Has the hype era for ICOs passed? Discussion with Ben Banerjee
Ben Banerjee, an economic advisor to several states, Board Member at InnMind and Investment Advisor discusses the influence of blockchain on finance and geopolitics, and many other aspects of the social impact of the blockchain.
Regulation for blockchain: pro and contra
Today central banks in many countries like Russia, the US, and Korea have become an instrument of political leverage. Blockchain, or rather, cryptocurrencies, are still not strongly regulated by central banks, and the gatekeepers are still being put in place. This means that blockchain has other options rather than to end up as the internet did. Just remember: a couple of decades back, the internet promised a complete democratic flow of information, yet today it has been severely restricted. However, if we don’t get gatekeepers, then we don’t get the creation of Googles and Facebooks — here is the crossroad we are standing at today, this is our choice to make.
The blockchain is basically an answer to this. All the data is stored everywhere, so no physical restriction or modification is possible without changing the entire mechanism. In terms of the central bank and state control of centralized finance - blockchain and crypto must not be completely outside those, because state regulation is there to protect the state’s own citizens. Take, for example, China. The Chinese government is perhaps forced to move in and control cryptocurrencies and ICOs, if it is to protect its own civilians from all kinds of gambling and fake ICO products. In a way, it is the correct move. However, banning cryptocurrencies and ICO is not really a good solution: this is like saying that although a sergeant can save you with a knife, the same knife will kill if used by a murderer, so let’s ban knives.
The right regulation will be based on the values we want to promote and maintain. If you look at it from the point of view of the finance and investment which we are dependent on, we will not get them if there are no regulations at all. The point is that you have to find a balance: which jurisdiction, what are the underlying facts, what are the authorities, and which government bodies are regulating it. In essence, who is able to see you?
The social impact of the blockchain
There is a vast number of areas of social impact which are affected by distributed ledgers. For example, land registration. I’m sure you know about Honduras, or many other emerging countries, where land registration is unverified — basically anyone can make or alter records of land ownership. If you start the registration process on the blockchain, that will significantly cut all this confusion. It’s also applicable to the aftermath of floods or massive natural disasters. Honduras has completely gone towards blockchain. If you have data of the land ownership and property rights, and all the records immediately available on the blockchain, that’s a massive advantage no other technology can provide.
Another good example is what we are doing. One of the projects is gold or blood diamond mining. Traditional mining methods ruin the environment, especially in the Amazon, as it poisons water arteries and the surrounding land. Alternatively, you can mine in an ecological way that does not damage nature and supports the local people. Registered on the blockchain, it’s easy to track the gold’s origin, to know that it’s coming from a clear, free or open source, and there was the fair trade. This is how blockchain makes an actual tangible difference to the environment.
Alternative applications of the blockchain
Californian, European and also Russian production companies have been trying to apply blockchain to several projects for fundraising for their movies. Naturally, it massively decreases the production cost of films. For example, to make a Star Wars film, the director and producer will need to find 250 million dollars, as only 140 million or 150 million is raised. In Hollywood, it is customary for the initial money raised to be allocated to the actors, directors and staff because once the film goes public there is no guaranteed payback.
With blockchain, all the parties can see all the cash raised and the cash flow position even before the film’s release. The actors and the directors can now wait for payment and allow time for the film to generate its own revenue, which means a less wealthy producer does not need to receive anything until the profits roll in. The producer, as an investor here, is being protected — and the same happens to other investors in many spheres.
Besides the fundraising, yet another great thing about this is that it provides the directors with a better understanding of market demand, and what directly appeals to their audiences. It’s kind of both way benefit.
The hype around the ICOs
Currently, lots of businesses try to ignore the fact that the hype era of startups has mostly passed, those startups being regular ones, ICO, TGE, or any other coin offerings without any investor protection or security. They miss out the fact that the market has definitely matured, and a very good story does not get you to Silicon Valley with millions of dollars, as it did a decade ago.
The hype era is really over, from the point of view of the investors. The project owners themselves are also realizing that you can’t get out there, do an ICO and ask for money with no solid idea in the background because many, many projects like that are failing. They have to start by looking outside the standard watergate funds which have completely dried up. They have to look to ultra high net worth individuals, they have to look to financial institutions, asset managers, and banks. They have to answer the questions as they should be answered.
I definitely agree that the hype is over. Today you have to come with a very good structure.
During the interview, Ben was also discussing several other topics which we have already written on in our blog. Please feel free to read those:
If you would be interested in meeting Ben in-person at the Blockchain Leadership Summit, feel free to do it and even book the meeting room with him. He will be happy to discuss investment, advisory or consulting prospect of your idea.