Chile Blockchain Summit

Chile Blockchain Summit

Posted by: Nicholas Turner
Category: News

Santiago de Chile was the venue, a great city to visit with beautiful views of the nearby Andes mountains. Chile is extremely developed and boasts a strong economy, stable government and crucially tons of great wineries!

The event in Chile had a great focus on education, there were talks from IBM, Microsoft, Buda.com, Athena Capital and ETHlend amonst others. There was also a focus on private discussions on finding the crypto unicorns. The general feeling was that Blockchain technology will open opportunities beyond the scope of what we can imagine today, just as the Internet opened the door to things unthinkable at the time. Who would’ve guessed that in 2017 more than 50% of the Internet bandwidth consumption in the United States was to watch movies via streaming on Netflix, and video & audio via YouTube, the vast majority from mobile devices? In this industry, it will take between 3 to 5 years for the real winners to appear. Maybe Bitcoin is one of them. Today everything seems to indicate that it will be, but just as in 2004, when MySpace reigned on social networks, it may happen that a Facebook will appear that will take away the kingdom in a short time. So in reality, we have no certainty as to who will be the final winners.

If we look back, and learn from the experience of Internet 1.0 (basically developed between 1995-2000) we will see that the best financial return was for those investors who bet on the trend at the framework level, that the Internet was going to revolutionize the way in which people from all over the world live their days. They bet on the companies that embodied the revolution: that revolutionary internet the way we communicate, do business, inform ourselves, read, learn, play, buy, etc. There was also lots of discussion around finance: smart bonds, on the blockchain and how they have already been trialled and proven to work by UBS. Last year, companies around the world issued $3.5 trillion of bonds. That’s about the same as the entire GDP of the UK.

Smart bond built on the blockchain will do away with the gatekeepers and let individuals invest directly. They would also massively cut down on inefficiencies and be incredibly easy for companies to issue.

Here’s how smart bonds work.

  • A company creates its own token on the blockchain.
  • That token has smart contracts built in that mirror how bonds currently work.
  • Investors can buy the bond directly from the company, and later through an exchange, or by trading with other investors. It is like any other crypto.
  • The smart contracts in the token give its holder a set pay out every six months (or at whatever interval was chosen).
  • This pay-out is pegged to the dollar and not to the price of the crypto. So crypto market volatility doesn’t affect it at all.
  • Then at the end of the set term the smart contract then pays out the principal, also pegged to dollar value, not crypto value.

Since cryptos that allow smart contracts, such as Ethereum, first appeared on the scene, smart people saw smart bonds as a major use case. And although cryptos have really only been mainstream for six months or so, people have been working on the smart bond idea for much longer. One of the biggest banks in the world, UBS, saw the potential right away and immediately started trials in London. In December 2016, UBS reported on this successful trial. Here was its conclusion:

This experiment validated our initial assumptions on smart contracts and virtual currencies, and confirmed the applicability of these logics across our use cases. It also confirmed the potential benefits for our clients, the regulators and our organization: clearing and settlement on blockchain could be faster, more efficient and transparent while reducing settlement risk and operational cost.

Smart bonds are coming. And they will shake up finance in a way not seen for decades, if ever. Take a look at the chart of Amazon:

Notice that little bulge around 1999-2000? That was the ‘tech bubble’ which crashed around 2001. ‘Latecomers’ who bought Amazon stock around 2002 would have made the same kind of mouth-watering returns as early investors who recognised Amazon’s potential in 1998– since then the stock has gained over 14,970%! Of course, there were plenty of tech stocks that crashed and burned, while successes like Amazon were far rarer. Not every coin will go on to make a profit for investors in this wildly volatile market. That’s why you need to know the right ones to pick…

The entire crypto market was overbought a few months ago, and an inevitable correction followed. The general feeling from Chile is that prices have reset, and now is the perfect moment to “buy the dip.” “I now predict Bitcoin at $1 million by the end of 2020,” predicts John McAfee, Chief Cybersecurity Visionary of MGT Capital Investments. And this isn’t wild-eyed speculators talking. Major institutions and banks have crunched the numbers and predict, “Our long-term estimate for the Crypto Currency space is in the $10 Trillion dollar range versus ~ $500B today”, Royal Bank of Canada analyst Mitch Steves.

Nicholas Turner
Author: Nicholas Turner
Nick is a partner at Lydia.Capital. He has a background in international real estate and splits his time between Argentina, USA, Dubai, and London.