Beyond crowdfunding–startup funding through blockchain cryptocurrency, smart contracts

Bitcoin + Smart Contracts or Bust! A surprise to this Editor was that Bitcoin (on 14 Aug an eye-blinking $4,400) has a host of ‘currency token’ competitors–Ethereum‘s Ether ($286), DCorp‘s DRP, and others in the wings waiting for their initial coin offerings (ICOs). These cryptocurrencies, while still hard to use (don’t try to shop for groceries with them), are demonstrating credible, real-world value despite shady uses in hacking.

The tech behind currency tokens, blockchain, with its distributed data ledger also offers another more intriguing development beyond what this Editor has noted in healthcare [TTA 16 July 165 Apr]–smart contracts. These are built on blockchain that stores, verifies, and executes the terms of an agreement without a middleman. This is proving to be high value–Royal Bank of Scotland is building a distributed clearing house to speed cross-border payments based on Ethereum’s distributed ledger and smart contracts tech. 

The combination of cryptocurrencies and smart contracts could create the next unregulated startup funding vector, according to this article in Forbes. It would more closely resemble an IPO, but using currency tokens. Smart contracts can also assure startup investors that entrepreneurs will be accountable and that investment and loan agreements will be enforced. The nearly unregulated world of crowdfunding has been surprisingly lucrative, with $34 billion invested in 2015. However, startups going this route had a high failure rate, nearly 40 percent, and crowdfunding is now more frequently used to test concepts and cause fundraising. We’ll see if blockchain-enabled funding becomes the Next Big (Funding) Thing. Hat tip to fellow NY Financial Writers Association member Katherine Heires of Mediakat.

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