Blockchain has quickly become the buzzword in fintech for 2017; Consensus 2017 took place this week in New York City and I wanted to share my thoughts on the event.
There were a few major themes I took away from the conference. Blockchain uses are expanding rapidly beyond financial services, there were auto companies, pharma companies and technology giants who were in attendance and spoke. This technology is a worldwide phenomenon. I met and saw speakers from the US, China, Japan, Korea, Australia, Europe, Latin America, South Africa, India and more. These distributed ledger technologies are becoming more diverse, in addition to the blockchain you now have Ethereum, Corda, Quorom and more.
All of these themes point to a burgeoning market that can truly transform the way business is done, but understanding the practicality of what can be implemented soon and what is more of a future aspiration is harder to figure out.
Financial services companies have been investing in and thinking about these new technologies for a few years. These companies have moved beyond the educational stage in the life cycle of understanding new innovation, but other areas like life sciences, auto companies, pharmaceutical makers and healthcare companies are still asking the introductory type questions. As expected, big companies require a concerted effort when they want to look at something like blockchain because of how much of the firm and their clients can be affected by such a change to their technology. Startups have been much more willing and nimble to work with the different forms of this new technology.
Worldwide interest and use cases was a welcome trend. It was great to see that companies all over the globe see the benefits to upgrading the old way of doing business. A few regions in particular were worth noting; China clearly is becoming a leader as infrastructure in the world’s biggest market is in need of this technology and the government has been a supportive partner. India has been at the forefront of countrywide adoption of new technologies with their biometrics ID system, they are also beginning to look at the uses of blockchain in their financial services industry in particular. The US shows how diverse the reach of blockchain can go with leading companies like Fidelity, IBM, JP Morgan, Microsoft the US government in attendance.
Understanding the various versions of this technology can be a bit overwhelming. Bitcoin, public blockchain, private blockchain, ethereum, corda, quorum, and others. While this clearly shows the level of innovation occurring it can be hard to fully understand what each of them does.
Initial Coin Offerings (ICOs) are a trending mechanism for startups in the space to raise capital from enthusiasts. An Initial Coin Offering (ICO) is used by blockchain startups to raise money outside the traditional VC world. Generally, tokens are sold to raise money for technical development, but tokens do not grant ownership in the company. ICOs have started to really take off in the last year, there was about $500mn raised using this fundraising in the space and currently it feels like there is another ICO announced daily. There are a lot of swirling questions around ICOs and what constitutes an investment. This reminds me a little bit like the crowdfunding craze about five years ago around the passage of the JOBs Act. There is one important difference, those interested in investing in an ICO are more likely to be aware of and involved in this market.
The legality of this method is another question in of itself, there were many viewpoints brought up during the event and it certainly will continue to be argued as more ICOs come to market.
What will this market look like in the next year? This is the one question I still find to be most fascinating. You can feel the excitement when alliances like the Ethereum Enterprise Alliance adds 86 members or when the R3 consortium raised over $100mn in the first two tranches of their series A. The practical applications currently happening will help to move this market forward, while the bigger projects with large aspirations of transforming a certain industry look to lay the foundation for their eventual implementation.
Todd is the host of PitchIt: the fintech startups podcast, a weekly interview show featuring emerging fintech founders and leading venture capitalists. He is responsible for leading the content team which covers fintech through daily & weekly email newsletters, editorial, virtual events, and in-person conferences. He has been covering fintech, banking, and venture capital for more than 15 years, including speaking regularly at industry events.