puts regulations on the ICO market on what seems like almost daily, and international markets are putting regulations in their own respective countries, ICOs are going to be affected in one way, shape, or form in the Boston tech scene. Goldstein describes the sector having a “fixation on ICOs.”

“A lot of entrepreneurs see an ICO as the end of their funding,” Pillar’s Founder said. “It is an opportunity, but it’s also a hard opportunity. The idea of raising $200 million on a single token is a difficult task.”

Dave Balter Flipside Crypto
Dave Balter, Co-Founder and Partner at Flipside Crypto

Dave Balter of Flipside Crypto voiced his not-so-positive opinions regarding ICOs with me but understands they won’t be going away anytime soon.

“You’re going to see a lot more ICOs, but I think most of them will fall apart,” said Balter. “There will be a better equity value market for tokens that do not involve ICOs.”

Investors in the blockchain and cryptocurrency scene in Boston also hypothesized the future of ICOs as being a bit more scaled back.

Richard Dulude Underscore VC
Richard Dulude, Founder and Principal of Underscore VC

“Certain companies should do an ICO, but most shouldn’t. They’ll need to prove there is a true use for that token," said Underscore VC Founder and Principal Richard Dulude. "You'll see more companies do it, but it will become less gray and more matter-of-fact. I think the window is getting more narrow for the ICO process."

Revsin has his own opinions on ICOs and how they will affect not only the cryptocurrency and blockchain space but also technology in general.

“It will become more black-and-white, and the speculators will be kicked out,” Revsin told me. “98% of ICOs today are worthless, but the remaining 2% could be the next Facebook or Amazon. You can’t ignore an opportunity like that, even if most of it is garbage.”

“Another prediction I have is there will be clarity on taxes from the IRS before clarity on securities from the SEC,” he added. “Taxes will come first.”

The bubble will burst...but people will stick around

Last week, the cryptocurrency world was in a state of panic (or at least that’s what the headlines made it sound like), as Bitcoin’s, and nearly all of the cryptocurrencies’, market value dropped a significant amount. While their values eventually increased, the looming threat of a market crash is hanging over the blockchain and cryptocurrency space in Boston.

However, everyone I spoke with shares a positive view of a potential crash as they believe it could weed out the speculators, and the entrepreneurs who are taking the technology seriously will be the ones who stick around.

Jamie Goldstein, Pillar Founder

“I think it [the bubble] will,” said Goldstein. “Anyone who is putting tens or hundreds of millions of dollars is going to receive a blowback. Hopefully, it will come down from Earth and the real entrepreneurs will stay.”

Entrepreneurs in this space are taking note of the potential downfall brought on by speculators and those just looking to make a quick buck.

"I think 90% of the altcoins on the market will go to zero within three years, but the good companies will stick around and thrive," said Cognate Founder and CEO Bennett Collen. "I think Boston is well positioned to be a leader in the space since we have such a strong pool of talent."

“Boston has a chance to excel,” said LBRY Co-Founder and CEO Jeremy Kauffman. “However nothing is really built out, and it’s a bit of a bubble right now. Nine out of ten companies that are forming may not be around in five years, but there is no reason why Boston can’t stand out in this space.”

When I spoke with Tengu Founder and CEO Chet Manikantan about the bubble and who will be affected, he simply stated, “The ones who will stick around are the ones who are building infrastructure. There are a lot of opportunistic people in this space who are in it just to make money.”

“It’s not about the money, it’s about the freedom,” Manikantan added. “The real-deal people are about the principles and technology.”

To be continued...across the Boston tech scene

And thus concludes Blockchain & Cryptocurrency in Boston Tech. I took you on a journey that combined lessons on what all of the terms mean, to insights from those heavily involved with this space, to what is to (potentially) come for the future.

Personally, I’d like to give special thanks to the following people involved with this space who also helped give me the insight I needed in order to write the series: Parul Singh of Founder Collective, Neha Narula of the MIT Digital Currency Initiative, Richard Dulude of Underscore VC, Dave Balter of Flipside Crypto, Rob Frasca of Cosimo Ventures, Jamie Goldstein of Pillar, Jeremy Kauffman of LBRY, Ty Danco, Chet Manikantan of Tengu, Auryn Macmillan and David DiNeno of FirstBlood, Havell Rodrigues of Adjoint, Bennett Collen of Cognate, Remy Carpinito of Esprezzo, Boris Revsin of Game Theory Crypto Group, and Christine To of AirFox.

And a final special thanks to the band Husker Du for providing a sort-of unofficial soundtrack for this series, and for the title names of each part. (Seriously, Zen Arcade is a phenomenal album…)

Next month, VentureFizz takes a deep dive into another industry that is slowly taking off in Boston.

One could say it’s an industry that is driving forward.

Colin Barry is a contributor to VentureFizz. Follow him on Twitter @ColinKrash.