26 | FORBES INDONESIA AUGUST 2017CRYPTOCURRENCIES and
blockchain assets are the newest,
and potentially most promising,
asset class. Investment returns
in cryptocurrencies have out-
performed—by far—traditional
assets. The Lawnmower Block-
chain Index is up 374% versus
world primary equity indices
16% and 4% for bonds (using the
Bloomberg Barclays global aggregate total return index).
However, public opinion and investors’ minds on cryp-
tocurrencies are divided, and incite philosophical, or even
emotional, debate. The cryptocurrency-based blockchain
economy is an asset-based economy, while the fractional re-
serve banking system based on fiat currency is a debt-based
system. High volatility and unexplained falls, risks of hack-
ing attacks are among the reasons why many still shy away
from cryptocurrencies and think of it as “magical Internet
money.” In a free, decentralized global market where vola-
tility is not suppressed by trillions of central bank-created
QE, the market becomes more volatile as it becomes more
efficient, acting faster to information changes.
Some say they like blockchain but they do not like cryp-
tocurrencies such as Bitcoin, Ether and Litecoin. This ar-
gument is like those in 1994 arguing a privately controlled
Intranet is better than a decentralized Internet. A private
blockchain without a trustless and distributed consensus-
based cryptocurrency is nothing more than a shared In-
tranet. Cryptocurrency proponents feel that blockchain, or
distributed ledger technology, could soon give rise to a new
Internet era even more disruptive than the current one.
Blockchain’s ability to generate unprecedented oppor-
tunities to create and trade value via cryptocurrencies will
lead to a generational shift in the Internet’s evolution, from
an Internet of information to a new Internet of value. Gov-
ernments that embrace cryptocurrencies can reap enor-
mous benefit by using the money native to the Internet. If
a country cracks down on Bitcoin and cryptocurrencies, it
would be like saying no more TCP/IP and innovation.
Countries that do adopt the In-
ternet of value are going to be much
better off. The Internet has allowed
massive disruption: Netflix now
threatens Hollywood, Spotify domi-
nates the music business, Google
and Facebook dominate advertising
and media businesses. Cryptocur-
rencies have the potential to do that
to the finance industry. The new
finance industry will settle on where
the innovation will be for smart con-
tracts and cryptocurrencies. It is Sil-
icon Valley’s replacement for the old
finance infrastructure. Traditional
bankers in suits were the miners of
the old generation, getting paid in
the currency of the central bank run by un-elected officials.
The new Federal Reserve is the cryptographers.
The new owners of the financial infrastructure are
the holders of cryptocurrency, which is, or could be, any-
body. Many today would like to have invested $100,000
into Facebook in 2004 if given the chance. The exis-
tence of cryptocurrencies today is a second chance. For
the first time, open-minded early adopters can make a
Silicon Valley venture capital style bet on the future of
money and finance. The future is generally an uncer-
tain place. Like any other investments, cryptocurrencies
carry risks. However, the risk of not owning the native
money of the Internet is even riskier. FCRYPTOCURRENCY AND THE
BLOCKCHAIN ECONOMY
RAINER MICHAEL PREISS IS PORTFOLIO STRATEGIST AT TAURUS FAMILY OFFICE IN SINGAPORE. THE VIEWS EXPRESSED ARE HIS OWN.MONEY & MARKETS RAINER MICHAEL PREISS
Like any other
investments,
cryptocur-
rencies carry
risks. How-
ever, the risk
of not own-
ing the na-
tive money of
the Internet is
even riskier.REUTERS