

DLD: Blockchain and FinTech Startups Can Change How We Deal with Money


May 19, 2016


alex tapscott dld16

Alex Tapscott began with a primer on blockchain technology and how it was different than most Internet technologies. In most cases, the Internet is about sending copies of information, but that's not true for currency. "It's ok to have a printing press for documents, but not for money," he said.


Bitcoin, and the blockchain technology behind it, involves a set of rules to move value online, so currencies can be safely exchanged peer-to-peer without a central party, because trust is "hard-coded" into the platform through a distributed ledger. In contrast, he said, the existing financial system relies on a "Rube Goldberg platform." Alex Tapscott said that makes blockchain "the trust protocol," and that it could be as important as double-entry bookkeeping or the distributed stock corporation.

Don Tappscott

Don Tapscott noted that in recent years we've seen the middle class decline for the first time in a century, as the digital age ended up producing big value for only a few. He said the "Internet of value" with peer-to-peer transactions gives people another shot.

He said blockchain technology can help in a variety of ways. It can include billions of additional people in the global economy; it can protect rights, such as property deeds, through immutable records; it can reduce the cost of sending money across borders; it can enable citizens to own and monetize their own data; it can foster new businesses; and it could also serve a "true sharing economy," so you might not need central services such as Uber. Plus, it could improve democracy.

jeremy allaire dld16

In a panel that followed, Jeremy Allaire, CEO of Circle talked about how that three-year-old company was using blockchain as a protocol for moving value around the globe. But all this is behind the scenes; he said a customer is just using whatever currency they have. The goal is to make money 'open' the same way that email is.

victor boyajin dld16

Victor Boyajian of Dentons said the concept crosses multiple lines of business and will be used in all sorts of areas, particularly because it offers a security benefit in applications such as financial services and health care. Allaire called it a "global trust machine" that is irreversible and immutable, and thus could replace people who aren't completely trustworthy, in applications like recording votes.

The concept is gaining more traction in Europe, Boyajian said, because in the U.S., each state has its own financial regulations, while in the U.K, there is just one financial regulator.

Allaire agreed, noting that Circle needed to get licenses from 46 states, and he pushed for the concept of some overarching legislation like the Telecommunications Act of 1996. But in the long run, he said, the best solutions will need to be global.

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A similar thought came up in a panel of financial startups and investors with Christian Angermayer of Apeiron Investments, Shachar Bialick of Curve, and Jack Harris of Wirecard, moderated by Techonomy's David Kirkpatrick.

All of them represented the "fintech" industry, with Bialick saying he saw a lot of room for new financial technology companies coming into areas that were formerly dominated by banks. He said that banks have taken so much value out of the financial sector, that there is plenty of room for new startups with real business models.

Asked if fintech is the next bubble, Harris said he hates the term, and while there is a lot of hype, he said he sees a huge opportunity and lots of companies creating their own niches.

Christian said the term "bubble" was too one-sided, as there is both tremendous opportunity but lots of hype, and that robo-advisors are not a business model, and that some financial startups will be acquired by banks. He didn't think that startups would so much destroy established banks as result in smart banks driving out dumb banks.

He noted that once you run a bank, after a while, you will have older systems, because you can't stop running to upgrade the infrastructure. Banks have client and regulatory understanding, while most startups try to avoid regulation. Any successful business in this space will be regulated, he said.

In general, the panelists agreed that it was good that Europe had a single regulatory environment instead of the fragmented environment in the U.S., but they pushed back on Kirkpatrick's thought that it was mostly deregulated.

Bialick noted the importance of banks, saying without banks, people don't have access to money, but that regulators understood how powerful the banks are, and have been proactive in decreasing barriers. He claims Curve is creating a platform to connect you to everything dealing with money, but doesn't require users to change behavior because it is layered on top of traditional services.

The conference both began and ended with thoughts about whether the current Internet economy was working for general people.

douglas rushkoff dld16

Author Douglas Rushkoff, whose most recent book is Throwing Rocks at the Google Bus, started the conference by railing against the current "economic operating system," saying we are trying to run a 21st century economy on 13th century ideas. He said the current digital economy is based on amplifying the "obsolete industrial era economy" by mostly rewarding large, growth-based companies and capital, rather than individuals and labor. He said this is unsustainable, but said new technologies offer "an opportunity for the revival of peer-to-peer economics."

Personally, I don't think things are nearly as bad as Rushkoff says, nor that things will change quite as radically as some of the blockchain and fintech supporters believe. I do believe blockchain technology will be an important technology in changing how many transactions are recorded and verified, and thus could lead to some big changes, but don't see this as a panacea that will transform the economy. We'll see.

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Michael J. Miller




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