Crypto Roundtable: The Possibilities of Blockchain Technology

Guest contribution: the fund | Krypto-Roundtable

(Image source: © IMAGO/Hanno Bode)

From sneakers to investments in tangible assets such as art, real estate or classic cars to exclusive concerts that are held in a digital world — blockchain makes it possible. Nike recently tokenized “CryptoKick” shoes on the Ethereum blockchain. When buying a pair, the buyer receives a code that “links” him to the shoe. This means: The buyer can prove that he is the owner and that they are originals. To help the world learn about the innovation, the sporting goods manufacturer has hired influencers such as Kim Kardashian. Hype or not?

A token can be both fungible (exchangeable) and non-fungible (not exchangeable). In this context, non-fungible means that it is a unique digital asset, unlike bitcoins. However, the creation and development of such non-fungible tokens (NFTs) is inscrutable. The work “Everydays: The First 5000 Days” by US artist Beeple, for example, sold at auction for almost 70 million euros. Cryptopunks, i.e. small pixelated images, also attract a lot of attention.

Now celebrities like Kim Kardashian are also jumping on the bandwagon. But is such an NFT investment worthwhile? “Especially because we live in a fast-paced society and an NFT is launched quickly, I find it difficult,” explains Henning Wagner, CTO of FINEXITY AG, which deals with the tokenization of tangible assets. “Their value is determined by time and the spirit of the times. The best example is Pokémon sets, which sell for up to 300,000 euros on marketplaces. ”

“For me, NFTs are a buzzword similar to what Initial Coin Offering (ICO) was back then, i.e. the unregulated method of crowd investing used by companies whose business model is based on cryptocurrencies,” adds Max Lautenschläger, co-founder and managing director of Iconic Holding, a globally active crypto asset management group. In his opinion, the technology behind it, i.e. the tokenization of art, is more fascinating than the product itself.

Elon Musk's impact on the crypto market

The fact that individuals like Elon Musk also have great influence on the crypto market has only recently become apparent. Two emojis, so-called “Diamond Hands,” from the Tesla founder were enough to stop the decline of Bitcoin and give him a boost again. “If you have such an influence and thousands of people listen to you, then you can't act so recklessly,” Wagner points out.

But what does that say about our society when a single person has such an influence on the markets? “The really bad thing is not Elon Musk, but what that says about our zeitgeist,” says Lautenschläger. “A single tweet has more influence on the market than fundamentally important news. ”

“Elon Musk must be aware of his responsibilities. It is true that the press reveals that a significant amount of institutional money is now also flowing into the crypto market. But the market is still dominated by retail investors,” adds Max Heinzle, founder and CEO of 21.finance AG, which deals with the tokenization of tangible assets.

Is Bitcoin a climate sinner?

The biggest criticism of Bitcoin is its high energy consumption, which puts the cryptocurrency in a bad light in terms of sustainability. “The current alternative should be used in order to have a reasonable basis for argument,” Lautenschläger points out. The only alternative to cryptocurrencies that can currently be used as a basis for comparison is “centralised finance”, i.e. the banking system. In contrast to this system, the Bitcoin network is significantly more efficient and uses less electricity, “but this is only mentioned very rarely in the media,” says Lautenschläger. However, something is far from being good just because the alternatives are worse.

The mining process, i.e. the production of Bitcoin, should therefore also be analyzed. “Many miners are already working with renewable energy, for economic reasons in particular,” says Lautenschläger. Bitcoin is a decentralized system, which allows miners to operate from anywhere. This means: “They will primarily be located where electricity is particularly cheap. And these are mostly locations where energy is produced in abundance by the earth, i.e. where wind, solar and hydropower determine the energy mix,” adds Michael Geike, CEO of Advanced Blockchain AG, a development company that invests in blockchain software solutions for industrial companies and applications. For example, most mining operations today take place in colder regions because there is a surplus of renewable energy and the equipment can also be cooled more cost-effectively.

“What if Bitcoin is the greenest industry we've ever had? “, says Max Heinzle for discussion. He is referring to a report by Forbes magazine, which shows that 56 percent of the electricity mix for mining consists of renewable energy. In contrast, the US electricity mix only contains 30 percent of clean energy.

“As a community, we must correct the milestones and misinformation,” Lautenschläger underlines and points out that Bitcoin, as a decentralized payment system, does not have a press department to guide public discourse. Nevertheless, experts still see room for improvement when it comes to sustainability. The good thing is: “This is software that can be improved at any time,” explains Wagner.

Blockchain technology and ESG aspects

But while many investors focus on the environmental aspect, the ESG social and governance criteria are often neglected when making investment decisions. However, blockchain technology has a lot to offer in terms of sustainability in these areas in particular: “Blockchain will distribute added value worldwide just as the Internet once did,” Lautenschläger is certain. What he means by that is that blockchain offers the opportunity to set up the value chain of the financial world worldwide instead of concentrating it in individual banking centers such as Frankfurt, New York or London. “We are therefore no longer dependent on individual intermediaries who can be manipulated and hacked,” adds Lautenschläger. The properties of blockchain, i.e. security and transparency, can show off their strengths here.

Further potential of the technology

“With regard to issues such as security, data protection and privacy, but also transparency, blockchain technology could still make a difference. It's still a while, but it's coming — as certain as the amen in church,” says Heinzle.

Countries such as Estonia and Dubai are already integrating blockchain into their administration and using it in land registry offices, for example. By using the technology, every owner could prove beyond doubt that a plot of land belongs to them. Because: On the blockchain, the owner and other important data are stored decentrally. It is incorruptible and can only be overwritten from outside with the help of a “private key” — for example when buying or selling.

The technology could also prove useful in the supply chain. Bananas are one example. These must be stored at a specific temperature during the entire transport process. Port workers and customs are currently checking on a random basis whether the temperature has been maintained. With the blockchain, however, it is possible to continuously check the temperature without the data being falsified afterwards. This would make it possible to prove beyond doubt whether the cold chain was maintained throughout the trip. Lautenschläger explains that the supply chain will thus be significantly more transparent for end customers.

In the 90s, it was repeatedly said that the Internet would not prevail. But even as we could slowly see what could result from this, no one had the imagination of what our world would look like today, 20 years later, and how much it depends on the Internet. “I am just as fascinated today that we have no idea what our world will look like in ten years. For me, however, there is no question that there will be no industry that will not sooner or later use blockchain technology as a fundamental part of its business model,” concludes Geike.

The possibilities of blockchain technology

Would you like to learn more about blockchain, crypto and investment opportunities? Then we recommend the following of the fund podcast series on blockchain, which deals in detail with the opportunities and risks of technology:

Blockchain podcast, part 1: “Germany is leading the way when it comes to blockchain technology”

Blockchain podcast, part 2: “Elon Musk is not living up to his responsibilities”

Blockchain podcast, part 3: “The value of NFTs is determined by the spirit of the times”