Blockchain and ICOs Offer Opportunities and Uncertainty for Entrepreneurs and Investors, Say MGCS Panelists

Blockchain is a powerful, potentially transformative technology that has attracted the attention of entrepreneurs and investors. Whether it will turn out to be a boom or bust over the long haul is still open to conjecture.

At the 2018 MGCS, a panel of researchers, entrepreneurs and investors took a critical look at blockchain, initial coin offerings (ICOs) and other fintech innovations and shared insights on the potential impact on these technological advances.

By definition, Blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Originally, it was conceived as a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly. Now the tech community is finding other potential uses for the technology.

“I caught the blockchain bug in 2013,” said Rob Zwink, the co-founder and CTO of SafeChain, which leverages blockchain technology in its fraud-prevention software for title service professionals.

Initially, the Ohio-based startup considered using blockchain-driven software applications in other industries, such as HR outsourcing, the energy sector and health care. “The main factor that led us to the title business is that the nature of data is primarily public,” Zwink explained. “Not having to overcome some of the sensitivities associated with health-care data was a check in the right box.”

Sam Savant, the founder and CEO of TwoScoreTwo, a blockchain commerce company, said the greatest barrier to market entry for blockchain is the widespread lack of understanding about what it is and what it does. “We need to educate the customer first,” he remarked. “At TwoScoreTwo, we try to steer our conversation to a discussion of how we can provide value and solve a problem for a customer.”

Savant said blockchain can be effective in moving extremely sensitive data between people, such as researchers or automotive designers, who don’t want to use less-secure communication channels such as email or text messaging.

Some startups are raising capital with ICOs rather than traditional venture capitalists, but there are risks. “I’ve known bitcoin since its inception, and it’s hard to predict its value,” said Murat Kantarcioglu, director of the UTD Data Security and Privacy Lab at the University of Texas. “The coin you own can go up 20 percent or go down 50 percent. It’s a volatile environment. For regular investors, it may be a big gamble.”

From an investor’s viewpoint, Calvin Cooper, a partner at NCT Ventures, said he does not consider ICOs as competition for traditional VCs, but rather as a parallel system of fundraising.

Before deciding to invest in a blockchain startup, Cooper applies the same investment criteria to vet the deal that he would use for any other company: Does the startup have the right team; does it create value; and what is its go-to-market plan? “We need to focus on the use case and the value of the company, because most investors are not technical experts,” he explained.

In the future, software-as-a-service (SaaS) solutions that companies build to run on blockchain technology will offer the greatest value for customers, investors and acquirers, the panelists agreed.

“I predict that once blockchain startups begin gaining traction, we may see a lot of acquisitions, because many companies don’t have that expertise,” Cooper concluded.