Blockchain Internet 2.0

Man holding calculator while looking at financial data

Authors: Patrick Poulin and Richard Hill, SWO Angel members

The Internet in the early 90s was a “wild west” that has matured into something that is today an integral part of life and business. Blockchain Internet 2.0 will be the same, but today it is still very much in the “wild west” stage of its life cycle.

Blockchain is the distributed ledger software technology on which crypto currencies, such as Bitcoin and Ether, function that will enable the next-generation Internet to emerge. To contrast the two – the current Internet enables the efficient exchange KNOWLEDGE; the blockchain Internet 2.0 will enable the efficient exchange of VALUE. The ability to securely, instantaneously and without intermediaries exchange smart contracts on the blockchain that hold value and decision logic, for example, will be an incredibly powerful new way of doing business.

The new way of raising money through the Initial Coin Offering (ICO) for blockchain startups has been controversial as legal and ethical matters are debated and established, but is stabilizing. Regulators are working hard to map an ICO’s underlying crypto currency against current securities laws. This is a bit like trying to apply the rules of football to rugby; they are kind of similar but when you look closely, they are very different. There is tremendous ongoing global effort on regulation and likely over the next six to 12 months, the good-guy best practices will start to evolve into clear sector specific laws.

Investing in blockchain start-ups via a direct ICO is probably not the best place for the average even semi-conservative Angel investor. There is definitely upside opportunity for those who have a particular interest or insight to a particular start-up idea or founder group. For most, it is probably too early to consider this space for DIRECT investment as part of a well-rounded portfolio.

However, make no mistake. Most large firms stand to be disrupted in some way by blockchain technology and they are accordingly allocating major resources to get ahead of the curve. All the major players in pretty much any space you can imagine (banks, insurance, investment firms, accounting and ERP software firms, gaming, GPU hardware, remittance pipelines, etc.) all either already have, or are creating a blockchain technology strategy. Therefore, as a mainstream investor, there are many good INDIRECT ways to catch some of the wave until the direct investing space has better defined itself in the next six to 12 months.

We as Angel investors should keep our finger on this pulse. But in the near term, direct investing in an ICO will likely be only for a select few with a very specific interest, gut feel, or risk/reward value system. For the rest of us still intrigued by the space, a good short term investment strategy would be to keep a foot on the brake, seek to learn more about blockchain and ICOs and watch closely for the next few months.

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