Blockchain and Bitcoin for Fun and Profit


By: R. Scott Raynovich

Blockchain is a riot. So much so, that Bitcoin just hit a new all-time high of $9,500 and the magic word "blockchain" have taken an unknown stock symbol to the moon. Riot blockchain (RIOT), a medical diagnostics company that changed it name from Bioptix Inc. to adopt blockchain, rose 400% after the name change.

Back in the Internet bubble of the late nineties, crafty hucksters tried to take advantage of the easy flow of capital by tacking .com onto their names in press releases. Of course there were also legitimate entrepreneurs like Jeff Bezos that managed to become among the most valuable companies in the world. A similar trend is taking hold in blockchain. How far will the blockchain boom go?

Riot's official explanation makes sense, whether you believe it or not. Its core business was not faring well, so the company is using its capital to refocus the business from biomedical to investing in blockchain and cryptocurrency technologies. Bloomberg recently recapped the trend.

From McAfee to Overstock

Other companies are taking a similar approach. Security technology legend and colorful entrepreneur John McAfee is chasing blockchain riches with his company MGT Capital Investments (MGTI), which has recently shifted emphasis from security technology to Bitcoin mining. Then there's Overstock (STOCK), the struggling Utah ecommerce company whose stock caught fire after it announced it would accept Bitcoins.

Curious about what all the hype is about? Blockchain technology is a distributed digital ledger technology that uses cryptography to confirm transactions by decentralized consensus. It has the potential to disrupt just about any industry that needs to record or broker transactions. The most famous application so far -- and one that has created billions of dollars in wealth -- is crytocurrencies such as Bitcoin, which uses blockchain technology to confirm and record every transaction, but applications could be far-reaching such as management of real-estate transactions, drugs, technology, or medical records, just to scratch the surface.

By the way, Bitcoin over the Thanksgiving weekend set a new all-time high as it vaulted over the $9500 level, with $10,000 clearly in sight. It's only up 800% this year.

VC Frenzy Builds

Of course, venture capitalists are jumping in on the fun, though their enthusiasm has taken a while to take hold. There's been a surge of investment in blockchain tools and platforms. There's actual a firm called Blockchain Capital, based in San Francisco. This VC firm has backed companies with blockchain-licious names like Bitfurry, Blockcypher, and Blockstream. It's also got investments with major cyrpto exchanges such as Coinbase and Kraken.

Even thought the crypto boom has its skeptics among financial traditionalists, including Chase CEO Jamie Dimon, many well-respected inevestors such as Marc Andreessen and Fred Wilson are on board. Wilson's firm, Union Square Ventures, has been an aggressive promoter of blockchain, Bitcoin, and the cryptocurrency boom. Andreessen has also been an outspoken supporter of the blockchain boom, and his firm Andreessen Horowitz partnered with venture capital giant to start a cryptocurrency hedge fund oddly named MetaStable Capital.

Wilson, founder of Union Square Ventures who has invested in blockchain companies including Coinbase and Blockstack, said that the traditional VC industry has been too skeptical about blockchain and bitcoin, which has made it a good investment.
"I do know one thing," wrote Wilson on his blog. "When not one hand goes up in a room full of VCs, go there. It is going to be profitable."

Wilson said he owns a "material amount" of Bitcoin, but "less than his wine collection." I think that's the equivalent of an average person owning an amount of Bitcoin less than their second vehicle. He still believes it may fail,

Given the amount of momentum moving into blockchain, I would not expect this theme to dissipate any time soon. In fact, I expect it to accelerate. That's why Futuriom is making it's own bet on blockchain -- we're going to be writing a whole lot more about it.

(Disclosure: The author since January of 2017 has owned an amount of Bitcoin that was once worth less than his beer collection but is now worth more than his wine collection -- which doesn't mean much because he only owns a few bottles of wine. The author also owns a small position in MGTI)