Back in 1965, an MIT scientist involved with the genesis of the internet decided to break data down into blocks to send information from one computer to another. The idea of compartmentalizing data into several pieces and sending them through different routes, called packet switching, was a means of making transmissions more secure. In the early days of the internet, it truly was revolutionary thinking as the initial framework for the web that we depend upon today.
In 1992, the U.S. Congress decided the world wide web could be used for commercial purposes, setting off a marathon-like start of companies developing e-commerce and social sites seeking to capitalize. Most know how the story goes, with the web creating countless millionaires and even billionaires and the tech bubble eventually popping in mid-2000, dragging the tech-heavy Nasdaq Composite from a then-record high of 5,132 to a low of 1,108 about two years later.
In the wake of the bubble, many companies were decimated, but some with solid fundamental strengths and vision, like Google (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN), had war chests of cash to move forward. The bubble may have burst, but tech didn’t die. Instead, as often happens, today’s tech was built on the graveyards of the past.
Fast forward five decades from the invention of packet switching and blocks, this time as they relate to blockchain, are set to revolutionize our world again. In doing so, they’re going to set countless industries on their side.
“There is a very strong correlation between the growth of the internet and the emergence of blockchain,” Shafin Diamond Tejani, CEO of tech incubator and accelerator Victory Square Technologies (CSE: VST) (OTC: VSQTF), recently told Baystreet.ca in a phone conversation. “Back in the early 90’s people didn’t understand the internet and its potential, but FOMO (an acronym for “fear of missing out”) elicited an outpouring of investor capital into the space, which helped it evolve rapidly. Blockchain and cryptocurrency, more succinctly digital tokens, have been integral to our company for years now and I’m confident in saying that most people still do not understand them, but FOMO is once again driving innovation.”
On its face, Blockchain is relatively simple, ingeniously so in fact. It is a decentralized public ledger of new transactions comprised of “blocks.” Because the data is not reliant upon a single server, it is visible to everyone. Each block can be comprised of any type of data and it can be represented by any type of digital token, albeit a currency exchange, medical data, a picture, deed, etc., literally anything. Once a block is created it is added to the chain (hence the name) upon validation. Every block is validated by means of solving a complex cryptographic equation; a practice that connects each block to the preceding blocks via time stamps, making alteration of the chain essentially impossible. People that solve the equations for validation and store of the blockchain in pieces all of the world are known as miners.
A deeper dive into the nuts and bolts of blockchain and its seemingly endless uses is where things start to get a little more complicated.
Right now, people mostly think of Bitcoin when they think of blockchain and – erroneously – think the two are synonymous. While it is the most famous of all cryptocurrencies, Bitcoin, along with its 1,400+ peers out there today, are merely branded applications of blockchain. Without blockchain, Bitcoin could not exist, but the opposite is completely not true.
Think of it this way: a shoe is the core technology (blockchain) and sneakers are an application (or type of shoe), with Nike a branded application.
Tejani says he clearly sees the future, with his company long on blockchain and a focus on investing in technologies that are going to benefit from blockchain in the coming years as it is integrated into all the different fields. “Human nature is fairly predictable, allowing history to repeat itself,” he said during the call. He knows whereof he speaks in looking for trends, having been intimately involved with more than 40 start-ups in 21 countries over two decades. As a young man, Tejani built his first successful businesses in online dating and online gambling.
“I always put my efforts into applications that were borderless to maximize returns. In the process, I learned how to assemble global pools of companies and people to quickly overcome obstacles. There’s strength in numbers and we have an unprecedented network.”
Money transfer in the form of cryptocurrency is obviously the hot-button topic of the moment because blockchain makes it simple to cut the middle man (i.e. banks), but the plan is to invest in an array of applications, such as real estate, fintech and online gambling, areas that are perfect fits for logging transactions in blockchain.
Kodak (NYSE: KODK) has recently seen shares spike on news of launching a platform using blockchain to protect ownership rights of images. Against the backdrop of sexual misconduct allegations running rampant worldwide, Dutch company LegalThings launched a beta version of a blockchain-based app that makes people verify explicit consent before any sexual acts transpire. Possible uses really only are left to the imagination.
Tejani says he is steering clear of miners and gaining exposure to cryptocurrencies in other ways, such as Initial Coin Offerings and investment in promising upstarts. For example, Victory Square this month made an investment in the Gibraltar Blockchain Exchange, a subsidiary of the European Union-regulated Gibraltar Stock Exchange and the world’s first licensed and regulated token sale platform and digital asset exchange.
In exchange for its $150,000 investment, VST received 1.5 million cryptographic tokens called Rock Tokens (a reference to the Rock of Gibraltar). Gibraltar, a British Overseas Territory on the southern coast of Spain, is a global leader in blockchain, recently launching their own distributed ledger technology framework, which is providing a pathway to tokenized securities within a stock exchange ecosystem, again an industry first.
“The GBX is expected to be a global listing and token sales springboard for utility tokens that have satisfied a strict due diligence and admissions process as well as a high-quality digital asset exchange,” said Tejani in a statement on the partnership. “In this regard, the GBX intends to set a higher standard for token issuance and trading for the benefit of all market participants.”
Similar to the way the internet had to carve out its regulatory pathway over time, this is the beginning of regulation of blockchain-based assets that the industry so desperately needs to attract larger-scale investment.
“Regulation, emergence of daytraders, institutional buying, democratization; those were things that happened with the internet and the blockchain industry will follow suit, so our strategy is to vet companies and become early adopters and partners,” explained Tejani. “Just watch, the paradigm will be re-shaped and majors will have to figure out a way to adapt, or buy smaller companies to fill big pain points that develop for them through a modality of decentralized transactions and interactions.”
Tejani was touching on the idea that the current architecture of a centralized network gives companies like Facebook 100% ownership of user input (pics, messages, videos, user data, etc.) on their uber-popular platform, and they monetize that input by selling access to advertisers. However, they don't share those advertising profits with users. In a decentralized world, FB user's own their own input, and the profit from monetizing that input is distributed to the entire network based on activity.
VST is de-risked by spreading itself out across many blockchain investments, all of which look good individually, but even more so as a group. Management’s strength resides in networks and identifying multi-billion market’s pain points and devising a solution that makes everyone money. Through its global pool of more than 80 other accelerators, VST has nearly boundless resources at its fingertips to ensure the strategy can be efficiently implemented.
When questioned about overseas initiatives threatening to squash innovation in the industry, such as China looking to ban Bitcoin mining and South Korea looking to halt cryptocurrency trading, Tejani says those things have no impact on him. To begin with, Victory Square is not a one-trick pony; they have many other investments as well. Second, those are actions directed towards cryptocurrency, not blockchain. Just like tech didn’t die, neither will blockchain in his opinion; the momentum is just going to keep getting stronger.
“We’re setting ourselves up as the premier outfit catering to and supporting a broad spectrum of blockchain technologies, some large cap like Bitcoin and Ethereum, others mid-cap and others still only just beginning to emerge. Could it be possible that over the next decade a bubble forms just like with the .com phenomenon? Absolutely. And we’ll be one of the companies with a war chest picking up the pieces, coming out the other end even stronger if it does,” he concluded.
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