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fortune.com

Bitcoin Ethereum: 7 Cryptocurrency

Predictions From Experts
Robert Hackett
8-10 minuti

Fortune convened some top cryptocurrency entrepreneurs, venture

capitalists, bankers, and others to chat about the future of digital
money at Fortunes Brainstorm Tech conference in Aspen, Colo.
last week. A select group met at the Aspen Institute for a breakfast
roundtable discussion on Wednesday morning.

Headliners on the panel included Balaji Srinivasan, CEO and

cofounder of 21.co, a cryptocurrency startup that has raised more
in traditional VC funding than almost other one. Another was Peter
Smith, CEO and cofounder of Blockchain, a U.K.-based
cryptocurrency wallet company that recently raised $40 million from
GV, the venture capital arm of Alphabet, parent company of Google
(goog, +0.22%). And Kathleen Breitman, CEO and cofounder of
Tezos, a blockchain startup that this year raised more than $200
million in an initial coin offering, or ICO, and which counts celeb
investor Tim Draper among its backers.

The crew of experts weighed in on everything from the longevity of

Bitcoin, the original cryptocurrency and blockchain, or
cryptographically secured public ledger, to the latest trend of
hosting so-called token sales to fund projects, especially on
Ethereum, a rival blockchain to Bitcoins, to the future of a
decentralized web. Here are some of the predictions we heard.

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1. Bitcoin and Ethereum are here to stay.

Most people who are enthusiastic about cryptocurrency appear to

agree that Bitcoin and its newer rival Ethereum have staying power,
though they may be more bullish on one versus the other. "In terms
of 5 to 10 years, Bitcoin and Ether will be around I bet," Balaji
Srinivasan told the room of more than 70 people.

Related

Peter Smith said his company, Blockchain, which was early to

Bitcoin, has only just started to warm up to newcomer Ethereum. In
contrast, Mike Cagney, CEO and cofounder of SoFi, a personal
finance company, said during a separate session on the main stage
that he was hotter on the latter technology.

Bitcoin "has some purpose but its application for commercial

transaction is limited right now," Cagney said. "The blockchain and
Ethereum, on the other hand, have absolutely fascinating
infrastructure applications, he continued, mentioning the possibility
to overhaul title insurance, which involves policies related to real
estate, as one example.

2. As yet unknown coins will hit the big time.

Bitcoin and Ethereum may have stolen the show at this point, but
the innovation wont end there. Expect more winners on the

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horizon.

Kathleen Breitman is hopeful that Tezos, her own blockchain bet,

will fill a niche that solves problems with extant blockchains. In
particular, she and her projects developers are designing Tezos to
automatically push software updates out to the network, thus, in
theory, avoiding the divisive feuding over upgrades that has
wracked systems like Bitcoin over the past few years.

No one can say how many tokens and coins and blockchain
protocols will eventually win out, but the experts seem to think
theres room for a multitude. "Its likely that another one or two
dominant ones we havent seen yet in the market," Smith projected.
"Another really dominant coin could come out this year or next
year.

3. Sure, people will get burned.

For the time being, token sales might seem like a fantastic way to
raise a lot of money quickly and with few questions asked. Will this
lead to riches for some? Undoubtedlyindeed, it already has. And
rip-offs for others? Almost certainly.

Smith said he presumes that market manipulation and insider

dealing is rampant among purveyors of initial coin offerings. Were
cautious about it in the short term, Smith said of his company. But
you have to temper that with the idea that every new technology is
going to be like that in the beginning.

Brad Garlinghouse, CEO of Ripple and a former executive at

Yahoo, voiced his less forgiving concerns about the sector on a
separate panel. Heavily regulated markets are typically heavily
regulated for a reason, he said. Frauds are happening, people are
going to jail.

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4. ICOs will (eventually) give Silicon Valley

and Wall Street a run for their money.

The days of making a pilgrimage to the homes of the holders of

purse strings are coming to an end. In a world where anyone can
participate as an investor online, physical location matters much
less.

It used to be you had to come to Silicon Valley, walk up Sand Hill

Road, network with individuals, Srinivasan said about
entrepreneurs seeking funding, often strolling up a strip to the west
of Palo Alto that long has been associated with venture capital
firms. ICOs change all that.

Projects are already getting funded this Kickstarter-like new way.

Breitman said she that when she set up Tezos token sale, she
aimed to get as many people who wanted to participate in the
ecosystem to contribute. The company raised more than $200
million to date and, according to her, more than 30,000 Tezos
wallets have been opened.

5. Regulations will stick.

Elena Kvochko, chief information officer of the security division at

Barclays, said that her bank has had talks with regulators about
Bitcoin, blockchains, and their ilk. The rule-sticklers appear to be
open to the idea as long as know your customer laws are obeyed,
although its still early days.

Meanwhile, as governments settle on sets of rules of the road,

countries like Switzerland, Singapore, and Estonia are jostling to
develop frameworks that easily accommodate the new technology,
Srinivasan said. Theyre seeking to displace geographic
incumbents and become hubs for a new wave of business

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financing. If youre a U.S. person or business, you have a good

deal to be concerned about, Smith said.

Breitman added that until the rules are agreed upon, its best to be
transparent about what one is doing.

6. Speculation will subside as killer apps

take hold.

As cryptocurrency prices fluctuate wildly, speculators have been

having a field day. However, theres reason to believe the markets
will become more stable, as Bitcoin gradually has over the past
couple of years (despite its still big price swings), Smith said.

In order for these computer coins to catch on big-time, they need a

use-case that beats traditional money. Ideally, this ought to be
better than merely buying drugs, as Jeff John Roberts, Fortune
reporter and the sessions moderator, noted.

Srinivasan proposed one possible scenario. Imagine that all your

waking hours are spent in the Matrix, he said, referring to a virtual
reality in which everyone is enmeshed in the future. As people from
all over the world meet and interact, they will need a medium of
exchange. To transact, you cant just hand over a dollar bill,
Srinivasan said. You need an international currency for that.

It might take a while but theres going to be more of a need to

transact across borders than there is today, he said.

7. Cryptocurrencies will pressure incumbents

to improve.

Whenever a consumer swipes or dips a credit card, payment

processors charge a fee.

Nicko van Someren, chief technology officer of the Linux

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Foundation, pointed out that the fee companies like Visa or

Mastercard charge exceeds the cost to clear or settle transactions.
These businesses can potentially process transactions quicker and
cheaper, he contended.

One potential outcome of the adoption of alternate systems, like

Bitcoin, is to provide companies with the impetus to improve their
services. Bitcoin is good because it will make banks move toward
the real cost of handling these transactions, van Someren said.
(By extension, in Ethereum's case, one could imagine upstart
companies built on it forcing giants like Amazon, Facebook, or
Dropbox to reconsider or improve their respective offerings.)

Smith, meanwhile, was less optimistic about incumbents ability to

adapt to such change. I dont think be lot of room for banks to
simply adjust their price models, he said.

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