 Live from Toronto, Canada, it's theCUBE. Covering Blockchain Futurist Conference 2018. Brought to you by theCUBE. Hello everyone, welcome back to theCUBE's exclusive couch here in Toronto, Canada and Arterio. We are here live breaking down what's going on in the Blockchain world. It's the untraceable event here. Tracy and team do a great job of untraceable. They're putting on the Blockchain Futurist Conference This is about the future, bringing the industry together. All the luminaries are here, Boundaries of Ethereum, Actors in the Ecosystem, influencers, Original gangsters, OGs are here. Of course theCUBE with our 2018 coverage, breaking it down. I'm John Furrier with Dave Vellante. Kind of wrapping up day one, Dave. I know you got to take off and head back on a flight home. Let's break down and analyze what's going on in the industry. Yesterday we had the first annual ever, first inaugural, Cloud and Blockchain Summit. Global Blockchain and Cloud Summit. Two worlds coming together. Here's a little bit different vibe. This is all about cryptocurrency. It's all about Blockchain. Big movements, speculators versus builders is my theme. And everyone's recognizing the certain trend of price shifts, billions lost in market cap that were gained last year, but still some are up. But the focus is about entrepreneurship on a global scale. This is the focus here, right? It's a lot of VIPs, a lot of players coming together. I don't see people crying in their wine about the prices, although you can see it on Anthony Diorio's face. Probably set back for the Ethereum community on the price. But still, the long game is what they're going after. Your thoughts and analysis. Well, you're definitely seeing a lot of talk about the boom and bust cycles. And we're hearing a lot from people, but by the way, there are a couple of guys who went big, maybe hedge fund guys or other fund guys that have taken a bath. Maybe they got in big in January, December, not the best time to get in. So you are seeing some long faces there, but generally the sentiment is, hey, these boom and bust cycles, they come and they go. We've seen it before. Now's the time to hunker down and innovate, execute and figure out how to add substance to value. Now, first of all, I would say a couple of things. One is, those guys probably have a store of fiat currency that they cast out. Number one, so they're feeling pretty good. Two is the big difference to me, John, is in 2018, crypto is much more in the mainstream news. You see it on CNBC, you see it in every medium, every day you get a medium post. Everybody's blogging about it, whereas obviously we've been blogging about Bitcoin for five, six years, but the mainstream media has picked up on it. Seven years, there you go. So the mainstream media has picked up on it, so it's much more front and center than it ever has been in the past. So I think that's a different dynamic. There seems to be still a lot of opportunistic sentiment. People are sanguine about the future. And I think that's because we're seeing some real hardcore innovation going on in real use cases. Now having said all that, the other scenario is there's just a lot of competition for quality projects. We're hearing too many coins out there. You're seeing all these ICOs tied to Ethereum and an oversupply right now. And you're clearly seeing that affect the price of Ethereum, which has dropped on a percentage basis much more than Bitcoin. It's down considerably this year, whereas Bitcoin actually is still up. Ethereum is trading about where it was last September. Bitcoin's up considerably since last September. So a lot of cycles, a lot of instability still, but a lot of optimism. The bottom line for me is that the big question that's coming out of this event in this whole week here in Toronto is why do cryptocurrencies matter? The mass influence and adoption of blockchain technology, where is that on the progress bar? This is the topic. And again, a lot of people that are poo-pooing this revolution, and I'm seeing it on my Facebook feed all the time, Bitcoin to zero, there's a lot of non-believers. Here's what I was saying, here's my analysis. I think that the comparisons to the dot-com bubble with all the irrational exuberance that was part of that phase, this ICO phase, is crashing, no doubt about it. The ICOs in the United States are down almost to nil. Certainly a lot of action going outside the United States, still unregulated to the wild, wild East or West, depending on how you call it. So yeah, that's happening. And a lot of the bad stuff's being filtered out. There's an emphasis on builders, which we mentioned. But here's the thing that no one might not see in the mainstream. During the dot-com bubble, there was all this companies that were started to get public. And that was because the market wanted it. That's what happened with the cryptocurrency ICOs. The market wanted more product and they just manufactured it and then they realized, oh shit, too many tokens. But if you look at the internet revolution, and I think this is the comparison with blockchain and crypto. You got blockchain, technology, cryptocurrency, which is token economics, are absolute game changers. And the demand for that is very high and there are more people coming on every day on a mass adoption basis. The internet actually never stopped. If you looked at internet penetration rates, Mary Meeker would point out at Morgan Stanley and now she's at Kleiner Perkins, that the internet adoption rate of the internet during the bubble and then post bubble continued to accelerate. That means more people got on the internet. So therefore the population of users became larger and larger every day. That really kind of level-setted the reality that this was not a fad, it was not going away. I see blockchain and token economics having the same trajectory where there'll be more people adopting the technologies and putting it into use than ever before. That's the tell sign. If that trend line continues to grow, the corrections will all take place, cycles will happen, but the entrepreneurs will follow the money. They're going to follow the user experience, they're going to follow the demand for opportunity. That to me is going to be the major tell sign and I think that's the general sentiment that I'm feeling here is screw the price of the tokens, yes there's too many tokens, clear out the dead wood, get back down to building companies. That's validated by the fact that there are more deals being done from a financing standpoint that are starting to look like traditional funding structures. Security tokens, equity, you're starting to see people talk about fundraising, lower rounds, not the big mega rounds. Money, that's going to be around seven to 30 million, 30 to 50, 50 to 100, 100 plus. This is going to be traditional structures, not the land grab utility token which gets you into a tailspin of basically managing coin distribution, managing all these things. There'll be a balance, but that's really kind of what's happening. So that's great analysis, John, I would add to that that the fundamentals are still in place. Blockchain attacks inefficiencies, where there's a middleman and there's inefficiencies and there's waste. Blockchain is being applied to attack those inefficiencies. I think the second thing is that new capital raising vehicles have catalyzed massive investments and are catalyzing innovation and a whole new breed of developers. The third point is this is a global phenomenon. You don't have to be in Silicon Valley or New York City or Boston or the United States or from an Ivy League school. It's happening around the world. You're seeing non-U.S. countries and island countries invite developers in, giving them tax havens, and as a result, it's becoming much more of a global phenomenon than a lot of the internet startups were. There are a lot of adoption barriers. I mean, you have the cyclicality and the volatility. You've got industries that are essentially entrenched, financial services, healthcare, lots of defense and aerospace industries, very much entrenched. It's going to take a long time for that collaboration to come together. And you also have a lot of scams. There's going to be a shakeout. We predicted that I think in February in the Bahamas, we predicted the flight to quality. People are trying to figure out where that quality is right now. And to your point, you're also seeing more hybrid models, more traditional equity models combined with token models. And that's not a surprise. You're going to see more and more of that as a hedge. The token model still gives people the potential for liquidity. And as long as that fundamental remains in place, I think that dynamic was here to stay. And also, you know, you and I have seen many cycles of innovation. You talk about in the industry, many waves. The people we talk to that have been through multiple ways like Bradley Rodder, Binon and others experience. They all know what's going on. The difference here that I think is interesting is that the smart contracts, the flight to quality, the companies that have buildable products are going to get the attention. Now the difference now in this community that I think is interesting, that makes the funding dynamic different, is you have now community dynamics. You've got open source software, cloud computing and new technology with new capital formation dynamics. I think those three things are the perfect storm of innovation that's being overlooked. And the interplay between that is going to give us a look and feel of an industry that we've never seen before. So we can compare and contrast waves. Oh, PC, client server, blah, blah, blah. I don't think this is going to look like any of those waves is going to look different. And that's going to be really the shakeout between the pundits who claim they know what's going on or predictions, whatnot. Talking to the people, putting the ear to the ground and the communities, that's key. And for the companies, the ones that are going to win are the ones that can build community, tap into communities and grow communities because they're now part of the ecosystem. It's not just you selling product to them. They got to be a bi-directional symbionic relationship between communities at large in this ecosystem. I think these are going to be new dynamics. They're going to be impact valuation. It's going to impact time to market, time to value, and ultimately give the entrepreneurs and the investors what they need, which is good outcomes in the process. You know, it's interesting you were saying about the waves. And the waves in the past, certainly looking back, were quite easy to identify and they tended to be architectural. You know, centralized mainframe, and you went to a client server, then you went to the sort of public internet and this cloud of remote services. The next wave is maybe not blatantly architectural, but it's this blending of digital services that's ubiquitous across all industries. And I think the key is there's an automation layer on top of these digital services, which is powered by AI and machine intelligence, machine learning, and deep learning, and blockchain is part of that automation layer. And people are building new businesses on top of that and disrupting existing industries. I think there's no industry that's safe from disruption. As I pointed out before, there are some entrenched high-risk industries like financial services, healthcare, defense, aerospace, education, that are going to take longer. But ultimately, there's waste in all of those businesses. And I would say, I think a lot of the incumbents are going to hop on this trend and do very well picking up blockchain and defending against the disruptors. Not all will make it, but a lot of the big guys are going to put some serious resources into this and they're going to lean in to blockchain in a big way. And just to kind of wrap up, I think the other factor that we're seeing here is that engineering-led dynamics are happening. Blockchain's got to lay down the plumbing, it's got to be stable. Decentralized applications over the top with token economics is the business model innovation. We've got technology theater and booming with innovation with engineering-led initiatives. That's got to accelerate. That's infrastructure. That's got to be more cloud-like. That's going to be much more stable. That's got to get laid down. Got to put the roads down, if you will. And then the business model innovation coming from the software, this is the game changer. So you're looking at all the smart money, smart money saying, okay, let me see guys building product. Let's see some unique IP. Let's see some token economics that are Nobel and different for what's happening. That to me is going to be the new investor algorithm, if you will, for vetting. And it's been that way in a way, the smart money follows the smart engineers. What are you building? And then they vet that with other standards. So again, big engineering-led focus. So what would you do now? Okay, so you were hearing this week too many damp tokens. Everything's tied to Ether and most ICOs. What would you do now if you're an entrepreneur, you have an idea, you know, you have a potential to build a community. Where would you focus? Would you just try to float another token? Would you go overseas? What would you do in that situation? I would look at the regulatory frameworks as a way, as a guidepost to risk management, right? I think you're going to see some regulatory regimes try to manage the bridge between slow changing old guard to new fast and loose crypto. Because look it, it's fast and loose, but there's real people that are working on it. I would focus on the real people that are builders. I'd look at the mechanisms that they wear, their domiciling and what they do with the economics of the tokens. One thing I will tell you is that as an entrepreneur, this is like a golden rule, your focus is everything. Focus, focus, focus. If you're focused on managing distribution of coins and the arbitrage of coin pricing, that takes away from the focus of engineering and building. I think that's going to be like an easy binary test for an investor to say, what are these guys working on? Is the token working for the venture or is the venture working for the token? That is a fundamental mindset. If that is not in the right position, it should be the token works for the venture, not the venture working for the token. That to me, I would run for the hills. If I see someone working for the token, I'd say I don't want that deal. Because you may pass up some money right in the short term but you're going to miss the long game. That's the way I would look at it. And again, I would add to that, I mean, yeah, okay, so there are a bunch of crypto billionaires that got minted and they got in early and good for them. But that doesn't mean there's not more opportunities. I mean, I think of a company like Dell. Michael Dell wasn't the first in PCs. Compact was the first. Rod Canyon, the back of the napkin, that urban legend. But what Michael Dell did is he improved on the system. He took inefficiencies out of the supply chain and became the dominant player. So first move advantage, yes, okay, great. You missed being a billionaire potentially, but the wave tends to get bigger after the market matures. And as a result, I think my focus would be on building to your theme, building that community, demonstrating value. And then eventually I think you're going to be able to use blockchain, cryptocurrencies, tokenization, crypto economics to power your business. But figure out a way to actually execute today and prove value. That's what I would do. Again, all great stuff, great analysis, Dave. Great to see you here. We're again, this is theCUBE's coverage in Toronto for Blockchain Futurist Conference. Again, it's part of our 2018 initiating coverage of the blockchain industry with our video presence, engaging the community as an upstream content project, sharing the data with you so you can make the decisions and understand who to connect with. That's our model. We're going to do it. We've been offering Bitcoin and Blockchain since 2011 on siliconangle.com. That's our journalism site. Go to thecube.net. That's where we have all the videos and soon to be our CUBE token coming out. Be part of our network. Join our community if you want to get engaged. We're happy to have you. Thanks for watching day one of the Futurist Conference here in Toronto, Ontario. Thanks for watching.