Our first joint meetup with the Litecoin Foundation, a non-profit dedicated to advancing and promoting blockchain technology, brought together great panelists to talk about mainstream adoption of digital assets.
VNX Exchange CEO and founder Alexander Tkachenko was a key speaker on the all-star panel which took place in Hong Kong last week on the sidelines of TOKEN2049, a premier blockchain and digital asset event in Asia. Other panelists included Charlie Lee, the inventor of Litecoin, a new generation cryptocurrency that took Asia by storm, as well as Michael Ou, CEO and founder of CoolbitX, the world’s first Bluetooth-based hardware wallet, Rich Rosenblum, co-founder of GSR, the first algorithmic market maker in the crypto space, and Chris Lee, CFO at Huobi Group, a leading crypto exchange that recently expanded into over-the-counter cryptocurrency trading, wallet, charts and mining pools. Zing Yang, VNX Exchange Senior Vice President and Head of Asia, moderated the discussion.
Here’s what you should know about what they talked about if you want to understand why digital assets matter.
“Software is eating the world.” Marc Andreessen, co-founder and general partner at Andreessen Horowitz, one of the world’s most famous venture capital firms, famously coined this term in a Wall Street Journal article in 2011. He referred to the tectonic shift tech companies were undergoing in favor of software versus hardware. Today we can safely say that tokenization is eating the world. Digital assets and blockchain are an enabler of this technological revolution. With a huge drop in cryptocurrencies between March 2017 and March 2019 it may sound counterintuitive. But as Tkachenko rightfully pointed out at the meetup, this is just a pause in the development of the sector and nothing more. Introducing instruments that are backed by real, tangible assets is vital in making tokenization work. VNX Exchange is a good example of a platform that works with such assets. We are a digital asset marketplace for venture capital investments. Our platform tokenizes VC firms’ startup portfolios and makes them available for trading to a broad pool of investors. They can now own a piece of the next Uber or Airbnb.
Education and time will pave way to the new generation of digital assets which will become a true go-to financial instrument for a broad pool of retail investors, our panelists said. All the speakers clearly tackle digital assets from different angles but there is no lack of enthusiasm.
“Education is vital, I strongly emphasize that. If you talk to your friends or colleagues, some of them will keep saying it’s a scam,” Charlie Lee said, referring to a common misconception in digital asset investing. “Understanding is the key to increase the capital flow in this new asset class,” said Lee, who is often labeled a crypto prodigy. He is among the most well-known figures in cryptocurrency and blockchain. One of the early crypto adopters, he quickly saw the potential of Bitcoins and launched his own coin and crypto exchange in 2011.
“There has been a progressive move to understand what is happening in the cryptocurrency and blockchain space and start the issuance of guidelines,” said Tkachenko. For example, the Swiss regulators have issued a guideline on what constitutes utility, payment and security tokens. We understand that the European regulator is following this approach, hasn’t adopted it formally but is moving in the same direction, he said. From the regulator’s perspective, if a payment token is used, as long as both parties in the transaction are happy to accept it, they should be okay. It is unclear when the regulation will be passed but it is moving in the right direction, he added.
There is an important regulatory shift. Regulators today are less worried about high-net-worth individuals with the right financial resources and knowledge getting burned. They’re concerned about a broad pool of retail investors who may not have the best means to support their investment decisions.
“Security, compliance and ease of use” are of paramount importance in tokenization,” said Michael Ou, CEO and founder of Coolbit, the world’s first Bluetooth-based hardware wallet. Tokenization is “about how to onboard new users easily.” User experience with as few new features as possible is key, he said. That way people don’t have to go through a steep learning curve: they shouldn’t have to understand what a private key is, they don’t have to memorize their recovery phrase on a piece of paper. This is hard work for most people. By bringing in legacy concepts and mechanisms the crypto industry should move towards simplifying the process of adoption and day-to-day use.
By tackling educational, regulatory and ease-of-use hurdles, the digital asset community can boost mainstream adoption.
If you take a look at the events of the past few years, investors into new technologies tend to be the same people. What’s actually missing is bringing in the 95% of the population that hasn’t touched the space, said Ou. “How do we do it? By standardizing the industry and becoming more compliant, to the point where governments can accept [this]. That’s the moment when mega banks like Citi will bring their existing customers, that’s billions overnight. So that’s the target we should aim for together,” he added.
Charlie Lee spoke about the freedom that digital assets can bring to investors globally. “The cryptocurrency revolution allows you to be your own bank, so it’s important for people to understand what that means,” he said. “It means that you control your own finances, no one can stop you from using your own money. With that comes the responsibility to secure your own coins and people should think about that more and exactly understand what that means to them,” he concluded.
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