For The First Time In History Everyone Can Have The Same Access To Invest In Promising Early-Stage Companies
“ICO is revolutionary and has many exciting aspects. What is most exciting to me is that it levels the playground for all investors, whether you are a whale or a small guy. For the first time ever in the history of investing, everyone can have the access to invest in promising early-stage companies and get the same deal.”
I had the pleasure to sit with Chinese multimedia artist Yi Zhou, founder of YiZhouStudio, board advisor at ArtWallet.
Yi Zhou was raised in Rome, Italy and studied in Paris and London, earning degrees in political science and economics. She is a polyglot artist whose video works have been shown at Shanghai Biennale, Venice Biennale, Sundance Film Festival and Cannes Film Festival. In 2010, she relocated to China and founded her creative strategy digital production company YiZhouStudio www.yizhoustudio.com in Shanghai and Hong Kong. She founded YiZhouStudio LA as the US branch in 2018. YiZhou is currently developing her first feature film as a writer/director and plans to invest in Hollywood and Chinese co-productions via her new company “Into the Sun Investment.” An active participant in the blockchain scene, she was recently appointed as a Board Advisor for ArtWallet.
The hype around this seemingly new, secure electronic ledger is real. In essence, blockchain represents a new paradigm for the way information is shared and tech vendors and companies are rushing to figure out how they can use the distributed ledger technology to save time and administration costs.
The 5 things that excite me:
Blockchains are highly transparent since anyone with access to a blockchain can view the entire chain.
Similar to Google docs, all participants within a network see all changes to the ledger. The ledger is constantly updated and each participant has their own copy of it.
One of the prime reasons blockchain is intriguing to businesses is that this technology is almost always ‘open source.’ That means other users or developers have the opportunity to modify it as they see fit.
But what’s most important about it being open source is that it makes altering logged data within a blockchain incredibly difficult. After all, if there are countless eyes on the network, someone is probably going to see that logged data has been altered. This makes blockchain a particularly secure technology.
2. Reduced transaction costs
As noted, blockchain allows peer-to-peer and business-to-business transactions to be completed without the need for a third party, which is often a bank. Since there’s no middleman involvement tied to blockchain transactions, it means they can actually reduce costs to the user or businesses over time.
When it comes to traditional banks, it’s not uncommon for transactions to take days to completely settle. This is due to protocols in bank transferring software, as well as the fact that financial institutions are only open during normal business hours, five days a week.
You also have financial institutions located in various time zones around the world, which can delay processing times. Comparatively, blockchain technology is working 24 hours a day, seven days a week, meaning blockchain-based transactions process considerably more quickly.
It is estimated that banks could save $8–12 billion annually if they used blockchain technology.
3. Decentralized Data Storage
Another central reason blockchain is so exciting is its lack of a central data hub.
Instead of running a massive data center and verifying transactions through that hub, blockchain actually allows individual transactions to have their own proof of validity and the authorization to enforce those constraints.
With information on a particular blockchain piecemealed throughout the world on individual servers, it ensures that if this information fell into unwanted hands (e.g., a cybercriminal), only a small amount of data, and not the entire network, would be compromised.
4. DEMOCRATIC fundraising
The ICOs act as financial mechanisms that allow raising capital in a similar fashion to crowdfunding. An ICO is simply crowdfunding for blockchain-based startups. This system currently operates outside of the traditional financial system, so it is essential to be aware of that. The ICO builds a road that allows these businesses to gather money while bypassing rigorous, regulated funding channels and restrictions set upon the formal financial sector.
ICO is revolutionary and has many exciting aspects. What is most exciting to me is that it levels the playground for all investors, whether you are a whale or a small guy. For the first time ever in the history of investing, everyone can have the access to invest in promising early-stage companies and get the same deal.
5. User-controlled networks
Lastly, cryptocurrency investors tend to be really encouraged by the control aspect of the blockchain. We all know that what Internet giants like Google and Facebook do with the content and data that users generate — just Google Facebook Cambridge — and that is not fair to us.
Rather than having a third party run the show, users and developers are the ones who get to call the shots. For instance, an inability to reach an 80% consensus on an upgrade tied to bitcoin’s blockchain is what necessitated a fork into two separate currencies (bitcoin and bitcoin cash) more than four months ago. Having a say goes a long way with investors and developers.
The 5 things to be worried about:
“Disruptive Technology is often overvalued in the short term yet undervalued in the long-term.”
1. Overvaluation & Over-optimism.
Because we don’t know how quickly blockchain will be adopted, or even which blockchain technology businesses are likely to prefer, attempting to put a value on what blockchain is worth is meaningless.
Whether we’re talking about Internet-based, business-to-business commerce, genome decoding, electric vehicles, 3D printing, and so on, none of these game-changers were immediate winners, despite investors sending the valuations of associated companies through the roof. It takes time to lay the groundwork for new technologies like blockchain, and it could be years before we see businesses adopt this technology as a major component of their payment networks.
Many people are so excited about the potential applications that they have ignored completely the architecture of the system on which they would run. Just as many Internet companies assume that the Internet works on its own, they assume that all blockchains are the same and work, but blockchain technology is not as mature as the Internet where you can almost get away with that.
2. Fraudulent ICOs and token sales
As with any boom, there are bad actors to be found in the land of ICOs. Because there is so little paperwork involved in ICOs it attracts many scammers who can simply create a bogus white paper and make off with a lot of money. In the world of ICOs, fraud is never hard to find. The industry of blockchain is unregulated and replete with scam stories, so the participants should be very cautious.
3. Lack of mainstream understanding & Adoption
In terms of its development, blockchain is where the Internet was 20 years ago. Only 0.5% of the world’s population is using blockchain today, but 50% or 3.77 billion people use the internet.
In those early days, and at some layers maybe even still today, there were only a very small number of people who had the background, brain type and personality to understand some of the core elements that made the Internet work.
Blockchain services and tools demand more technical know-how from the users than many contemporary digital platforms, and that could prove problematic for adoption, especially if security scares and lost funds become associated with blockchain’s public image.
4. Scalability & Energy Consumption
Bitcoin can handle approximately 60 transactions per second, which pales in comparison to Visa’s peak rate of 47,000 per second. In order for it to expand into the same ubiquitous role as fiat currency, cryptocurrency must be able to process much higher numbers of transactions.
If you look into payment space, the global Visa/Mastercard networks can handle about 40,000 ~ 50,000 transactions per second. The ripple network can process 1,500 transactions per second. Blockchain can process about 1,000 transactions every eight minutes, or seven transactions per second. That’s it. You need to get massive scalability before this technology can be used in payment solutions, and there has to be a solution that solves for scale and high volume.
Bitcoin — last year it was claimed that the computing power required to keep the network running consumes as much energy as was used by 159 of the world’s nations.
Even at the current volumes of about 1,000 transactions every eight minutes, it consumes more energy than it takes to run the entire Visa network. I read in The New York Times that if the blockchain could be scaled to reach the transaction number of Visa, the energy requirement will be equivalent of 5,000 nuclear reactors, or the entire energy consumption in the world, and we are only talking about one payment network i.e. Visa, not even Mastercard or WeChat Pay.
5. Regulation Environment
Blockchain has the ability to cross jurisdictional boundaries as the nodes on a blockchain can be located anywhere in the world. This can pose a number of complex jurisdictional issues which require careful consideration in relation to the relevant contractual relationships.
The principles of contract and title differ across jurisdictions and therefore identifying the appropriate governing law is essential. In a conventional banking transaction, for example, if the bank is at fault then irrespective of the transacting mechanism or location, the bank can be sued and the applicable jurisdiction will most likely be contractually governed. However, in a decentralized environment, it may be difficult to identify the appropriate set of rules to apply.