Blockchain has got it made. IBM, for example, will sell you a complete enterprise implementation, perfect for those decentralized applications, like tracking where that piece of lettuce really came from. But cryptocurrency? Not so much. It’s still dogged by a “here be dragons” approach by most companies. It’s not hard to see why when billionaires like Warren Buffett say in interviews that buying into cryptocurrencies is “speculating” rather than investing.
Cryptocurrency is financial technology. In my view, it really has nothing to do with supply chain management. Yes, cryptocurrencies are based on the blockchain, but crypto is very different — it’s specifically about money. When I first realized that, I pivoted from the path of enterprise blockchain and focused instead on setting up a better way for my industry to crowdfund innovative projects. But I still wonder, why all the fear, uncertainty and doubt around cryptocurrencies? I think it’s probably lack of education. Here’s what I have learned from working in the industry.
The world’s most successful alternative currency is the frequent flyer mile. The key is that it can be turned into something of value. A cryptocurrency is much the same, except that it has the potential to be a great deal more open than airlines and their miles. And the cryptocurrency market is on a steady growth path, right along with the mainstream adoption of blockchain, which is expected to be worth $20 billion by 2024. But that is nothing when compared with cryptocurrencies, which as of November of 2018 have a market cap of about $214 billion, of which bitcoin makes up about half.
That’s in a very early market with real uncertainty about which tokens have value and which do not. There are more than 2,000 coins on the market, with new offerings being made all the time. But there are also around 1,000 coins that are essentially dead. The latest wave is the security-compliant token. These are being offered on new, security-compliant exchanges, such as Coinbase. These will, I believe, replace the weaker, unregulated ones, and create a stronger crypto ecosystem overall. That, I think, is what companies considering a cryptocurrency strategy need to understand: As these coins gain mainstream adoption, I think they will create an entirely new economy. I believe this capital pool could eventually reach as deep as, say, Facebook — or even deeper as billions become involved. I think that companies that don’t figure out how to add crypto financing will be missing out on a world-changing revenue stream.
But what corporate America really wants is established coins and exchanges, with use cases to lend them credibility. “Suit-compliant” is what I call it. To illustrate this point, I want to revisit the RIDE coin I invented in my last article, “Beyond Uber: A Simple Way To Understand Blockchain and Crypto.” The RIDE coin would create a decentralized ecosystem for ride-hailing, including a suite of distributed applications (DApps). Those apps would be in place to verify insurance, bonding, licensing and background checks, and would be provided by certified vendors. (See? We’re already building the ecosystem.)
Riders access the decentralized network and pay via their RIDE coin wallet. The drivers make what riders will pay, and there is no middleman to take a bite of the profits. The efficiency and cost are unmatched, attracting both riders and drivers to the ecosystem. And as more insurance providers, bonding providers and background checkers get involved via DApps, the ecosystem expands.
What suit-compliant means, in this case, is that there’s enough use of the network and the DApps to make it a worthwhile and less risky investment. Sort of like Amazon Certified Resellers — we trust them because Amazon says we can and backs up the transaction. And it’s true: Most corporate players aren’t going to have enough knowledge of the crypto space at this point to be able to identify the opportunities to get involved with their own strategy; they’re going to need the financial institutions, accounting and investment firms, business consultancies and more to determine the strongest tokens and ecosystems.
When it comes to building the ecosystems, I believe it will be the smaller players who create and use the DApps that will build the foundation of use cases and drive adoption. Then you’ll have the disruptive tech and investment firms that lead the charge on creating tokens and exchanges.
Already, the SEC is lending its weight to cryptocurrencies, giving corporate players peace of mind about not only anti-fraud and anti-theft measures but also the actual stability of any coin they want to invest in. U.S.-regulated security markets are becoming a reality as I write this. There’s a lot of work being done in the security space to improve anti-virus and fraud solutions, add hardware gateways and further protections, and these will only continue to add legitimacy to cryptocurrencies overall. I believe it’s only a matter of time before corporate America starts to get on the crypto bandwagon — and the companies that start to pivot now will have the opportunity to define and lead the market.