Bitcoin and Blockchain are Here to Stay
- Thoughts on Bitcoin and Consensus 2018
The hottest ticket last week was in New York City. But unlike any Top-Tier event, you were invited … if you could afford it.
At approximately $2,000, Consensus 2018 was the most expensive edition in the Bitcoin conference’s history. Despite that, it was the most heavily attended by a country mile.
Founded by CoinDesk, Consensus 2018 drew 8,500 attendees, an all-time record.
Last year’s haul topped out at 2,700 people, which was a respectable figure at that time, representing a near-doubling from Consensus 2016. But at a growth rate of 215%, this year’s edition took the Bitcoin conference to a whole new level.
Usually, cryptocurrency-related events are self-serving. Nothing new is learned because the people attending do not have to be sold on anything. Most are already steeped in the Bitcoin culture. What made Consensus 2018 stand out was its diversity. Not everyone was a believer, and even among the faithful, not everyone saw eye to eye.
Most importantly, Consensus 2018 proved that the Bitcoin ecosystem was far more than just speculators looking to profit.
Here is a deeper look at the Bitcoin conference and the issues presented, and some of the Key reasons Bitcoin and blockchain are here to stay, as follows:
Reason #1: Bulls Go to Bat for Bitcoin
With the way the mainstream media has portrayed Bitcoin and the blockchain as a wildly speculative venture, FedEx Corporation (NYSE:FDX) chairman and chief executive Fred Smith’s words may come as a surprise. Smith matter-of-factly states, “Blockchain has the potential to completely revolutionize what’s across the border.”
He further doubled-down on the blockchain technology and its implications. In front of a packed audience, he stated, “For cross-border shipments, ‘trust’ is legal requirement for every transaction. What blockchain has is a potential for the first time ever to make the information available for everybody.”
In terms of the logistics business, Smith’s support for blockchain is completely understandable. One of the biggest challenges with international shipments is dealing with differences: different regulations, operating protocols, industry-specific terminologies and cultural expectations.
Anything that can standardize the logistics platform would go a long way in making the overall process more efficient. Thus, the FedEx CEO praised the blockchain technology’s “chain of custody.” Put another way, the blockchain allows everyone to speak one language.
Perhaps the most significant aspect of FedEx’s love affair with the blockchain is that it’s not just lip service. The company joined the Blockchain in Transportation Alliance (BiTA) in an effort to explore how blockchain applications can positively impact the logistics industry.
I’m biased, of course, but FedEx is making the right, and necessary, decision. The company’s CIO, Fred Carter, stated:
“We move easily 12 million shipments a day and that more than doubles during the peak seasons. While we absolutely believe this technology is going to scale, right now it makes sense for us to do this in our freight world.”
Reason #2: Blockchain Has Practical Utility
Carter hits upon a critical point. While the general public’s idea about cryptocurrencies centers on speculative financial investments, and 20-year old kids driving Lambos, what gets lost in the discussion is that the blockchain has practical utility.
Yes, everyone talks about the soaring Bitcoin price, and it’s true that overnight millionaires have sprouted across the world. In its initial launch, the original cryptocurrency could have been purchased for under a buck.
But at the end of the day, cryptocurrencies are blockchain reward tokens.
Bitcoin’s highly speculative market value is a separate issue from the underlying blockchain technology. That’s why I’m glad Consensus 2018 featured FedEx. Their executives understand what so many fail to see.
Regarding Carter’s point, his organization is already operating at the highest level. Yet shipping demand will only increase. The advent of e-Commerce, and Amazon.com, Inc.’s (NASDAQ:AMZN) dominance, in particular, will continue to shift consumer behavior.
As I mentioned in my recent write-up for Amazon, the company’s Prime membership comprises consumers of all income levels. Furthermore, the difference between Amazon’s affluent and lower-income consumers isn’t nearly as lopsided as you might imagine.
I wrote: As expected, the affluent find enormous value in Prime. Approximately 70% of people who earn $150,000 or more, and who shop online, are Prime members. Moreover, over half of online customers who make between $50,000 and $125,000 are also active Prime users. This broad income bracket essentially represents most upscale retailers’ target demographic.
Put another way, the vast majority of consumers love shopping at Amazon, and love shopping online in general. Both FedEx and its rival United Parcel Service, Inc. (NYSE:UPS) should experience a demand boon in upcoming years.
And that means both companies need a next-generation innovation to keep up.
Reason #3: Blockchain Will Cause Trickle-Down Effect
Granted, Amazon is currently experimenting with their own courier system, and that could impinge on FedEx and UPS revenues. While it’s not the greatest thing to happen for couriers, I wouldn’t get too worried. Here’s what I wrote at the time:
“However, I think the bearishness is overplayed. While Amazon could theoretically replace UPS and similar services, it would be a massive undertaking. The longer-term benefit for AMZN in terms of reducing shipping costs could be outweighed due to the onerous investment. From an economies of scale perspective, it may make sense for Amazon to continue utilizing UPS.”
But the greater point is that no one entity can possibly handle the demand surge. My InvestorPlace colleague Will Ashworth, with regards to Amazon’s proposed internal courier service, stated, “I just don’t think that’s feasible or sensible given Amazon’s real business is selling 100 million Prime members as many things as possible.”
Exactly. This isn’t a knock on Amazon, of which I’ve been especially bullish. But as great as they are, they couldn’t possibly cover all the gaps.
Next, you have to consider the competition. Big-box retailers Walmart Inc(NYSE:WMT) and Target Corporation (NYSE:TGT) have aggressively pushed into the e-Commerce market. Their efforts will continue with the same, if not increased, aggression.
I admit that Walmart has not demonstrated ideal results late last year, which is why WMT stock has skidded. However, operational issues impeded their progress.
Translation: Walmart perhaps bit off more than it can chew.
But the challenges of e-Commerce make one thing clear. Consumers increasingly prefer online retail, and current solutions aren’t working effectively.
This is a perfect opportunity for the blockchain to flex its muscles. Eventually, other companies will have to embrace it, or slowly fade away.
Reason # 4: Blockchain Forces Companies to Adapt … or Die
FedEx CEO Fred Smith had one final comment at Consensus 2018.
He stated: “If you are not operating at the edge of new technologies, you will surely be disrupted. If you are not willing to embrace new technologies like internet of things and blockchain to face those new threats, you are, maybe subtly, at some point … going to extinction.”
I find myself marveling at FedEx’s leadership team. Unlike so many other executives and mainstream pundits, Smith discerns the strawman arguments used against Bitcoin.
As I stated earlier, Bitcoin’s speculative trading and its underlying blockchain technology are completely separate issues. That the Bitcoin price is as wild as a penny stock has nothing to do with the blockchain’s utilitarian value.
What many critics miss is that you don’t have to ever invest in cryptocurrencies to benefit from the blockchain. The price of Bitcoin could fall to zero, which I highly doubt. Yet even in that draconian circumstance, I believe that Pandora’s Box has already been opened.
Once people see what’s possible, there’s no going back.
Furthermore, most companies will eventually be forced to adapt to the blockchain, or die. As enterprising businesses advantage the new technology’s utility, they’ll get a head start in their industry. By adopting an irrationally negative attitude toward the blockchain, competitors risk obsolescence.
To be clear, I’m not suggesting that the blockchain is a cure-all for any company. If a business is a failing one, a new technology would only decelerate its inevitable demise. But for an organization not to try based on precontrived feelings would be the height of folly.
Reason #5: Even Bitcoin Critics Will Turn Around
Currently, cryptocurrency critics will note that the Bitcoin price has fallen sharply since Consensus 2018 started.
If the biggest crypto proponents can’t pump up the digital markets, who can?
Fair enough. However, I wouldn’t be too comfortable taking potshots at bitcoin. Cryptocurrencies have proven to be more resilient than people give them credit for. In addition, things will eventually turn around in the right direction.
How can I be so sure?
Because even the haters realize that their derision toward cryptocurrencies lacks common and business sense. Compare it to tulip bubbles all you want. All the criticisms in the world have been widely disseminated through the internet. Not a single, unique argument against Bitcoin exists because we have heard every one.
Yet in this hate-filled environment, the haters are backing away from their reproach.
I’m speaking of course about Facebook, Inc. (NASDAQ:FB). Earlier this year, the social media giant announced a draconian ban on all cryptocurrency-related advertisements. It was one of the biggest knee-jerk reactions in recent memory.
With Facebook, I understood their concerns. Several cryptocurrency-related projects are indeed scams. But I could say the same thing about other projects and businesses, including publicly traded companies. Rather than blame individual con-artists, Facebook took the easy way out and accused the platform.
That was a big mistake, and they know it. Now, they’re exploring how the blockchain technology can aid their business. Facebook could have saved themselves much embarrassment and at least stayed Neutral.
Reason #6: More Companies to Get Bitcoin Fever
If Consensus 2018 has taught us anything, it’s that Bitcoin is no longer for nerds. FedEx executives just went to bat for the blockchain. This is no longer a niche market you can simply ignore.
I’m even more bullish on Bitcoin, if such a thing is possible. That’s because the immense popularity over Consensus 2018 is just the beginning. More companies will follow FedEx’s lead. But just as importantly, more companies will follow Facebook’s lead.
Initially, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Twitter Inc(NYSE:TWTR) adopted Facebook’s early stance on cryptocurrencies. The former 2 companies banned crypto-related advertisements I suppose as a show of solidarity.
They too will regret their hasty and illogical decisions.
I genuinely don’t care what any Alphabet executive personally thinks about Bitcoin; by refusing crypto-related advertisements, they’re throwing free money away.
Last year, “Bitcoin” was one of the top Googled search items. I can virtually guarantee you that it will remain highly popular for years to come. Thus, it makes zero sense to ban advertisements for a subject everyone is talking about.
A few months back, I happened to watch Jim Cramer briefly discussed cryptocurrencies. I normally don’t get my financial advice from Jim Cramer, and this time was no different. But what intrigued me was that his friends called him up to ask about bitcoin.
I don’t know Jim Cramer, but he doesn’t strike me as a bitcoin guy. So if Cramer’s friends who are probably stodgy, stocks and bonds type of folks, are bugging him about Bitcoin, imagine the conversations occurring on Main Street.
And if anyone wants to learn about Bitcoin, Google is the first site they’ll go. That means the company will idly watch easily convertible metrics slip by. It’s insane, and they’ll soon recant.
Not Everything Was Rosy for Consensus 2018
By almost any reasonable standard, Consensus 2018 was a huge success. Bitcoin received unprecedented attention and credibility. Like I said earlier, this sector is no longer just for computer nerds. It’s hit the big-time in the Big Apple.
But not everything about Consensus 2018 was a standout success. In some ways, this bitcoin conference was defined not by who was there, but who wasn’t. And Ethereum creator Vitalik Buterin’s absence was especially conspicuous.
To get a ticket to the event at the last minute will cost you $3,000. That’s roughly 33% the cost of a single Bitcoin. Buterin took exception to this highway robbery, stating simply, “I refuse to personally contribute to that level of rent-seeking.”
I can understand why he was upset.
As one of the blockchain space’s most prominent and accomplished figures, I appreciated his standing up for the little guys.
Consensus 2018 offered valuable content and insights; that, no one will argue against. But the hoopla and extracurricular activities were something the conference could do without.
For instance, the parading of the Lamborghinis was tacky. It screams desperation and insecurity. In my opinion, it was a bad look for the cryptocurrency sector’s marquee event.
More critically, Buterin may have been concerned that the blockchain was losing its ideological base. What should be celebrated was not crass commercialism, but rather, the blockchain’s ability to open doors. As it has done for the logistics business, cryptocurrencies offer trading based on a Neutral platform.
In other words, people can finally invest outside the USD hegemony. This puts emerging-market investors on the same floor as American or western investors. Yet the Lambo parade suggested that bitcoin proponents could care less about the blockchain’s social impact.
Consensus 2018 Lacked Consensus
Indeed, one of the ironic characteristics about Consensus 2018 was that it lacked exactly that: consensus. Don’t get me wrong, most people at the conference support Bitcoin and cryptocurrencies. But this did not involve folks preaching to the choir.
Going back to Buterin, he complained that Consensus 2018 founder CoinDesk lacked integrity. The Ethereum founder claimed that CoinDesk resorts to “gotcha” tactics for its off-the-record policy.
Obviously, I cannot corroborate Buterin’s accusation. However, his statements indicate that the blockchain space has substantial room for further maturing.
For instance, a reporter had to wait over an hour to get her entrance badge.
Nor was this an isolated case.
Several attendees, irrespective of status, also waited an hour to gain admission. In fact, Consensus 2018 had to start the day with an apology for operational inefficiencies.
Fireworks also erupted on the panel floor. Prominent blockchain business owners engaged in heated debates over the crypto sector’s direction. One side felt that the sector was hitting a bubble, that too many blockchain projects were speculative. The other side disagreed sharply, ultimately ending the feud with a bitcoin bet.
The details of this debate don’t really interest me. Rather, I find it intriguing that wildly successful bitcoin adopters still sharply disagree about bitcoin. I also find this dynamic encouraging.
You’ll often hear critics state that cryptocurrencies are the modern-day tulip bubbles. But if that were the case, why the robust debates within the sector? I’d understand if the counterarguments originated from outside the bitcoin love-fest. But they’re not. Some of the biggest bitcoin supporters are also its biggest critics.
Last time I checked, bubbles occur because most everyone believes the only direction is up. At Consensus 2018, no such consensus existed.
The Bankers Have Their Say
For me, the biggest surprise of the Bitcoin conference was St. Louis Federal Reserve president James Bullard. He attended Consensus 2018, and it went down how you might imagine it. Bullard stated to the audience:
You’ve got this kind of special problem of who’s going to issue the currency and what are those promises about future issuance and can you really maintain the credibility of those promises. If you can’t, the value of your currency is going to zero the same way the Venezuelan bolivar has.
Mr. Bullard further noted that non-uniform currencies have historically met significant resistance, and later failed. In his view, cryptocurrencies have a challenged road ahead before they can achieve mainstream financial acceptance.
“They’ve got to compete just like everybody else…welcome to the currency competition game,” Mr. Bullard said.
Respectfully, but unfortunately, the Fed banker misses the point.
Cryptocurrencies represent a paradigm shift in how we view money. To merely categorize them as “non-uniform currencies” is a grave disservice, if not disinformation.
The value of the dollar doesn’t just stem from US economic stability; rather, our military backs our currency. Recall that when Admiral Perry opened Japan’s borders, he did so with battleships. Currencies, particularly western currencies, have always been inked with blood.
Bitcoin, on the other hand, doesn’t threaten anyone. It merely encourages through unprecedented opportunities.
The value of Bitcoin in Nigeria is the same as the value of Bitcoin in Norway. All participants operate on the same platform with the same rules. The blockchain doesn’t consider any other factor, such as skin color or national allegiances.
Put another way, people want to use Bitcoin. In sharp contrast, people are forced to use the USD.
Final Thoughts on Bitcoin and Consensus 2018
Consensus 2018 had its fair share of problems. The organizers clearly didn’t prepare adequately for the popularity surge, and frankly, they have no excuse. Ticket-buyers didn’t just pop up randomly; ample time was in place for proper administration and procedures.
I also wasn’t impressed with Consensus 2018 not taking care of its media guests. Again, you can’t excuse organizers not having made prior arrangements for financial/business journalists. These are the folks to fast-track as they will relay their opinions to everyone else.
After all, Consensus 2018 is typically the only time in the year that outsiders can glimpse inside the crypto world. For this audience, you want to present the best image possible. Instead, it looked like amateur hour.
That said, the annual Bitcoin conference achieved what all cryptocurrency proponents have sought: mainstream acceptance and credibility.
Bitcoin started off as a get-rich-quick scheme.
Now, its underlying technology made the most powerful names in business take notice.
Not only that, but the diversity of opinions suggests that we’re still a long way from the dreaded Bitcoin bubble. As I stated earlier, Consensus 2018 was marked for the lack of consensus.
Moreover, the conference organizers’ clumsy operations has a silver lining. If the conference itself was surprised at the attendee number, imagine what the next year will bring.
The Bitcoin price is almost 60% lower than its all-time high now.
Currently, Bitcoin is trading at: 8,002.8848, -324.49, or -3.90%, as of 1:12a BST, the market is open
In any other asset, such losses would cause severe panic. But not the cryptocurrency sector. This market has seen the worst of times, yet its proponents keep coming back for more.
Note: Josh Enomoto is long Bitcoin and Ethereum.
By Josh Enomoto
Paul Ebeling, Editor
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