We’ve seen how the invention of the internet led to a wave of empowerment around the world. Cryptocurrency and blockchain technology are poised to bring about the next round of newfound economic opportunities. By breaking down barriers to investment, enabling cross-border trade, and creating novel avenues for project funding, crypto and blockchain technology are blazing new pathways for the next generation of entrepreneurs.
Cryptocurrency is digital money that is not backed by any centralized institution, such as a bank or government. Cryptocurrency transactions are stored on a decentralized, digital ledger called a blockchain. By eliminating the need for third party verification of transactions, blockchain technology forms the foundation for entirely new economies and gives rise to novel opportunities for wealth generation that were not previously possible.
Historically, if a person didn’t have a bank account, that individual was essentially limited to cash transactions local to his or her geographic area. The internet made it possible, in theory, for a craftswoman in Kenya to sell her products to someone on the other side of the world through an online platform like Etsy or Ebay; the catch was she still needed a bank account in order to collect profits. The invention of cryptocurrencies breaks down barriers to enter global trade markets by empowering individuals to store and exchange value without verification from a bank. These days, that same craftswoman only needs access to a device, such as a phone, that supports a digital wallet and she can sell her goods to customers based anywhere in the world. Not only is this method of direct payment much more efficient from a logistics standpoint, but it also saves the craftswoman money she would normally lose to transaction and exchange fees.
Cryptocurrency also jump-starts opportunities for investment and entrepreneurship across robust markets. During the summer of 2017, many startups using blockchain technology to power decentralized applications and platforms launched Initial Coin Offers (ICOs). The name is a play on the term Initial Public Offering or (IPO) to denote a private company opening its stocks to public investment. ICOs involve the raising of tokens to fund development on blockchain-based projects. Oftentimes, these tokens possess a function within the project’s specific ecosystem and can be used to pay for services within that network. These tokens are referred to as utility tokens, because they have a unique “use” within their respective platform or network. Recently, ICOs have been determined to be securities and under the purview of the SEC, which should bring more investor protections and safety mechanisms into the sphere.
The natural trajectory for the crypto ecosystem is toward compliance and assurance of legality. Pressure from institutional investors and serious players in the realm of traditional finance has led to the development of security tokens. We are just now beginning to see the launch of Security Token Offerings, or STOs, that offer US-compliant opportunities for investment in digital assets. The development of security tokens lends much-needed legitimacy to this emerging sphere, which may comfort institutional and retail investors alike who are on the brink of taking the leap into crypto. Just recently, the SEC chairman discussed allowing more mainstreet investors in on private deals. Further relaxation around eligibility for investment offerings will have a direct impact on everyday people seeking additional wealth generating opportunities.
The fundraising options for entrepreneurs in Silicon Valley can be incredibly limiting, and so Security Token Offerings could offer some entrepreneurs a distinct avenue for jump-starting their businesses, especially those utilizing blockchain technology to build decentralized applications and who understand the requirements of achieving compliance with the SEC. For entrepreneurs unwilling to compromise their visions to match the expectations of San Francisco VCs, the world of cryptocurrency and digital assets is full of open doors.
Unlike other emerging technologies, such as artificial intelligence or virtual reality, blockchain and cryptocurrencies are based in values of democratization and decentralization. Bitcoin was created in reaction to the misuse of power by big banks that ultimately led to the 2008 crash. The intention was to form the basis for a peer-to-peer online payment system that didn’t need the banks or any third party intermediary to function. Such a system empowers users with more control over their own assets and investment decisions. Blockchain creates the possibility of a more open economy with novel opportunities for wealth generation and global trade. It’s up to us as entrepreneurs, investors, and the curious-minded to harness the power of this emerging technology to expand the economy from today’s baseline.