Academic Gavin Brown describes the world of cryptocurrency as pluralistic and says no-one has a “complete hold” on the space, in which he’s been involved for three years.
There are financiers, psychologists, computer scientists and people involved in marketing who have all been drawn to cryptocurrency.
His background is finance, working as an economist, in hedge funds and setting up investment banking. “I’m not a techie,” he admits. “I’m interested in how this plays out in the wider economy.” He’s now a senior lecturer at Manchester Metropolitan University, co-founder of Blockchain Capital Limited, and a regular commentator on cryptocurrency.
“We have a significant number of coins and the market cap after the bubble burst or the market corrected is 2,100 coins, excluding dead coins. The UN says there are only 180 fiat currencies, so there are many more coins,” he says.
“Many are replacement Bitcoin wannabes but the vast majority will disappear and we will only see a handful survive.
“The main replacement will be tokenisation that genuinely adds value to a business or industry,” he adds.
He points our we are starting to see the emerging Circle USD stablecoin backed by Goldman Sachs and we are “seeing that becoming incredibly important.”
More generally, the problem is finding legitimacy for cryptocurrencies and ensuring people adopt them.
Multinationals such as Facebook and Starbucks are exploring the idea of paying for services using their own coin which gives the technology “instant legitimacy.”
It’s a model used by Disney during the 1980s when it printed ‘dollars’ with Pluto and Donald Duck’s faces on them which had been exchanged for US Dollars, but they had the same monetary value within its theme parks.
By doing this in a simplified form, it will make cryptocurrency more accessible to a wider audience who can be confused by the intricacies of trading.
In the world of crypto, the Circle USD coin enables legitimacy and has all the benefits of crypto with real time transactions and micro transactions with minimal fees. It’s also outperforming the dollar currently, at between $1.06 and $1.10 in value – more than the fiat currency, he tells me.
“We are starting to see multinationals wrestle control from the central banks and nation states,” he adds. “Central Bank Digital Currencies are cryptocurrency versions of existing currencies. The central banks are looking at digital currencies and creating digital currencies in parallel.”
And last summer, the Bank of England was looking at a digital currency in parallel to GBP with a wallet hosted on the blockchain aligned to an NI number which would probably lead to cryptocurrency purists “throwing their hands in the air in horror,” he says.
It is surprising, he says, how niche cryptocurrency continues to be. At a recent event, he was speaking to 300 people and he asked how many of the mostly young people from financial backgrounds in the audience were using cryptocurrency and was slightly surprised it was “only three in 300.”
“People will ask if it is so fantastic, why are so few people using it. But a lot of this is about fear,” he continues.
“It’s like anything, it needs to have a proportion of the community who agree to use it.”
“It is still so nascent and is beyond the early days”, as Bitcoin has been around for a decade now, he points out.
In the world of fiat currency, he says statistics show something like 35% of the highest denomination 50 Euro notes are unaccounted for as a result of money laundering. “It is just accepted that it is something we fighting,” he says of money laundering, whereas it’s often mentioned unfairly in the same breath as cryptocurrency.
There’s a need, he says, for the regulators to allow the old money to migrate to cryptocurrency so it is legitimised and regulated – without that “regulatory hurdle” there will not be mass adoption.
Within the major banks, there are teams working internally on the potential for disruption to central banking of cryptocurrencies, but none of the banks “will make that reputational jump and talk about it in a public arena”, it remains behind the scenes.
Resistant to attacks
He likens the blockchain technology to a steam locomotive and points out that Iota and the tanglechain technology is working differently to the linear blockchain and it works in a 3D way and can reduce 51% attacks and is even “resistant to quantum computing attacks.”
He’s particularly interested in the real-time, zero transactions use case of blockchain which gives access to those with no bank account who can connect via a mobile phone with a wi-fi signal.
“Perhaps it is the greatest breakthrough unveiled in the history of mankind,” he adds. But there’s a rocky road ahead with adoption.”
The multinationals are looking at pushing a form of currency, the central banks are carrying out research with teams theorising if and when the tipping point when they lose control will be and the adoption of security tokens.
When he was talking to a regulator, they asked him where the blockchain is based. This, more than anything, encapsulates the lack of wider understanding in cryptocurrency which better education can address.