Harry Hamburg – Exponential Investor (United Kingdom) –
Last week, Blockchain Week came to London.
And I was there, along with Sam Volkering, to find out all the biggest developments in crypto.
If you haven’t seen Sam’s report on the great blockchain collision yet, you need to read it now. Everything we saw at the event supports what he is saying in that report.
If you want to find out how you could make life-changing money from these huge developments in blockchain
So, what did we learn?
Well, my biggest takeaway from the week was that we are still very early.
There were a lot of panel discussions about what cryptos could achieve in the future. It was clear many of the panellists didn’t even know that much about the tech.
They saw potential. But they didn’t really understand it deeply enough to see the impact it is going to have.
I took this is a very good sign. It means we are still very early in this revolution and the biggest developments are yet to come. But they are coming fast.
As Dominik Schiener – co-founder of the IOTA Foundation – said, 2017 was about proof of concept, 2018 is when those concepts become real.
“Blockchain could boost global GDP by 5% and global trade by 15%”
By far the best talk came from Jason Kelley, IBM’s general manager (GM) of Blockchain Services.
He talked about how blockchain can be used to solve real-world supply chain problems.
He said the traditional supply (or value) chain is owned by intermediaries.
This is the process the supply chain takes.
Production > distribution > processing > regulations and compliance > manufacturing > point of sale.
At every step of the way there is an intermediary taking a cut. IBM’s vision is that the blockchain will eliminate these intermediaries.
He showed us the partnerships it is forming with Walmart and Maersk.
Maersk is the world’s largest shipping company. If any industry can benefit from blockchain technology, it is Maersk. And it knows it.
In fact, as Kelley showed, it projects that the savings and efficiency gains the blockchain will provide will lead to a 5% increase in world GDP and a 15% in world trade volume.
Here’s the slide from Kelley’s presentation.
This is huge.
Kelley’s take on blockchain was that it’s not about the tech, it’s about the outcome. Blockchain technology is the best way to produce that outcome and so IBM is jumping on it.
“You can’t go around with a ‘bucket of blockchain’ and go painting it on every problem,” he said.
But for the problems it’s suited for, it can make a world of difference.
Look out for big things from IBM in this space. Its GM is on point.
Solving the problem of identity
Another use case that was talked about a lot is identity. In fact, it’s talked about a lot in any in-depth discussion on crypto.
Currently our identity online is controlled by the big corporations. They have access to our data, and we entrust them to prove who we are to other companies.
For instance, you can sign in to a lot of services using your Google or Facebook account.
These third parties (Google, Facebook, etc) solve the problem of trust. They are trusted. So when they say we are who we say we are, other parties trust them and in turn trust us.
The issue with this is twofold:
- They have all our data and sell it on. This is how their business models work. This is why you get targeted adverts and popups.
- They can revoke our identity at any time. If they don’t like what we’re saying of doing they can stop us saying or doing it very easily.
These are big problems that affect millions of people worldwide. One of the biggest potential uses of crypto is to solve this problem.
Through blockchain technology we will be able to take control of our own identity. There will be no need for third parties to say who we say we are because it will be provable on the blockchain.
We will also control who we give our data to and when. We could even emulate Facebook’s business model and sell our own data to make money.
There are a number of cryptos aiming to be the main player in identity already.
There was one called Blockpass promoting its initial coin offering (ICO) there. It seemed great, but I didn’t see how it was better, or even very different, to established identity cryptos like Civic.
Identity is definitely a key use case for cryptos. But it’s anyone’s guess which ones will come out on top.
Once a winner does emerge, it will change how we live in a big way. It’s only a matter of time until even things like passports utilise blockchain tech.
If you want to read more about blockchain and identity, there’s a fairly good New York Times article on it here.
The Royal Mint has launched a crypto backed by gold
Another good use case for crypto is ownership of assets.
This is why the Royal Mint has launched its own crypto that lets people buy gold in a very easy and cheap way.
The gold is stored in real vaults, and the fees to buy and store it are low.
The Royal Mint is very pro-blockchain. Tom Coghill, commercial director of Royal Mint Gold, stated that the Royal Mint’s decision to create a crypto for gold was “a step to getting wider adoption of blockchain.” He was very bullish on the future uses of cryptos.
Like many others, he described blockchain as moving us from the internet of information towards the internet of value.
If you’re interested in how Royal Mint Gold works, or if you want to buy some, you can find out more about it here.
Regulation not coming
Talk about regulation often causes the crypto market to crash. Or at least dip.
The general feeling in the crypto communities is that governments want to regulate as fast and as heavy-handedly as possible.
I thought that was the case too. It certainly seems to be in China. But that’s simply not the case, according to the “Blockchain & government” panel.
In fact, Antanas Guoga, MEP of the European Parliament, said they would not be regulating any time soon.
The panel all agreed that it was better not to rush into regulation. They said they had no desire to regulate it at this time or in the near future, which goes against a lot of what you hear in the press and online.
IOTA will power smart cities
IOTA is the biggest and most well-known DAG crypto.
If you’re not familiar with DAG cryptos, you can read my article explaining what they are here.
As I’ve already written about, it (potentially) solves a lot of the problems facing blockchain cryptos at the moment.
A keynote at the event was given by Dominik Schiener, co-founder of the IOTA Foundation.
He talked a bit about what makes IOTA special, which is common knowledge, and then went into what he sees happening in the near future. This was the interesting bit.
As has been revealed in the last two weeks, IOTA has been working closely with Volkswagen and Bosch.
In fact, one of its main advisers is the chief digital officer of Volkswagen, Johann Jungwirth.
And one of its main partnerships is with Bosch.
It has just launched a big project together to power smart cities. And Schiener revealed that by the end of the month they will be releasing a smart city simulation.
This smart city will be entirely powered by IOTA.
For example, in the simulation driverless electric cars charge themselves at smart charging points using sensors made by Bosch, using IOTA tokens, all running on the IOTA Tangle.
But that’s just one example of how IOTA will be used in machine-to-machine transactions in the future. It has far more use cases than just that.
Also, because of how IOTA works, the more people and devices that use it, the faster the network will go. That’s why IOTA doesn’t need other cryptos built on top of it. The more things it is used for, the better it will get.
This is completely different to traditional blockchain cryptos that need to run certain things “off chain” to stop congestion.
If IOTA can deliver on its promises, it could well become the one crypto to rule them all. But that is a big if.
There’s a meme in crypto circles that no matter how much good news IOTA brings out, the price only ever goes down. Let’s wait and see.
In fact, Schiener said that right now ALL cryptos – including Ethereum and IOTA – are just a proof of concept.
He said only a few pure currency cryptos and a few platform cryptos will survive 2018.
Capital gains tax on cryptos is not 18% or 28%!
Okay, this one isn’t about the conference. But it needs to be said.
Over the last couple of weeks most of the major newspapers have posted about cryptos and possible tax implications. They all get it wrong.
A lot of them state that you may be able to write your crypto gains off as gambling wins and so not pay tax on them.
This, unfortunately is not true. Crypto gains are treated like stock gains and subject to capital gains tax (CGT).
But the biggest mistake every single newspaper that covered it – The Telegraph, the Express, The Daily Mail – made was getting the CGT amounts wrong.
They all, every one of them, quoted the CGT rates for property.
CGT on cryptos is the same as stocks, 10% or 20% depending on your tax bracket. It is not 18% or 28%. That is property.
This is a huge oversight made be the UK press. It’s incredible.
How do I know I’m right about this? I asked HMRC directly on Twitter.
(I would have emailed HMRC, but you can’t email. And post takes too long and phoning leaves no record. So Twitter it had to be.)
You can see our conversation below.
Okay, that’s all for today.
Until next time,
Editor, Exponential Investor
PS I forgot to mention this last week, so I’m squeezing it into today’s edition. Remember the crypto crash from a couple of weeks ago? There were a number of good reasons for it to happen, but one of the best was the bitcoin futures contracts expiring.
Well at time of writing (Friday 26 Jan) cryptos are once again down. This is the day the first CME bitcoin futures contract expires. It expires at 4pm London time. So it will be interesting to see if there’s a sudden bounce after 4pm.
PPS Feel free to follow me on Twitter: @HarryHamburg. I haven’t used it very regularly recently, but that’s about to change.