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February 8, 2017

#Blockchain + Capital Markets

FutureCapMarkets

#Blockchain is defined as the ‘great chain of being sure about things.” by The Economist. We are moving towards a blockchain future where the marginal cost of a transaction drops to zero and peer-to-peer commerce is facilitated by ‘trustless’ transactions.

Depending on your future view of bitcoin, the blockchain and fintech, there are a few possible camps that you fall into:

  • you believe that bitcoin will become the dominant crypto asset and all other ‘alt coins’ (alternative digital currencies) will go to zero #bitcoinmaximalism
  • you believe that bitcoin will go to zero and that the underlying technology behind bitcoin (blockchain) will be leveraged to power the future of financial markets #blockchainmaximalism
  • you see a future where we have multiple blockchains, including bitcoin, working in tandem across multiple verticals and nation states to power next-gen financial applications in a  #multichainworld

The future view here is the latter, that we will live in a multi-chain world. If you subscribe to that view, then the future of capital markets is happening here and now on Poloniex, an exchange for cryptocurrency assets.

Ethereum CapM

+ Poloniex

Poloniex is an exchange based in the US where you can buy assets in emerging cryptocurrencies such as Ethereum, Monero, Maidsafe and an array of others. The ‘tokens’ for each individual asset were created during ‘ICOs’ (Initial Coin Offerings) where the respective teams issued a certain amount of cryptocurrency coins and sold a certain percentage of them to the public as a means to finance project development.

MaidEth

+ A Brief History of Coin Crowdsales

Of the hundreds of crowdsales run over the years, not all of them are legal from a securities law perspective; however, major success stories such as Maidsafe and Ethereum have paved the way towards this new ICO funding vehicle that regulators in several jurisdictions are now studying as it becomes a new structure for fundraising projects built in and around the blockchain:

“In 2016 alone, it is estimated that approximately $200 million USD was raised by Initial Coin Offerings, and even more is on the roster for 2017″ Fintech Experts to Focus on ICO Craze

Once a company sells units of its token, which is typically done on their own website, exchanges such as Poloniex choose whether or not they want to add the coin to their exchange. Popular coins are traded on multiple exchanges, globally, and the aggregate value of the currencies can be seen on sites such as CoinMarketCap:

CoinMarketCap

+ CoinMarketCap

If we do in fact enter a #multichainworld, then trading platforms like Poloniex will become the future of capital markets and buying tokens in the major winners now will pay off exponentially over a 5 – 10 year timeframe. That’s why we see certain firms loading up with capital to make bets on such coins.  Polychain Capital, for example, raised $10 million from Union Square Ventures to invest in frontier crypto assets:

“The investment in the fund signals the belief among some venture capitalists and other players in the cryptocurrency and blockchain industry that the future will consist of multiple digital assets beyond the first one, bitcoin.” USV invests $10 Million in Polychain Capital 

Currently, bitcoin represents ~$17 billion in ‘crypto assets’ while all other cryptocurrencies combined represent approximately $2 billion:

“Carlson-Wee projects that someday, the market cap of all blockchain-based tokens could be “in the trillions of dollars,” USV invests $10 Million in Polychain Capital 

The question is which coin(s) will be worth trillions and what will happen between now and then in the global financial landscape to get us there.