What is the outlook for Blockchain Technology and Crypto

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring views and insights from executives at alternative investment firms. Get in touch if you are interested in being featured Elana Margulies-Snyderman.

This week Elana talks to Hamiz Mushtaq Awan, Founder and Partner, Plutus21 Capital.

What is your outlook for cryptocurrency?

Blockchain technology has huge applications beyond cryptocurrencies. For example, bitcoin is the first digital resource to use blockchain technology. Bitcoin has the potential to be an institutional portfolio hedge against macro issues such as expansion of the money supply and fears of inflation. Bitcoin can also serve as a digital substitute for or companion to gold. Any interaction made expensive, inefficient and slow by intermediaries can be improved by using shared and open infrastructure. We expect blockchain technology to have a greater impact on society than the internet. Blockchain technology enables the next generation of internet applications to be built enabled by information and value becoming digital.

What are the biggest opportunities you see and why?

Like previous technologies, we expect blockchain technology to be developed and adopted in a specific order depending on the need and progress of specific use cases. For example, the use of software taking over software companies: What we have seen in the last 20 years will be overshadowed by what we are about to see in the next 20. Software companies have eaten the lunch of traditional companies, but now it will be software itself eats the lunch of software companies. Replacing traditional companies with software companies reduces costs by 10 to 20%. But replacing software companies with software itself cuts costs by 90%. For example: Compound is a bank on the blockchain without physical branches. It has a total of 50 billion dollars in deposits. We expect that the use cases that are the most original digital with the lowest regulation (e.g. video games) will be adopted first, and the use cases that are the least original digital with the highest regulation (e.g. mortgage) will be adopted last.

What are the biggest challenges you face and why?

Adoption among non-technical users. You had to be a computer programmer to learn how to send email in the early days. It wasn’t until user-friendly email applications like Hotmail and Gmail were created that email use became ubiquitous. There is a lot of improvement needed in the experience for non-technical blockchain users to achieve mainstream adoption. In addition, regulations are another challenge we face. Given the pace of development and the global nature of blockchain technology, regulators are having a hard time keeping up, creating uncertainty for entrepreneurs and investors building in the space. Clearly, although strict, regulations will allow builders and users to have more confidence. Finally, we think about the security of users and their assets. Given the complex nature of today’s technology and interfaces, the security of users and their assets is a challenge that must be addressed with robust security protocols and best practices.

What keeps you awake at night?

Bad actors are attracted to young industries that have captured the interest of investors, entrepreneurs and users. The general tension and lack of experience allows bad actors to take advantage of the system. Our regulators and industry stakeholders must come together to protect the ecosystem from these bad actors.

The views and opinions expressed above are those of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.