Global payments, the stock markets, and access to fundraising – those are the industries that blockchain technologies and distributed solutions would disrupt in the coming years. This is the prediction of Jed McCaleb, founder of the Mt.Gox exchange, as well as the more recent and promising Stellar project.
Jed McCaleb has been close to the world of crypto assets since its beginning. But he is more confident now that the crypto world will gain mainstream adoption:
“In the future, I think it’s pretty clear to me there will be a universal payments network that will operate,” McCaleb said. That will involve a “public ledger that people can see and can’t change arbitrarily” and letting people “use things they’re used to, like dollars and euros.”
The Mt. Gox exchange started operations under McCaleb, but he sold the enterprise in 2011. The infamous hacking, bot trading and subsequent crash of Mt. Gox happened under its new owner, Mark Karpelles, who operated the exchange until 2013.
The Mt. Gox exchange crash is still considered one of the most infamous events in the world of crypto coins. The exchange crashed in 2013, causing Bitcoin to slide from peaks above $1,000 to lows near $100, and spend years with a depressed price.
McCaleb is the co-founder of Stellar and serves as its Chief Technology Officer. Stellar is one of the most prominent platforms that allows the creation of distributed applications and the creation of new tokens. The Stellar digital asset, XLM, is among the top 10 crypto assets by market capitalization. McCaleb has stated his reason for starting the Stellar project was “recognizing that the world’s financial infrastructure is broken.”
The Stellar platform tries to solve the matter of scaling blockchain solutions to match the speed and volume of traditional financial transaction systems. The Stellar platform settles a transaction in seconds. The platform also offers a second layer of complexity, allowing anyone to tokenize and exchange traditional financial assets, stocks, bonds, or currencies.
The possibility for tokenizing assets and moving them securely over a cryptographically protected network makes the Stellar project capable of handling international transactions. Recently, IBM officially confirmed it is using the Stellar network to achieve faster, low-fee cross-border transactions.
There is even bigger disruptive potential for crypto assets in the field of fundraising and venture capital, believes McCaleb. Startup projects which performed ICOs raised between $4 and $9 billions’ worth of digital assets, without relying on intermediaries and the limitations of investors. Performing an ICO also means that the team keeps ownership of the project, unlike selling shares in an Initial Public Offering (IPO).
The ascent of ICO projects reveals that there are “markets not tapped right now by the financial system.” Performing an ICO has been a free-for-all until recently, giving international access to funding for projects across the globe. However, regulations in China curbed the process, and were followed by increased limits worldwide.
ICO projects also allow retail investors to participate directly, although recently limitations have started to apply. The US Securities and Exchange Commission has put additional scrutiny, inviting startups for discussions to prove their token is not in fact serving the role of an unregistered security.
But at least in theory, ICOs allow anyone to buy into a future project. Tokens bought through ICOs may be used on the platforms, or they may be traded in case their value increases.
McCaleb also believes in the future, stocks may be digitized and transferred using distributed ledger technology.
“In the next 10 years I wouldn’t be surprised if all equity isn’t tokenized on some blockchain somewhere,” he said.
Any asset can be represented through a blockchain platform, and allow borderless trading with no barriers to entry. McCaleb believes in the idea of decentralized exchanges, since no centralized entity would be able to list all the assets in demand for trading. Decentralized exchanges rely on so-called “smart contracts” that ensure the conditions of exchanging assets. The process is verified and secured through cryptography, ensuring fairness and transparency.
Stellar itself is already running a decentralized exchange carrying coins and tokens, the Stellar DEX. Startups are starting to bridge the gap between securities and crypto coins. Recently, Maryland-based Securrency started work on a platform for buying stocks with Bitcoin.
The Stellar Development Foundation was started by Jed McCaleb and Joyce Kin back in 2014. Until its recent rebranding, the asset was named Stellar Lumens. In December 2017, Stellar (XLM) peaked with a market price above $0.90. Since then, the asset has lost more than 70% of its value. After the most recent market downturn at the end of March 2018, Stellar slid by 12% in just one day, to $0.19.
McCaleb is also an advisor in the Machine Intelligence Research Institute (MIRI). The organization, working on ethical and technological challenges of artificial intelligence, is also accepting crypto coins for funding, going beyond Bitcoin to also include a Stellar fundraising option.