Blockchain News

I’ve Seen the Blockchain’s Future. It’s Banana-Shaped


Did you know it was London Blockchain Week? It has felt like an ultra-compressed Gartner Hype Cycle — the famous curve that shows all tech goes through wildly overblown optimism and then equally exaggerated despondency before hitting a normal path.

To kick off we had a New York Times story boasting that the technology will fix the internet, displace Big Tech and solve capitalism. By the end of the week, my inbox was stuffed with the usual desperate pitches for cannabis, gambling and gaming projects backed by Bitcoin and Ethereum. From New Jerusalem to shabby reality in a few days.

But these hype cycles do tend to smooth out over time. There’s a chance that stronger regulation and more sober digital currency markets will encourage people to develop genuinely useful applications, rather than just try to mint fortunes out of thin air.

By March, we’ll know more about the blockchain plans of financial institutions such as the Australian Stock Exchange and the SWIFT bank-payments network. Governments are cracking down on digital coins that flout financial rules. The path to enlightenment seems closer.

The Blockchain Hype Cycle

Long Island Ice Tea’s share jump since adding “blockchain” to its name has eased somewhat

Source: Bloomberg

For now, we can amuse ourselves with corporate neophytes trying to catch the crypto wave. Arsenal Holdings, parent company of the famous old football club, is lending its name to promote CashBet Coin, a token sold by a gambling platform developer. French supermarket Carrefour is talking up a blockchain test to track its chickens from hatchery to slaughter. Then there’s Bananacoin, pegged to the export price of 1 kilogram of bananas, and whose mission is to grow organic fruit.

On one level, this is all kinds of barmy. Big firms know that mentioning “blockchain” can boost their value and provide free marketing buzz. Startups flogging cryptocurrencies via Initial Coin Offerings — sorry, Token Generation Events — use early-bird discounts, bonus schemes and white papers to entice punters, with no safety net if things go wrong.

Yes, clever algorithms are meant to contain losses — CashBet has some incredible scientific formulae. But as the feuding around last year’s $232 million Tezos ICO shows, human nature tends to get in the way.

Still, even this week’s bunch of crypto-oddities hint at something more interesting and possibly longer lasting; where blockchain apps meet real-world value rather than mere abstraction.

Take Bananacoin. If its price is pegged to banana markets, doesn’t that make it a fruit futures bet a la Trading Places? CashBet, meanwhile, says 15 percent of its token-sale proceeds will go toward debt restructuring — so buyers know they’re helping out with real liabilities.

Bananas, an Edible Store of Value

Global price of bananas, in U.S. dollars/metric ton

Source: Federal Reserve Bank of St. Louis


You can still deride the absurd claims in the digital coin white papers and the notion of treating such bets as investments — not least because authorities might decide that tokens imitating shares or futures should be regulated as such. But as a source of crowd-based asset finance, there may be something here. Bananacoin even accepts bank transfers, unlike the usual crypto-crowd who prefer untraceable coins and virtual pets.

We’re a long way from the blockchain fixing anything, let alone the internet or capitalism. But beyond the hype cycle lies a way for firms to funnel money into early-stage project finance. The results will no doubt be less glorious than dreamers expect, and there will be more blowups. But the doom-mongers might not have it all their own way.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net



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