UPDATED 18:56 EDT / JANUARY 14 2019

BLOCKCHAIN

Fintech gets pressure-tested, but ‘crypto winter’ may not be as cold as it feels

For many participants in the world of financial technology, 2018 was a year to forget.

The market for initial coin offerings ground to a halt, buffeted by regulatory issues and a steep collapse in value. Miners have come under fire for the massive amounts of electricity used to mint new coins. Questions plagued the security of cryptocurrencies and their vulnerability to attackers.

As Matthew Roszak, co-founder and chairman of Bloq, told attendees at the Digital Money Forum during the CES consumer electronics show in Las Vegas last week, the roller-coaster year took its toll.

“What a year it’s been in 2018,” Roszak said. “When the value ranks down, it pressure-tests who’s in the room. Do you have eggnog with a shot of bourbon?”

Move toward asset tokens

CES provided an interesting benchmark at the start of the new year for the state of fintech and the future of both digital currencies and the blockchain. And the news was not all bad.

Bloq Inc.'s Matthew Roszak (Photo: Mark Albertson/SiliconANGLE)

Bloq Inc.’s Matthew Roszak (Photo: Mark Albertson/SiliconANGLE)

In the cryptocurrency market, a growing move toward asset tokenization could infuse some stability into the fintech market. Tokenization of real estate and tangible assets such as precious metals or art offer the potential for investors to become more comfortable about diving into the digital money pool.

A blockchain platform built by JP Morgan Chase and Co. is tokenizing gold and DX.Exchange, a crypto firm based in Estonia, has launched a trading platform which enables investors to buy digital shares of Nasdaq-listed companies through security tokens.

“What’s starting to come into focus is this notion of security token offers,” Roszak said. “Tokenization of assets is going to be the training wheels for Wall Street and Main Street.”

AWS and State Farm test blockchain

To gauge the health of the fintech industry, Roszak believes that it’s instructive to look at both the Fortune 50 and the leading crypto firms. Both have shown a healthy level of activity, according to Roszak.

On the Fortune 50 side, Amazon Web Services Inc. recently launched a new service for users to create a cloud-based blockchain using Ethereum or Hyperledger Fabric. State Farm announced in December that it would begin testing a blockchain solution for auto claims. And IBM Corp., Microsoft Corp. and Google LLC have together snapped up a total of 121 blockchain-related patents over the past year.

There has also been no shortage of activity among crypto companies. Binance, which has emerged as the leading cryptocurrency exchange, reported $20 billion in trading volume in December, an increase of $2 billion over the previous month. Block.one raised a crypto record $4 billion for its EOS offering during the turmoil of 2018. In November, the cryptocurrency trading platform Coinbase raised $300 million on a valuation of $8 billion.

“Crypto is alive and well,” Roszak said. “These are billions of dollars of investment. The only thing I wish I could do is invest more.”

Whether the cryptocurrency space sorts itself out and regains momentum in 2019 is still an open question. Concerns about coin validity haven’t helped, as highlighted by a Satis Group LLC study released last spring that showed more than 80 percent of ICOs were of dubious quality. At one CES panel discussion last week, a number of speakers shrugged off the volatile year for cryptocurrencies as a needed and healthy correction.

“It essentially is a cleaning or purging of all the people who don’t belong here,” said Brock Pierce, chairman of the Bitcoin Foundation. “What’s going to turn it around? Delivering functional products at scale.”

Blockchain phone calls at CES

To Pierce’s point, a number of companies at CES last week showcased new blockchain-based products and services. Some of these included actual blockchain-driven devices.

Brock Pierce (left( and Ryan Singer (Photo: Mark Albertson/SiliconANGLE)

Bitcoin Foundation’s Brock Pierce (left) and Chia Network’s Ryan Singer (Photo: Mark Albertson/SiliconANGLE)

Pundi X, a startup based in Singapore and fueled by money from its own ICO, demonstrated a blockchain phone. The XPhone comes equipped with normal Android connectivity, but users can also activate a blockchain mode which relies on Pundi X’s own distributed ledger to make encrypted calls and texts.

During a booth demonstration, a prototype held by Soohan Han, Pundi X’s director of marketing, suddenly rang, triggered by a colleague nearby. “Look, the world’s first blockchain call,” Han exclaimed.

Pundi X also showcased the XPOS, a blockchain-based point-of-sale device that provides both merchants and consumers with the ability to transact in multiple cryptocurrencies. The XPOS will be the exclusive platform for payment processing as part of Dubai’s plan to introduce its government-backed digital currency, according to the company.

A Thai startup called Last of Ours is raising funds through blockchain to protect endangered species. Users purchase “crypto collectible eggs” on the blockchain that morph into a digital representation of a real animal in the wild. The company earned its way to CES by placing as a semifinalist in entrepreneur Richard Branson’s Extreme Tech Challenge.

The use of blockchain for authentication is also generating a new ecosystem of companies. One firm – Seal – uses the blockchain to verify product authenticity and combat counterfeiting. Seal chips are incorporated into any manufactured product and then matched with a digital counterpart on the blockchain.

BCDiploma follows a similar verification approach. The blockchain-powered certification platform lets users certify and store their diplomas for verification via a unique URL link. Verified institutions store the diploma data, which can then be accessed by third parties.

Jan. 3 marked the 10-year anniversary of the day that bitcoin’s still-unidentified inventor – going by the moniker Satoshi Nakamoto – mined the genesis block which ignited the whole crypto revolution. It seems hard to believe that bitcoin is now older than other tech-driven institutions that have become an integral part of our daily lives, such as Uber, Lyft and Instagram.

Like many of those institutions, there’s still much more to come in the complicated fintech industry.

“This is 10 years into the odyssey right now and there’s a lot of work to do,” Roszak said. “Keep your heads down and build.”

Featured photo: Wild0ne/Pixabay

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