Last week saw Techemy host Blockchain South 2018, literally a gathering of the titans of the blockchain industry (check out the bios) to chart a narrative for the sector, discuss what's next, riff in detail around Security Token Offerings and talk about the challenges and opportunities of our industry.
Digitizing Value Panel (Security Tokens)
Here are some of the clear themes I noted:
Regulation is still the biggest pain point
This came through loud and clear, no matter where you are based, the blockchain industry needs regulatory certainty - frankly this is a industry wide requirement.
Essentially we agree that legacy political and economic interests are either avoiding change or are actively resisting it. This shows up in banking, in ancient legal frameworks — and in the global game of whack-a-mole that is being played with regulators. Witness the rise of Malta as a jurisdiction as proof of this.
While some countries like Singapore have made great progress, typically the conversation has been dominated by the US laws.
Interestingly enough, the unintended consequences of some of EU/US regulations has been capital raising has been made really hard in other parts of the world — which is actually driving people to crowdfunding and Security Tokens as some of the few ways to address this.
Build networks
To be successful, we will need networks of businesses to tackle the challenges. We need to look for partners in our ecosystems, aligned companies who share your views - and enter into coopetition to get scale and address product / infrastructural gaps that are too hard to do on your own. Then move to competition First principles apply - make it operate, then look for interoperability. There will be parallel ecosystems, and that's ok.
Security Tokens Offerings
STOs create this interesting collision of customer / shareholder - what happens when they are both at once? How can that be? But think it through, if your token enables the user to use your product and provides say a return or dividend, what then?
Are you selling stocks or services?
Is this investor relations or marketing?
What do you have to disclose? What should you disclose?
What rules and regulations can and should you apply?
Clearly the flexibility of tokens applied to financial products creates some amazing hybrid structures that need a lot more thinking through to be successful and frankly, usable.
What value will be digitised first?
Interestingly enough, there was no unified response to this question from the people literally inventing it. The short list includes
Real estate (making the illiquid liquid)
Existing financial instruments - bonds, stocks, ETFs
Replacing small cap finance needs with token raises that provide the investor with a interest based return
And many many more. Asset backed tokens are already getting plenty of airtime too. What was clear was that we have the opportunity to replicate but also create something new, the possibility of a 'purple token' - something completely new - is just around the corner, and that's exciting.
It's the apps, stupid
All this focus on protocols is a point in time, but in the future people won't care or even know about DLT or blockchains or even protocols if the interface (App) delivers the experience they want. This reality is largely inconsistent with the current investor sentiment, who are all saying "we focus on protocols". I'd argue that's a short sighted view. In reality we haven't seen hundreds of millions invested in 'protocols', instead it's been in the new solutions they have promised.
Yes we still have some infrastructural issues to address, and maybe we even need some new protocols. But it will ultimately be the apps that people take to, in much the same way as no one thinks about TCP/IP when they visit a website or use an app on their phone — and so it will be with the future of blockchain.
Disruption will be broad and unpredictable
Think more about the disruptive potential of blockchains, not just the industries but part of our social fabric and lives. Identity will be a forerunner, but so will other things. Property rights, marriage certificates etc. All potentially changed by this technology.
Think about the 'purple token' opportunity … use this technology to make something new and better
Don't just focus on replicating what we already have, there are efficiency and reach benefits from digitising stocks and bonds, however, the real opportunity is in using DLT to create something new, something that couldn't be done without this technology - distributed computing, self sovereign identity solutions. Things that only the advent of the blockchain can do. Unleash our minds.
In summary, an incredible conference. Speakers like Jeff Pulver and Patrick Byrne shared powerful, personal stories, stories about why we need to make the most of this opportunity, stories that make you sit up and look for those purple token opportunities. I'm incredibly humbled by the generosity and intellect of all the speakers and am grateful to them for their time.
About the author:
Paul Quickenden is the general manager of Techemy Advisory — an investor-focused token issuance platform.