The current crypto markets certainly keep many hardcore enthusiasts wondering whether it is worth getting up in the morning. I am confident that this is just a phase, and although bubbles bursting are painful, it serves an important economic function often known as ‘creative destruction’.
When the next bull market arrives, we will be much better equipped to handle it and many of the malicious actors in the field will have a harder time operating as the crypto sphere grows more mature. Essentially, operating a business in the crypto sphere is like any other field; the same principles and fundamentals apply.
Up until now, a large chunk of people active in the crypto sphere have not followed these principles, and I believe the current situation will bestow change on these circumstances that are healthy for the sector in the long term.
Being based out of Malta, I can see the same process happening that also happened to the early iGaming industry that sprung up on the island back in 2005. I was not here at the time, but the situation was quite similar to ‘Crypto 2018’. It was literally the Wild West, with all kinds of fortune seekers starting online casinos and betting sites with varying degrees of seriousness.
Lawyers, accountants, and other service providers who made up the first point of contact with the early iGaming industry quickly learned what boxes to tick before engaging in deeper business relations with an iGaming company. The ones to come out successful from this race were, to a large degree, those who minded their own reputation, focused on cash flow and superior product development, held an urge to do things properly and honestly while also making a lot of money, did their market research, and built their businesses on a solid foundation based on consumer trust in their brand.
Those lawyers and accountants who failed to spot the warning signs of companies not adhering to any of these principles ended up with a chunk of unpaid bills. The crypto sphere is not any different from any other new business sector, it is just new. But there is nothing new about doing business. It will be the same companies who will win this race as those of the early iGaming industry.
As a consultant, I have been frequently interacting with a number of very new players in the field. Many of them share common features. They view their ICO as the core goal of the business rather than a funding vehicle. They have not conducted any methodological market research or have a business plan for their product, and they do not adhere to common pricing custom.
Building a successful company is the art of keeping simple things simple. I believe that the current market predicament is healthy in the long term as it will drive consolidation within the sector and bring companies in line with their core business operations.
A number of jurisdictions, such as Malta, are now seeing the rise of regulated crypto exchanges, blockchain applications, and authorised financial agents active in the crypto space. This will make it easier for users to gain trust in the sector and overall improve the reputation of the sector. In the long term, this will ensure that legitimate businesses come winning out of the race.
In the end, I believe this is what blockchain was all about in the first place. Finding a way to create immutable digital ledgers to form the foundation of a digital economy running on trust.
Economic theory is confident of the fact that high levels of trust among participants of an economy will lower transaction costs, which means increasing wealth; regardless of how that wealth is eventually distributed. So it seems evident that everyone stands to benefit from blockchain technology. Except, of course, the intermediaries benefiting from the current low social trust predicament.