With both Bitcoin and Ether surging to record highs this week, everyone – entrepreneurs, investors, consumers, businesses and governments – have been caught up in the flurry surrounding cryptocurrencies. Many are trying to understand what’s happening now and where all this is headed.
It’s always hard to predict how a new computing platform will play out, but right now I see four opportunities that are at different stages of development. Here are my four crypto waves, ranked from furthest to least developed:
Wave one: Store of value
Bitcoin has found its place as “censorship-free store of value.” It’s like “digital gold,” but with some major advantages, including that it’s more fungible and easier to transfer. There are now enough people in the world that believe in this positioning and the Bitcoin mining community is also very protective of this position. So, there’s a high likelihood that Bitcoin will remain a store of value and the only open question is just how big the opportunity can be. How many people will believe and value such a store of value?
Wave two: Disruption of financial markets / tokenization of financial assets
This second wave has really taken off due to ETH-based ERC20 tokens and all the ICOs built around them. The first use case is live and has already created markets that have transacted billions of dollars (even if many ICOs are probably doomed to fail, given the quality, or lack thereof, of the underlying products).
My theory is that over time every single asset class will be tokenized, and perhaps new asset classes will be created in this process, bringing about new financial markets with global reach and frictionless access. The big question is how quickly regulators will let this happen, if at all.
Wave three: Disruption of every other information market
Disruption won’t just be limited to financial markets. I believe that every other information market will be changed by blockchain: storage, computing, access, firewalls, CDNs, Wi-Fi, etc. We’re just now seeing the first projects emerge in this space. The most prominent project so far is Filecoin, who has raised over $200M to disrupt storage. Of course, these products aren’t live yet and it will probably be a few years before we’ll be able to use any of these platforms.
Wave four: Disruption of what a firm means
Crypto’s last wave will actually disrupt how we define a firm. Through decentralized governance and decentralized incentive systems, we will see very large communities emerge to tackle projects that have been created by centralized organizations to date. Numerai, a decentralized hedge fund, is the first example for this opportunity. This stage is still early in development, but I expect it to become a much larger trend down the road. But, we’ll first have to figure out the optimal model for decentralized governance. And, that’s not a simple task.
Most predictions fail, I know. But it is still incredibly exciting to think about how crypto can play out over the coming years. Any thoughts and comments are welcome – let’s discuss!