Caitlin’s Top 10 Blockchain Predictions for the Next 12 Months

 

Below are the welcoming remarks I gave as chairman of IMN’s blockchain conference, which was held on September 28, 2016 in New York City. IMN has kindly given me permission to reprint them here. Enjoy!

 

Good morning and welcome to IMN’s Blockchain Conference!  Julius Hill, CEO of IMN, asked me to chair this conference to bring perspectives from the three different hats I’ve worn in this young ecosystem:  (1) a bank hat (serving on Morgan Stanley’s distributed ledger technology working group beginning in 2014), (2) an independent hat (working over the spring and summer to advance the ecosystem, especially with regulators) and (3) a start-up hat (joining Symbiont as chairman and president a month ago).

Specifically, Julius asked me to speak about where the ecosystem stands and where it’s going.  

 

Where do we stand?  

One word:  deluge.

The deluge is coming from potential customers–if you think about it, it’s quite unusual that customers are beating down the doors of vendors, not the reverse, but that’s what the ecosystem is experiencing. The deluge is also coming from regulators, who want to see demos of the technology in action. And the deluge is also coming from personal networks.  Just for fun, I counted the number of people who sent me direct-messages on social media alone during my first week at Symbiont, not counting emails or calls:  208 people. And it was the week before Labor Day.  And it hasn’t slowed down that much. Others in the ecosystem are experiencing the same, so the deluge is not unique to Symbiont or to me.

Something big is happening.

Duncan Niederhauer shared what I think is the best insight about it. He’s the former CEO of the NYSE, and before that he ran equities at Goldman Sachs. He was early to join the boards of two blockchain start-ups. His insight? Most of the innovation on Wall Street came from the front office during the past couple of decades. Innovation will come from the back office in the coming decades, for myriad reasons.  I think he’s right.

Credit Suisse’s announcement yesterday is a perfect example of why he’s right. Credit Suisse executed a syndicated loans pilot through the R3 consortium, in which 14 major financial institutions participated. This is the most complex proof-of-concept undertaken to date in blockchains. It’s also the first project in which multiple buy-side firms participated. And Credit Suisse announced that the project successfully met milestones, not merely that it kicked off. Yes, big things are really happening.

And that brings us to today’s conference. 300 of you are here today, representing all major banks, exchanges, credit card companies, clearinghouses and buy-side firms. All major financial sector blockchain companies are here, as are 18 corporate sponsors. And an issuer is here too–Overstock.com, whose CEO will give the keynote this afternoon.  

 

And where do we go from here?  

Frankly, it’s easier to talk about the end state for blockchain implementation than it is to see the the near-term steps to get there. So I’ll throw caution to the wind and predict 10 things that will happen in the next 12 months.  All predictions are my own and are not endorsed by IMN or my company, Symbiont. And they’re worth the piece of paper they’re written on, which is not much! These are “educated guesses” based on the breadth of what I’ve seen in the ecosystem, not based on direct knowledge.  

Also, none of these are investment recommendations, so please do not rely on them in your decision making. Caveat emptor!

Here are my predictions for the next 12 months in blockchains:

  1. A well-known private company will kick off preparations for its IPO on a blockchain, thus forcing a fundamental change to the plumbing of securities offerings on Wall Street. I’d bet most people who work in the securities industry don’t even understand that when entrepreneurs take their company public in an IPO, they’re required to sign over title to every single share of the company to the DTC — even shares the entrepreneurs aren’t selling in the IPO. If I’m an entrepreneur, why would I be happy about that? If there’s a viable alternative that allows entrepreneurs to keep title to their own shares, I see the IPO market pivoting to it quickly. Yes, I think that will start to happen within 12 months and a big, important issuer will drive this change. 
  2. Banks will widely adopt blockchain in the syndicated loan market, finally eradicating the fax machine as a prevalent means of communication among parties in this market. 
  3. Insurers and reinsurers will complete a reinsurance syndication on a blockchain. 
  4. A credit card company will deploy a blockchain as its network in mobile payments. 
  5. Bitcoin will generally continue to trend “up and to the right” — in hashpower, transaction volume and price. (But I explicitly do not recommend buying or selling bitcoin!) 
  6. “Failures to deliver” will start happening, as some blockchain start-ups and projects will fail to keep up with their hype. I think a shake-out has already begun, through which a very small number of production-quality blockchain platforms will break out as clear leaders based on what they’ve actually done, not what they might someday possibly maybe do. Folks, it’s hard to deliver blockchain software that meets institutional-level requirements for performance, security and functionality. And let’s face it — players in this ecosystem issue press releases at the drop of a hat, announcing that they’ve started a project or contributed X thousand lines of code, but it seems very few press releases disclose something actually finished, or a milestone met, or software that demonstrably works well. Within the next year, an enterprising reporter will dig into this and write a critical, “big reveal” story. 
  7. More central banks in small countries will follow the lead of the central bank of Barbados, which green-lighted a blockchain start-up called Bitt to create a digital Barbados dollar that uses Bitcoin’s blockchain as an alternative method for settling foreign exchange. Small central banks are searching for alternatives because local banks are losing access to US financial system, owing to the retreat of American correspondent banks from small countries — a trend called “de-risking.” This is choking off trade, which is the lifeblood of most small economies.  Folks, this an unintended consequence of laws requiring U.S. banks to comply with strict anti-money laundering and know-your-customer regulations. These laws are hurting the developing world — and, ironically, boosting Bitcoin as a valuable alternative payment system. Kudos to Barbados for its creative solution! 
  8. Overstock.com will complete the first public securities offering on a blockchain, and skeptics will be surprised at how well the blockchain-settled securities trade relative to Overstock’s existing common stock. 
  9. The Delaware Blockchain Initiative will improve the delivery of all kinds of government services by the State, which will fundamentally boost its relationship with its constituents. Other states will follow Delaware’s lead. 
  10. The Bank of England will issue sterling on a blockchain, causing the pound to become the preferred intermediary currency for cross-border payments and creating a new competitive advantage for London’s financial markets post-Brexit.

OK, I may be too optimistic on a few of these (especially the timing of #10). Caveat emptor! These predictions are worth what you paid for them.  But I believe they’re all directionally correct. It will be a most exciting year ahead!