Take a look at Ethereum. The company bills itself as a blockchain platform for others to build apps on. Blockchain is the underlying technology behind bitcoin and acts as a decentralized ledger of transactions. But its uses span far beyond bitcoin. Ethereum has its own blockchain which companies like Microsoft and J.P. Morgan are experimenting with.
Ethereum is specifically designed for so-called “smart contracts” which are pieces of software that execute a contract once certain conditions are met by all parties involved. This removes the need for complex paperwork and errors.
Ripple is another blockchain company that is working on cross-border payments across different currencies in seconds. The digital coin created by the company called XRP, acts as a bridging currency to help facilitate transactions.
Both Ethereum and Ripple have seen stunning rallies this year, but both are in the early stages of their experiments. But in the future, valuing them could be easier. For example, if Ripple began to process a fraction of the trillions of dollars that is transacted across borders, we could start to put a price on one XRP.
If Ethereum was responsible for a number of trade finance deals, we could use a similar valuation metric.
Of course, this is all very simplistic, and the biggest risk is that people lose belief in these platforms and cryptocurrencies. They are also in danger of being replaced by something better.
Cryptocurrencies or digital tokens are here to stay but it’s unlikely they’ll survive in their current form. One big plus of this current bubble bursting however could be that we get some real innovation across a number of industries, with valuations a little clearer to understand.
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