Last Monday, 500 people attended the Long Finance Digital Currency Educational Trade Fair.
They were excited about Initial Token Offerings (ITOs) and Initial Coin Offerings (ICOs), and heard pitches for new cryptocurrency-based tokens and coins for investment.
Cryptocurrency capitalisation has risen from circa $50bn at the beginning of 2017 to over $170bn now. ITOs and ICOs, if done safely, may well constitute a revolution in funding innovative waves of new firms. Figures on ITOs and ICOs during the first six months of 2017 vary, but approximately $4bn has been raised worldwide.
Read more: The London Token Fundraising Manifesto
The increasing hype and speculation surrounding cryptocurrency has drawn attention to its technical robustness.
Every cryptocurrency needs an underlying set of ledger records. Smart ledgers are the confluence of distributed ledger (aka blockchain) technology with embedded computer code, cryptography, and consensus techniques for validating transactions.
Smart ledgers offer the very real potential to organise cooperative forms of commerce using transactions less susceptible to central third party monopolies or cheating. They can increase trust in third party digital relationships and trade transactions, at a time when these are increasingly threatened.
Some 90 per cent of businesses responding to the International Chamber of Commerce 2016 Global Trade Finance Survey pointed to anti-money laundering regulations as the most significant impediment to trade. Now, numerous smart ledger initiatives are addressing identity and GDPR simplification.
It’s not just about payments – smart ledgers can revolutionise paperwork for identity and agreement exchange in shipping, insurance, and banking. One system out of Singapore proposes to use UK technology to increase inter-Commonwealth trade by up to 20 per cent by making trade paperwork easier and cheaper.
Smart ledgers are really just “multi-organisational databases with a super audit trail”. An immutable master ledger is held by everyone rather than some central third party, yet nobody can forge a false history. Everyone works on the same data all the time, reducing trade confusion and disagreements.
Trust underpins all trade and investment. The token bubble is inflating rapidly from irrational investment and honest optimism, both sadly mixed with some scams. It would be regrettable if smart ledger technology fell into disrepute because a token and coin investment bubble using the same technology “popped”.
At the very least, responsible self-regulation is needed. The smart ledger community needs to help clarify the use of tokens and coins in its own best interest. Where tokens and coins have a necessary role, that role needs to meet certain standards.
On the morning of the trade fair, a group of signatories set out a London Token Fundraising Manifesto in hopes of curtailing such a bubble. These included industry representatives from firms active in this flourishing smart ledger industry.
We hope that self-regulation will provide fundraisers with a better starting point for raising capital and enthusiastic investors with a sensible degree of caution, and will speed the appropriate adoption of tokens, coins, and smart ledgers.