Last week, investors and high-growth tech startups from around the world descended on Santa Monica for the annual Montgomery Summit. The Summit marries high-growth technology companies with investors that want to establish relationships with the founders. Some of the companies are looking for capital, others are just interested in laying the groundwork for future capital raises or to hear some of the sharpest minds in how to scale a technology company.
FreightWaves attended both as a presenter and as an observer. We had the opportunity to jump into a number of great sessions at the event.
One of the speakers was Paul Brody, the Global Innovation Leader of Blockchain for EY. The big four consulting firm is always on the cutting edge of understanding innovation and has been studying enterprise blockchain and their uses cases. Paul joined EY in 2015 after serving as a Vice President of Mobile and IoT at IBM. He currently oversees the blockchain efforts for EY.
Paul was not shy about his belief that most ICOs are going to zero and the use case in enterprise applications is questionable. His view is that most investors lack the sophistication to “match the statements in the SAFT to the software code” and often lack an appreciation for the challenges of commercial adoption. According to Coindesk, SAFTs stand for “Simple Agreements for Future Tokens.” SAFTs are issued during the ICO process to explain the opportunities and risks that are involved in investing in floated crypto currencies.
He believes that fiat currencies in the US, Europe, and Japan are far superior to tokens that have been generated during ICO processes. According to Paul, “we looked at 400 ICOs from 2017; 60% have already closed up shop. Never bring a product to market. Most investors do not understand the risk.”
His view of ICOs boiled down to a single description: most ICOs as “non-refundable” donations to for-profit companies. He believes that countries with trusted banking systems, regulations, and stable currencies like the US, Japan, and Europe will not benefit from alternative currencies that are being issued in ICOs.
Once the discussion evolved to enterprise applications using blockchain, Paul was much more enthusiastic about the potential. He was quick to point out that many people assume that blockchain is a universal answer to solve issues using data, but in fact in many cases, it was not necessary and a centralized database could be superior. He said EY has developed a quick set of questions on whether blockchain is the right approach:
Are you trying to get multiple parties to work together?
Do you have trust issues between the parties? Examples are payments, royalties, or purchase orders.
Is it important to get tamper proof record of transaction between parties?
Are you moving something of finite value around?
Do the group benefit from increase transparency?
If you can answer yes to at least three of these questions, then blockchain makes sense. Otherwise, you might be better off with a centralized database application.
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