Given today's blockchain bubble and stratospheric returns of many cyptocurrency ICOs, it is tempting to chase possible sky-high investments. Fear of missing out (FOMO) is real for most entrepreneurs. For many, it's the late 1990s "dot com" boom all over again. There are scammers and charlatans all over the place during this Wild West phase and there is basically no regulation. Pump-and-dump schemes abound. In the crypto-markets, it is buyer beware.
But that is ok, because if you really want to profit from these technological innovations in the long run, your time may actually be better spent elsewhere. What is going on is the beginning of a critical change in how value is created and measured, made possible by the invention of blockchains, or perhaps more appropriately, distributed ledger technology (DLT).
I had an opportunity to speak with Jeremy Epstein, CEO of Never Stop Marketing and author of The CMO Primer for the Blockchain World. Some venture capital investors consider Epstein to be a "modern day unicorn" because of what he accomplished as the VP of Marketing during his time at Sprinklr. Specifically, during his tenure, the company grew from a Series A $23mm valuation with 30 employees to a Series E valuation of $1 Billion dollars with 700+ employees in 10 countries, serving 800+ enterprise brands.
Simply put, when a fellow marketer who helped grow a company to a valuation of over $1 Billion wants to talk about the future of technology, I listen ... and I take really good notes.
A Quick Blockchain Primer
Epstein explained the core innovation of bitcoin, supported by the Bitcoin blockchain, is that it solves the "double spend" problem associated with digital technology. When you get paid, you need to trust that the asset you are obtaining in return for your product or service will have value in the future. If the other person in the transaction can easily make a copy of the asset, then yours will not be unique. As such, its value will be less.
This is why it's ok if we both have a picture of your dog or child, but it's not ok if we both have the exact same $20 bill. So, by creating an immutable ledger, secured by a decentralized network, we all know who owns what at what time. This is what is called "consensus."
In this world, when a transaction occurs and you send .002 Bitcoin or Ether or any crypto-token to another person, the entire network is made aware of the fact that an asset has changed hands, so it cannot be used or "spent" again.
There are some members of the network, called "miners," who invest their time and money in the form of electricity and computing power, to verify that you have it in the first place and to ensure that, once you have signed the transaction with your private key, you no longer have it.
Once they have completed the process, there is a mathematically elegant way for them to secure the network and distribute the information to others. For this work, they are rewarded with their own Bitcoins (or another token if they are using a different blockchain).
The key thing here is that each coin that is created (also called a "token") is digitally unique, cannot be forged, and has a clear, indisputable owner. If you have the private key, you own the coin.
Assets and Value, Secured by the Blockchain
The implication of all of this is that we now have a technology that can cost-effectively represent assets in a unique way. Since the assets are digital, they are fungible. You cannot own a fraction of a Picasso painting, but you can own .0000023 of the token that represents the Picasso painting.
When you "tokenize" an asset and its uniqueness is undeniable, the asset has value. It may be large or small, but it is the only one of its kind in the world and that is worth something. Think about how many assets you currently have that are under-leveraged because the costs involved in buying, selling, or trading them are too high. This could include unused hard-disk space on your computer, bandwidth at your home that lays dormant during the day, or the family heirloom painting that you do not want to sell but could provide some liquidity. It's possible that every asset will be "tokenized."
The second implication is that asset control will stay with the creator until she decides to part with it. In the future, companies will have to pay you for the data they get for free today such as name, email address, phone numbers, and social media profiles. If you are the company, the same will be true of those you serve. If you want control of an asset, whether it is for a marketing campaign or a data feed to improve your crops, you will have to buy or rent it from the owner.
Finally, because these assets are digital, it means that they can be programmed, like a computer. The business and legal rules that currently surround an asset in the form of documents and contracts can be applied to the asset itself to govern its use.
The three things you need to understand in order to prepare for the transformative power of Blockchains are:
- Asset Tokenization in ever smaller increments
- Asset Ownership that is clear and indisputable
- Asset Programmability that can reduce transaction times
Amidst all of the hype of crypto, these are the implications of blockchain's arrival that are really going to change things up.
It Won't Be Here Tomorrow, But It Is Coming
Blockchains are in their infancy and there are plenty of issues ranging from stability to security to interoperability, among others. The cryptocurrency craze is just a signal that the genie is officially out of the bottle. Whether you buy Bitcoin, Ether, Zcash, ARK or other tokens, is up to you. It may well be worth some of your time to understand them. The real value for you is to start looking at how your business might change if every asset is tokenized, owned by its creator, and digitally programmable. These impacts are especially important if you are just starting out in 2018.