Better together: The Era of Crypto Collaboration?
The cryptocurrency industry seems to have grown up. The harsh winter dampened the hype that surrounded it and the industry is starting to take itself seriously. And thanks to Facebook’s news, we won’t be alone in this sentiment for much longer.
This evolution of the industry was needed, and those that have weathered the storm are realising that there is strength — and new opportunities — in working together. But what will the era of crypto collaboration bring? We will see the end of fierce competition in favour of partnerships and collaboration? Is this the dawn of a new era in the crypto-sphere?
From revolution to evolution
There are signs that the crypto-sphere is changing; we have seen the industry shift from revolution to evolution. There have been far fewer new initiatives launched this year. Instead, we have seen large-scale collaborations and those smaller companies who have remained have chosen to focus on improving existing offerings and investing time into building relationships for potential partnerships. Across the industry, there is an air of collaboration.
The crypto industry has come of age and has started to take itself seriously. A part of this ‘growing-up’, or the industry’s evolution, is an assessment of which of a company’s use cases — or their strengths — has the greatest chance of success or longevity — rather than capitalising on capital and building as many new products as the market can hold.
It is about focusing on doing what they do well and partnering with those that do this too, or that complement what they do — with this collaboration obviously benefiting both parties.
This isn’t the first time that the industry has realised that there’s strength in numbers. In September of last year, it was announced that Ripple will lead a group of crypto startups to lobby lawmakers and financial regulators in D.C. to support crypto and blockchain innovation. The coalition of San Francisco-based crypto firms is working with the Klein/Johnson Group, a bipartisan lobby group, to assist the crypto and blockchain community in conveying to regulators that the industry needs support from the government. The group, called the ‘Securing America’s Internet of Value Coalition’, has been working to soften the government’s stance in order to encourage innovation and support competition in the ecosystem of global crypto markets.
Collaboration with those from outside of the industry is also expected; partnerships between crypto and traditional custodians were also predicted to grow as part of a panel at Consensus earlier this year. Traditional custodians are often reluctant to take on new coins due to institutional barriers, so they partner with crypto custodians to gain access to these assets for their customers. Meanwhile, the crypto custodians benefit from these arrangements because customers who may be cautiously interested in crypto assets are more willing to invest in them if they can do so via a trusted bank or custodian.
Facebook’s net of partnership
A perfect example of collaboration between outside the industry came just a few weeks ago when Facebook revealed plans of its Libra cryptocurrency. The partnership includes crypto firms, venture capital firms, nonprofit organizations, and major corporate financial, telecommunications, and technology service providers. While partnerships can be powerful to create progress in the crypto industry, we need to be wary of the consequences partnerships between large global corporations will bring, especially when creating a global digital currency.
Libra is trying to fill the void of a need for a global currency, as nation states and international institutions have been unable or willing to provide a global solution.
However, partnerships between major corporations mean they will be acting on behalf of their shareholders, and not in the interest of the Libra’s general holders. In our view, the solution is to create organizations that operate globally and represent their users. Such organizations should work in parallel and together with nation-states to represent citizens.
To conclude, the message is clear — partnerships will drive the industry forward. Startups need to demonstrate value, and that is as relevant to the crypto industry as it is to any other. However, while partnerships can be beneficial for firms in the crypto industry, be careful what you wish for when it comes to large corporations collaborating.