The audience gathering at the Casino Zug was international and diverse – as in previous years. The mood, however, seemed to be more subdued, more sober, and less upbeat. The tone set by the moderator, confirmed my first impression: Utility over hype turned out to be the red thread of the 2022 CV summit.
There is consensus, that we are in “cryptowinter”, not only with regard to the cryptomarket, and the sharp drop of trading observed on Open Sea, the leading NFT marketplace but also from a VCs perspective. Investors get more prudent, but there are no indications of investors withdrawing from crypto/ blockchain technology. On the contrary, new hotspots, such as Berlin, or Dubai, are emerging. Alexander Baan compares the drop on Open Sea to the downturn of ICOs about 5 years ago – a consolidation, that will accelerate the transformation of the ecosystem.
VCs shift their focus from token marketing and sales to the quality of the team, the “utility” a project provides to future customers, and a solid business model. The blockchain ecosystem is indeed entering a new stage of evolution. Many speakers talk about the “Merge of the old world with the new crypto world”. This merge happens with people – more “grey” leaders from the “old” economy joining ventures in the crypto space, it happens with new offers – tokenization of physical assets – , and it happens with crypto making inroad to institutional investors – as an acknowledged, alternative asset class.
Innovation against recession angst
Innovation is the key to overcoming economic challenges and mitigating the risk of recession (Olaf Hannemann). Blockchain technology is ready to make this world a better place and drive growth. DeF is taking out the middleman and providing substantial efficiency gains for both B2C and B2B. NFTs guarantee digital property rights, be it art, data, intellectual property, real estate or diamonds. The security and decentralized control of DLT endorse the trend toward personalized health. Leading players in finance and tech do not curb their investments in blockchain.
Daniel Rood of Google confirms that Alphabet is the biggest investor in Web3 and that Google stays committed to its Web3 efforts. The challenge is to create the infrastructure to bring on board the next billion users. Web3 will open up new opportunities, it will democratize ownership, and provide access for young talents, allowing them to compete with imagination, not with rank.
Let’s get phygital
Phygital is the new buzzword on the block. The blockchain ecosystem is meeting reality: How to provide utility, how to offer relevant benefits to the customer, and how to meet the burning needs of the audience. Creating a bridge between physical and digital is one way to achieve that goal. Ventures around asset-backed tokens – or tokenized assets (depending on the perspective) hence are on the agenda of a majority of speakers. The key benefits are more transparency of markets, and massive cost reductions, elimination of the middleman and of paperwork. Further, the digitalization of assets on the blockchain also comes with the – maybe overly idealistic – promise of democratization. Opportunities emerge for providers of new services, such as validation and custody of real-world assets.
On an abstract level, NFTs stand for digital property rights. A wide range of businesses will be affected by the tokenization of physical assets.
- Artists who can sell their creativity without a gallerist (eliminating the notorious middleman – Roger Haas), without a music label (eliminating the shackles of a complex contract – Alex van der Baan)
- Vendors, commodity traders, and supply chain managers make the supply chain more efficient and more transparent (track and trace) with tokenized metal bars. (Marco Grossi)
- Diamonds are tokenized and kept and validated in a safe vault in Liechtenstein, eliminating the retailers, and making provenance fully transparent. (Monty Metzger)
- Private equity is democratized, made more liquid and transparent, and fairer in pricing when shares of non-public companies are tokenized and made available through a user-friendly, smooth and safe app ( Nicola Plain)
As soon as physical assets are involved, including precious metals, real estate, and diamonds, regulation kicks in. There was a consensus, that we need the right balance between innovation and regulation.
Maturing finance sector
An animated panel discussed the virtues of retail investors leading the crowd into crypto investments. Retail investors allowed providers, such as Bitcoin Swiss, to develop their services, to gain experience with crypto, and now to move towards professional and institutional investors. However, there are a lot of emotions involved when retail investors dominate the market. The “gamification” of investments is seen as very critical. Investors who do not understand what they are investing in obviously are a challenge. Still, there is consensus on two points:
- The crypto market is maturing, with institutional investors and established banks getting increasingly involved and committed
- Investor protection is paramount: the right level of regulation is welcome.
Technology is no longer the dominant theme at crypto conferences. A panel and a couple of speakers addressed the burning issues of today’s tech stack. Efficiency and scalability are still not solved with many applications and blockchains. Attempts to revolutionize the ecosystem with disruptive approaches exist, e.g. overcoming the limitations of smart contracts (Michael Holdman). The solution to the blockchain trilemma – how to optimize decentralization, security, and efficiency at the same time, is still up in the skies.
The second challenge is interoperability – a prerequisite for keeping up to the promises of “Web3”, another buzzword, embracing a vision of democracy, transparency, and fairness, together with tech across the underlying layers.