Essentially, EY expects public blockchains to do for B2B what ERP software did for internal operations. They're building zero-knowledge tech to make that sufficiently private and help with scaling.
Yes, but it's totally and completely unnecessary. If a company doing business with another company doesn't trust either the other company or a mutual jurisdiction to remediate -- they just shouldn't be in business together. No amount of blockchain magic fairy dust is going to change that.
Blockchain also only accurately reflects things solely encapsulated within the blockchain. As soon as you're trusting someone to enter data they can enter false data, and now you've got a permanent immutable ledger of hot garbage.
The video you linked leads with "it's been too complicated in the past to explain return on investment" lol, if you can't tell me if your product will save me money or not, your product is bad and will cost me money.
It's like going to buy a new fangled electric car, and you asking the salesman, hey, so how much will this save me on gas! And the salesman responds: "well that's hard to say." That's not a good sign.
You could run everything on one system, but companies don't like trusting and paying whoever runs that one system, so mostly they run their own systems, send messages back and forth, and do a lot of cumbersome mutual auditing. That's exactly the sort of thing EY works on for a living.
There's absolutely no reason that (1) Microsoft licensing should have taken a month to begin with, that's madness, you can buy a license on their website in seconds -- so it was a process and policy issue, not a technology issue and (2) there's no reason that if you trust Microsoft and Windows to validate that license information that you can't trust them to store that license information alongside your receipt/proof of purchase. None. They're required to hold on to it by law anyways. And if they don't honor it (and they will) you can always sue them.
Who on earth needs to validate MyCo has a license to Windows other than MyCo and Microsoft? Absolutely nobody. And if you don't trust Microsoft to honor the license in the first place why are you doing business with Microsoft?
Now beyond that, EY. They're not selling blockchain, they're selling SaaS apps built on top of blockchain technology because they need to meet CTO/CIO buzzword quotas. Their SaaS apps could be just as easily run on, wait for it, AWS.
The transnational nature of it is interesting. But otherwise ya, I agree. Very niche at the moment and not really exploding in use or use case.
So, the hedge seems to concern investing in a new computing platform that will gain traction around 2021-2023. Does either the thesis or hedge seem bad? Well, the thesis doesn't seem obviously bad in comparison to other VC theses out there (I mean, theses are sort of about putting a stake in the ground with regards to predicting the future). Let's agree the thesis is sound. Is the hedge still bad? I don't know. If you were to line up the other options, like A.I. and AR/MR/VR (are there any others?), I'm not sure one would really stand out above all the others. Maybe A.I.? But even then, they've already invested in the other options (especially A.I.), so at this point it's a matter of distribution of invested capital.
Could the crypto investments end up being complete and embarrassing failures. Definitely. But, I'm not sure how this risk really stacks up to a different hedge for 2021-2023. It doesn't seem to be obviously bad in comparison to the other options.
And numerology with suspect numbers at that; 1978 was the year after the introduction of the first viable personal computers, 1993 was, er, Mosaic came out I suppose, but it was not the year the web showed up (that was earlier) or the year that it started to see widespread adoption (that'd be, er, 95 or 96). 2007 was the year that smartphones became mainstream, if you don't count blackberries or other consumer quasi-smartphones. This all feels very cherrypicked to fit the thesis.
I don't know what their reasoning is, but I suspect it's a mix of everything discussed on this thread: ancap/right-libertarian ideology, an affinity for sexy tech regardless of usefulness, faulty reasoning by historical analogy, reality distortion due to having made money off the crypto bubble, and a bit of sunk cost fallacy.
I am willing to be proven wrong. Show me growing uses of cryptocurrency that are not one of: niche wire transfer applications, black/grey market commerce, cryptocurrency aficionados nerding out, gambling, speculation, fraud, or solutions in search of a problem. Those are all (except the last two) real applications to varying degrees, but they're not large, rapidly growing, mainstream, or of that much interest to business customers.
In other words show me something someone that doesn't care about cryptocurrency would use. The Internet in the mid-90s offered a ton of things people wanted to use even if those people didn't know what an IP packet was.
I have asked the above in various forums, Twitter, etc. for years and so far nobody can produce anything. The closest I've ever seen is this:
It's the only ICO project I know of that has actually shipped something usable and possibly useful. Still that's one singular example and it's not like they're going to displace Amazon S3 or Backblaze any time soon.
Is it a good thesis? What's your criteria? By any scientific criteria, of course, the thesis is asinine. However, if the criteria is other VC theses, then it is an adequate thesis.
"AI" is great at solving fuzzy matching and pattern inference, which opens up a world of interesting things. Image segmentation, image analysis, dynamic image infill, facial recognition, and so on can all benefit. Is it a be all and end all technology? Probably not, certainly not yet, but it's clearly, trivially and obviously superior for a certain problem domain.
Just because something happens "every 15 years on average" doesn't mean it happens on a 15 year clock and it certainly doesn't mean you can just throw a lawn dart and hit one in the face without using some logic, reasoning and due diligence.
An overnight success twenty years in the making :)
Everyone has had access to cryptocurrency for over a decade, yet it still only has its original niches. This is a niche technology, not the next revolution.
As an Ethereum user, I find Ethereum useful. Maybe my experience is not unlike that of the initial ARPAnet users?
While between jobs, I have paid my rent with a blockchain-based loan. I found Ethereum to be a much better creditor than a bank.
I've quickly and inexpensively sent money to friends in other countries.
> yet [cryptocurrency] still only has its original niches [after a decade]
On this point, you are misinformed. There are many niches, services, and new kinds of financial primitives that have emerged on Ethereum over the past few years.
There's another reason too: faulty reasoning by superficial historical analogy. There's a crowd of people who think cryptocurrency resembles the early Internet, and that its detractors are wrong in the same was as Paul Krugman was when he thought the net would turn into nothing.
The difference of course is that the Internet was immediately useful to an exponentially exploding number of people. I got on the net in 1993-1994 as an early teen and immediately found a ton of fascinating stuff to do with it. I helped less tech-savvy people (including my step sister) get online and they started enjoying chat rooms and the very early web.
Nobody uses cryptocurrency except users in a few niches that have remained relatively stable since its inception: people using it as an alternative wire transfer method, black/grey market commerce, and enthusiasts who just think it's cool and go out of their way to use it for the sake of using it. Those niches exist but they aren't growing very fast.
Reason from first principles, not by analogy.