Crypto Winter Isn't Fatal For All 'Picks and Shovels' Makers
January 17 2019 - 6:24AM
ADVFN Crypto NewsWire
The crypto winter that’s seen major digital assets crash by as
much as 90 percent hasn’t been bad for all of the firms building
infrastructure or investors looking to pick up equity in projects
that dropped appreciably.
"This is the most productive phase we’ve ever been in," said
Konstantin Richter, chief executive officer of Blockdaemon, a firm that creates and
hosts the computer nodes that make up blockchain networks. That’s
because various efforts in the space need to deliver on their
ambitions and are turning to firms like Blockdaemon for help.
"Projects now need to show their colors. The time is up of raising
a lot of money and talking a lot of talk," Richter said at a panel
discussion hosted at the Los Angeles bureau of Bloomberg News.
After seeing cryptocurrency prices soar to records in late 2017
and early 2018 -- Bitcoin peaked near $20,000 and Ether traded over
$1,300 -- the market had a disastrous time last year. Bitcoin is
down about 80 percent with Ether having dropped about 90 percent.
Investors and the public appear to have major concerns about what
blockchain technology can actually deliver in the real world after
hearing promises of its transformational potential.
"The skepticism is warranted in many ways because this
technology is nascent and untested at an industrial scale," said
Adam Jiwan, CEO of Spring Labs, which is using blockchain
technology to build a decentralized credit-reporting system. He
said the shakeout has been good for picking up employees who have
seen their funding dry up or been cut loose from development firms.
"Our hope is this presents us with a great opportunity to recruit
talent," he said during the discussion.
The rise and fall of digital currencies validated the approach
at Maco.la, a Los Angeles based investment, advisory and recruiting
firm, said co-founder and principal advisor Sheri Kaiserman. That’s
because the firm decided at inception last year to make equity
investments rather than buying initial coin offerings, she
said.
"We felt like the best way to make money is to buy the
infrastructure companies -- the picks and shovels -- that are
helping build the foundation," she said. "They are coming down in
valuation, which is the best part of the crypto winter for us,"
Kaiserman said.
Maco.la is looking to invest in projects that avoid the
repetitious work being done in the space at the moment as well as
ones that have a high likelihood of being acquired, she said.
"That’s why we focus on ones where we think Microsoft might be
interested or that Google might be interested."
Blockchain, originally developed as the ledger technology that
powers Bitcoin, is promising for corporations, if they can figure
out how to use it. Proponents predict billions of dollars in
savings by handling data and transactions more efficiently and
rapidly. Yet most corporate efforts are still in early development
or testing. Still, depending on when a blockchain startup raised
funding, it could still have plenty of money to spend on
development, Richter said.
"There are projects that are so well funded they’ll last for
years," he said. Any ICO that went before the summer of 2017, for
example, may have been able to buy Bitcoin at $600 compared to its
current value of about $3,600, he said.
Health Care
Kaiserman said blockchain has the potential to radically change
how global payments are made, specifically remittance payments when
you factor in that Western Union charges 8 percent to 10 percent to
send money compared with "a nominal cost" of Bitcoin transactions.
There is also the chance to use it to give 1.1 billion people a
digital identity around the world who currently lack a documented
existence. Her favorite use is in health care, she said.
"I would love to be able to go to a doctor and the knowledge of
my insurance is on the blockchain" so that "the insurance company
knows that’s a covered diagnosis and there’s no need for
reconciliation because we’re all sharing this one ledger," she
said.
Spring Labs is advised by former Federal Deposit Insurance Corp.
Chair Shelia Bair and former Goldman Sachs president and Trump
administration chief economic advisor Gary Cohn. The firm avoided an ICO because they
thought it would hurt adoption and risked regulatory scrutiny,
Jiwan said. It’s working closely with regulators like the
Securities and Exchange Commission to understand how to transition
from a firm backed by equity to issuing a token that would be used
on its network, he said.
In November, the SEC announced its first civil penalties against
two crypto companies for allegedly violating securities offering
registration rules with their ICOs. Both Airfox and Paragon Coin
Inc. will need to pay $250,000 in penalties and register the
digital tokens they sold through their ICOs as securities to
resolve the matters against them, the SEC said Nov. 16. A few weeks
later, commission Chairman Jay Clayton said cryptocurrency
entrepreneurs should get their “act together” and register their
initial coin offerings with the SEC if they want to avoid problems
down the road.
"There’s some important issues in terms of straddling the
transition from security tokens to utility tokens," Jiwan said.
"The SEC’s primary concern is speculation ahead of actually
delivering a functional technology, which, by the way, is
reasonable," he said.
Source: Bloomberg
By
Matthew Leising
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