Blockchain in the next 5 years from 1 million miles

As an active member of the Blockchain community for over 6 years, I’ve spent a lot of time thinking about what the future holds for blockchain and the world of digital assets. I’ve done my best to describe this future below.

Turning a ‘network effect’ into a tradable asset — the power of the blockchain

Blockchain enables anyone to convert a ‘network effect’ into a tradable asset, which has made way for the democratization of the financial space. What does this mean exactly? Well, right now anyone can issue any asset and turn it into a tradable asset by leveraging his or her own network of contacts. This ‘network effect’ generates value and can turn any asset into a tradable asset. This is revolutionary.

When anyone can access and so easily issue an asset, it is likely we will see millions of new types of assets popping up around the world. We stand, quite possibly, at the foot of a creative revolution, the likes of which we have not seen since the 1990s and the flowering of the Internet. One way to understand this value chain and gauge what kind of businesses will be most valuable is to look at it top-down via the galaxy analogy.

Blockchain Galaxy

Let’s envision the blockchain ecosystem as a galaxy with 3 different entities: stars, moons and black holes. Each one represents 3 different kinds of businesses.

Stars represent the platform that enables the issuers of other types of crypto assets like Ethereum, for example, to grow. There will be additional assets on top of this platform (stars).

Moons are the asset that are on top of each platform or star. These assets are not gaining exposure or growing as a result of the growth of the industry, but instead are being diluted by competition. A good example of this is GUP on top of ETH.

Black Holes represent the facilitators — the largest businesses that exist in the blockchain space today, and re so large mainly due to the value they gain from each asset in the space, regardless of whether it is on ETH or another ledger.

We are headed into a future where there will be significantly more assets, and black holes will serve those assets, and will grow as a result.

The Role of Black Holes aka facilitators

The below are 5 types of black holes which are extracting the highest value. Each can be geographically local or global, ledger-based or for all the ledgers, and in general have many additional characteristics that contribute to their ability to extract value.

The 5 Pillars:

1. Liquidity (OTC and market making):

• Desk that are doing menual deals and also market making on the markets . connect buyer and seller in traded coins and possibly even run a desk or a platform for a coins that are not out yet — iou- the secret is to get to know lots of funds , otc desks and regular investor- maybe through a pool .
• Platform that connect all the market participants including escrows

2. Tradability (exchange):

Include any type of trade platform that currently trade asset which can be derivatives like bitmex or cfd like etoro, stocks or commodities .

Go to market can be to collaborate with all the fintech trading companies to convert them into crypto , also collaborate with exchanges of the world — derivatives , stocks and commodities .

3. Mining enablers (Bitmain, and possibly mining enablers will be a business in the future):

That one is tricky — because bitmain is selling equipment .

The idea is to build a devops operation that will do the best service in all chains to offer staking services for others and will also chase the birth of new good chains to do the same there- go for creating a good relationship in them and always strive to have a professional service provider for it .

• Staking for new and promising chains and constantly look for new chains to stake .
• Looking for new consensus systems like proof of space to earn coins in — proof of space for example

4. Acceleration and guidance (accelerators and incubators) :

Basically convert the accelerators to do it — need technical skill and a community skill .

• Focus on new chains like aelf,zilika,icon,neo,stellar,cardano,eos
• Focus on specific types of assets: large scale apps , financial instruments creation

5. Crypto assets issuance platform- smart contract platform:

With a special edge — special market or feature set for example

Other facilitators businesses which are not extracting a lot of the value they are creating but also very important :

There are also black hole businesses that do not extract value, but actually create value. They serve all the assets in the industry and grow with the industry, however, as they are unable to extract as much value as they create, they are unlikely to be as important as the five types mentioned above. Examples of these are are: media sites, group chat applications like Telegram and Rocketchat, audit services, wallets , community management businesses ,pr firms ,development tools company etc.

Types of Market Participants

Asset issuance platforms

In the coming year we are going to see different types of smart contract platforms arise. Some will have technical advantages, some will have go-to-market advantages (Y Combinator for example), and some will have regulatory advantages.

New types of assets

Many new types of assets will be created and some will serve as a digitization layer on existing assets like stocks, debt, collectibles etc. Some new assets will be new types of financial instruments which will allow people — usually professional investors and traders — to allocate capital and manage exposure in new ways.

For a new asset to be defensible against its legacy counterparts, it must enable a new form of ownership, value transfer, or coordination. An example of this can be an Exchange-Traded Fund (ETF) for coins or insurance and options that minimize risk. The most valuable new asset types will be the ones that function as a utility for the 5 black hole pillars.

Interesting assets worth mentioning:

1. Payment, native blockchain based assets — some will go the pos and dpos route, and it is clear that the market highly values coins based on dpos.
2. Stable coins
3. Access tokens or utility tokens — We will see some of these represented by large and mature companies, and also by the 5 pillars which will be the strongest utility coins.
4. Decentralized stake utility coins — AI-assisted legal smart contracts, social networking, automated tokens liquidity providers, decentralized exchange, secure communication protocol, data exchange market, intellectual property trading market, prediction market, advertising market, hashpower market etc.
5. Real asset representation, security tokens — shares or debt in real companies and collectibles
6. new financial instruments :Derivatives on crypto/real assets and assets backed by commitments etc..

Issuers

There will be many new types of issuers — mainly people or companies that will try to impact the network effect they currently control (a company user base, a country of residents etc.). 10% will be issuers who are running their businesses in order to be facilitators, with the goal of having their coin be the focal point.

Investors

We will see millions and millions of new investors due to one very simple reason: the cryptocurrency space is like a giant pyramid scheme. Every person that has influence on his or her tribe will take the tribe’s money and match it with his or her assets. All assets are cryptocurrencies, whose value adds to the total market size. Moreover, the big money managers are not in yet, but once they enter they’ll get trillions that’s being managed by the finance industry. An interesting category here would be businesses that help new people enter the crypto space much more easily.

Facilitators

Facilitators are the businesses that will serve the needs of issuers and investors. Some will be only on only one platform (new or iota based), and some will be for all ledgers.

Facilitators can help investors with:

• Get access to projects, funds and syndicates
• Get information about and communicate with other investors both online via telegram groups, media sites and aggregation data providers, and offline through conferences
• Liquidity and tradability of the assets they are trading, OTC and exchanges
• Curation of the best and worst projects
• Easier management of assets, wallet and asset management platforms

Facilitators can help projects with:

• Investor communication, conferences, PR firms, community management and youtube channels
• Money: funds, syndicates
• Knowledge about and guidance with accelerators
• Liquidity and tradability: OTC, market making and exchanges
• Audit, getting the code right
• easy access to trade assets and derivatives : exchanges and bitmex
• develop the code