According to Reinventure venture capitalist Simon Cant, the blockchain ‘hype cycle’ is approximately one year away from the dot-com bubble pop, with the prominent investor questioning the technology’s use case outside of its own ecosystem.
Cant was speaking at the Salesforce World Tour in Sydney on Tuesday when he made the bold prediction.
The partner at the Westpac-backed VC firm was joined on a panel by Hanna Glass, a solicitor at King & Wood Mallesons, and Mike Kayamori, co-founder of cryptocurrency exchange QUOINE and cryptocurrency QASH, to discuss an ever-popular topic: what is the blockchain, and how can it be used in business?
Asked if he thought of blockchain and cryptocurrency “in the same breath”, Cant said he did, but questioned where the widespread use cases for public blockchain were. To his mind, the distributed ledger technology is still in “beta”.
“Where do I think we’re at in the cycle? I think it’s fair to say, in the terms of the public blockchain, we’re still in the space where there aren’t really any significant businesses running public blockchain systems outside of the internal ecosystem,” Cant said, while also praising blockchain systems such as Ethereum for the service it provides to the blockchain ecosystem.
“In the broader hype cycle, compared to the dot-com cycle, I think we’re a year or so off the dot-com pop, or maybe we’ve already hit it?”
“We’ve got a multi-hundred billion dollar beta project that’s still not actually doing anything useful in the world apart from being a global casino for people who want to trade.”
Cant stressed that overall, he and Reinventure are largely bullish on blockchain technology, with the VC firm being one of the earlier investors in online cryptocurrency purchasing platform Coinbase in 2015.
Due to crypto’s recent popularity, Coinbase is valued at over $US1.6 billion and reported over $US1 billion in revenue last year, with Cant saying the investment has been an “exciting” one.
He also outlined some of the biggest challenges for blockchain technology to overcome before it’s integrated into the mainstream, with scalability and privacy topping his list.
“We still don’t have a widespread blockchain that can process transactions at any meaningful rate, and while there’s a bunch of solutions like sharding and the lightning network, they’re all just coming out of the workshop now,” he says.
“Privacy and identity also need to be solved for scale adoption.”
Web 3.0 getting Silicon Valley VCs excited
Glass told the audience that any regulation on the blockchain space must be “tech neutral” so as to not cut across legitimate businesses, and discussed the fine line regulators have to walk between over and under-regulating the industry.
Glass also shared some advice to companies considering if an ICO is right for their business: make sure you can explain the use case for an ICO without using the terms “token” or “blockchain”.
“You have to be able to explain what you’re doing and how you’re giving customers better access to your service or product. Essentially it has to have substance,” she said.
“We’re seeing everything from no explanatory documents at all to ICOs structured like actual share offerings with advice from nine different law firms. It’s not a matter of ICOs themselves, it’s what the companies are providing, and if it has real value.”
Cant also identified what he and “a lot of Silicon Valley VCs” are most excited about in the blockchain space, picking out the emerging Web 3.0 space as having the potential to be one of the blockchain’s best use cases.
“The most exciting vision is about how this transforms commerce and becomes the basis of the Web 3.0, and how blockchain can be used to topple dominant consumer platforms and break their network effects,” he said.
“When you can incentivise early users to your platform with tokens that then may increase in value, that’s a beautiful mechanism for toppling other dominant consumer platforms. It’s an incentive for users to grow and evangelise the network.”
StartupSmart attended Salesforce World Tour as a guest of Salesforce.