The New Fintech Revolution: ICOs, Blockchain, Cryptocurrency And The Alternate Commercial Market
The cryptocurrency ecosystem has seen an enormous evolution since its inception: over a dozen alternative currencies presently hold market capitalizations at or above $1 billion, while the total market cap for the space as a whole sits at well over $100 billion. Admittedly, the spread of Bitcoin and its contemporaries has been something I have considered only tangentially, its own compartmentalized universe apart from the fintech space I have long operated in. Last week’s NY FinTech Week Conference -- a motley of technology chiefs, funders, blockchain acolytes and startups -- was a wakeup call.
Beyond disruption, the mechanisms surrounding cryptocurrency, particularly blockchain (an open ledger at the heart of alternative currencies) and Initial Coin Offerings (ICOs, or unregulated funding vehicles for blockchain projects) are revolutionizing the global fintech landscape. Not only are these the latest trending topics across the tech Twittersphere, the global crypto-powered ecosystem is uniquely positioned to reshape the way we transact business and interact in the global commercial market. I'm talking about enabling new channels to power small business growth, employee payroll networks, B2B and D2C transactions, as well as equity and debt financing.
As fintech executives like myself discussed realignment in banking and venture capital funding across the globe, we confronted tremendous ICO success stories. The crypto startups we encountered at the conference included 0x, a protocol for trading tokens, which raised tens of millions of dollars ($24 million to be exact), fully realizing funding round objectives within hours of its ICO launch -- and this is far from an anomaly. ICOs are seeing very real, instantaneous and globally sourced early-stage startup money. The excitement is airborne and begs the question: Is the fintech industry listening?
An Alternate Commercial Market
At first glance, this world appears insular, almost cult-like. The uninitiated can draw parallels from the ICO process to equity funding rounds for startups or IPO launches -- but there are key distinctions here. ICOs are global, equity-free (apart from discounts on digital currencies before they hit exchanges) and unregulated (aside from crowdsourced due diligence, an industry byproduct of self-regulation). The most jarring element to crypto neophytes is that ICOs are fundraising on yet-to-be-completed projects -- sometimes even yet-to-be-started ideas.
As banking continues to be disrupted by fintech startups, the crypto-enabled marketplace is next to turn the financial world on its head. Already, forward-looking investors and consumers have taken note -- with returns upwards of 2000% alongside the added value of investment liquidity, budding crypto investors, VCs and hedge funds are cashing in, while financial leaders and regulators are examining underlying signs of market displacement. At the consumer level, the cryptocurrency ecosystem is already altering the financial landscape: Bitcoin ATMs number near 1,500 globally, cost-effective international money transfers and currency exchanges are being reimagined with ease and speed, and digital currency transactions are proliferating online. And this is only the start.
Wherever you stand on cryptocurrency, its echoes to the 1990s dot-com bubble are palpable. As in the internet era, we are again in the midst of a revolution, with the new guard replacing the old and unlocking an entire universe of alternate commercial markets. There is clearly a ton of noise, unease and uncertainty, but market displacement is coming, and it will be bigger than anything we have ever seen.
The Global Landscape: Is The U.S. Being Left Behind?
Something you quickly realize while among a conference full of blockchain acolytes is that the space is crowded with global players, but the U.S. is not chief among them.
Ethereum creator, Vitalik Buterin characterizes the global cryptocurrency opportunity to a tee. To paraphrase, Western society (namely that of the U.S.) places a high level of trust in its financial institutions and behemoth organizations, like Google or Facebook. The collective cryptocurrency spheres of influence are increasingly concentrated across the rest of the world -- Africa, China and Russia, for instance -- where institutions and corporations are far less trusted by the greater public.
Buterin's thoughts ring true. Financial instability is an important factor in considering global market displacement. Developing countries where fiat and commodity-based currencies have spiraled out of control have seen consumers turn to alternative currencies like Bitcoin. The relative stability of U.S. banking alongside the powerful regulatory forces at play make it difficult, but not impossible, for a stateside cryptocurrency explosion. For now, others are dominating, and the U.S. is still playing catch-up.
While thought leaders, funders, regulators and executives debate the merits and long-term impacts of cryptocurrency, there is no question that the movement has created an alternative way of conducting business, particularly in the non-Western world. Forward-looking investors have already cashed in, sending rippling effects across the traditional equity funding system, all the while generating both momentum and skepticism for the decentralized, dis-intermediated financial market of the future: a crypto-powered market that is slated, by some estimates, to hit a $5 trillion market cap by 2022.
Non-Western players have only scratched the surface of blockchain implementation and innovation. I envision a new frontier of crypto-powered tech, where digital and fiat money will collide and unspool institutional banking, payroll processing, taxation systems and overall consumer transactions in their current forms. Count me among the evangelists.
This article was originally featured on Forbes. Access it here.