The crypto and blockchain industry has been fascinating and rapidly changing for as long as I can remember. I had a chat with Toby Lewis, the CEO of Novum Insights, an analytics firm focused on crypto and blockchain. He shared his thoughts on where we’ve been, what he’s watching and where we go from here.
Colin (CP): Hi Toby, thanks for joining us. With quarantine going on everywhere, it’s great we could connect digitally.
Toby (TL): Thank you for connecting, yes it’s good to join you.
CP: Could you give me a bit of information on your background and Novum Insights?
TL: Certainly, previously I co-founded a global corporate venture capital analytics firm, in 2011. We looked at large corps like Google, Qualcomm and other corporate venture investments. We had more than 600 customers, who looked to us to help identify trends. After doing that, I decided that in my next business, I wanted to go much deeper into the tech. In 2016, I set up Novum Insights, with the aim of digging deep into one sector, and finally chose to focus on blockchain, which was a “through the rabbithole” moment for me. Ethereum was quite new and there weren’t many tokens, but that changed very rapidly after I started working in the sector. Initially there was lots of smoke and mirrors, but a lot of excitement. It was quite difficult to get our head around everything in the early days because so much was happening, which is still the case. But over the years the dust is beginning to settle and things are starting to change. Now with the current crisis, the reality is that things are getting more interesting with blockchain and crypto acting as a digital dataset. I think that the virtue of a monetary system based on information will begin to show through as we are all under lockdown.
The Novum Insights team is quite diverse, with backgrounds in data science and enterprise, we are people that are passionate about analytics and data collection on frontier technologies.
CP: You made some really interesting points about how chaotic things were when you got started. Can you talk to me a bit more about what you started looking at to understand what was going on?
TL: When we got started out three and a half years ago we wanted to go very deep into the technology to gain a deeper understanding of what was really going on in the industry. With blockchain that meant understanding which protocols were being used, and ecosystems, and signs of traction. We looked at sentiment analysis and github profiles and trading data. Next steps adding blockchain level data. From there we identified 14,000 companies to look at. We then delved into particular focus areas. From there we got started by putting together some sponsored reports, including on securities tokens.
CP: What have you seen change over the last three and a half years? Have we had clear phases in the industry?
TL: In 2016, people were just beginning to understand it and tended to boil the ocean. So we thought that it was important to really understand what was real and what wasn’t to best track the sector. Most people were interested in blockchain and felt the excitement but only knew buzzwords. 2016 was also the Ethereum era, the time where everyone was saying: “yeah, so we think we can get smart contracts that work on top of that and get real logical money”, sadly there was a degree to where reality sat, and what was being promised. Everyone thought smart money was the important thing, and it was an evolution. Programmable money got people excited. It eventually set in that most people couldn’t really build anything on it yet though.
CP: And where would you say we are now?
TL: It’s interesting, as we are getting less hype, we are getting projects that are much more real. Now is likely to be quite an exciting time, but less speculative. That said, the market is still driven by speculation, and needs to move on from hype. DeFi is an exciting area, but we’re going through bumps at the moment.
The reason that I have alway been excited in the space is creating a smarter money without a central party and of course the ease of transferring information. There is still a big issue around getting things to actually work, and a lot of skeptics are questioning if you can ever get a lot of these smart contracts to work at all.
CP: You bring up the current situation around Coronavirus and the economic situation, what impacts do you think that could have?
TL: I’ve been watching trading on Bitcoin recently, especially as this crisis and money printing has started to unfold, this is the time to watch how it performs. Now will be the first test. What happened initially is that crypto fell with everything , and even harder, but bounced back a lot and now just moves around a range. Look at how the US Dollar traded, structurally the USD is the currency that performed the strongest in the fall. In Bitcoin and other cryptos, it’s been an interesting yoyo effect, and they’ve been bouncing up and down, Long term, with Bitcoin possibly setup as an alternative to traditional money, we now get to test some of the aspects that make it similar or different to other monies without the backing of a central bank or government.
CP: Outside of cryptocurrencies, another trend we’ve heard a lot about is securities tokens, what are your thoughts on that development?
TL: I got interested in the concept of digital securities quite quickly, by mid to late 2017 when it became clear that a lot of tokens would be deemed securities. I had a thesis that a whole brand of regulated securities that effectively enabled more institutional investors to get into these assets could find a strong market. When Jay Clayton came out and said: “every token he has seen is a security”, the token industry got killed almost overnight and people started to digest what this meant, but wanted to wait until the dust settled. Those that had already begun their token sale just carried on. In early 2019, as the dust settled, a lot of the smart people focussed on regulated exchanges and tradeable crowdfunding, yet to date this hasn’t played out. Many of the securities tokens exchanges have run out of money. At the end of the day it will have a lot of the costs of securities, and it may make sense to have traditional players come forward with security tokens rather than challengers.
CP: And what kind of themes are you looking at now?
TL: Digital acceleration and cashless payments are at the forefront. With Coronavirus we have seen cash evaporate overnight, with many shops not wanting to accept cash.
In the next 12 months, we could see a number of interesting token economies that start to take off and can work at scale. Economies and the game like nature will come to the fore while people have more time to tinker. Clearly, many of the NFTs (Non-fungible tokens) have a loyal following and that’s exciting. The full on crypto speculation and day trading should boom over the next year with everyone stuck at home. People will realise that they can do leveraged plays on crypto which will bring new people in. Coinbase now has 30m customers and Revolut has 10m, which gives you an idea that there is a groundswell of people wanting to play around with the new form of digital cash. Even central banks talking about CBDC (central bank digital currency), with bail-out packages having had plans to look into a digital dollar, and the Chinese digital currency being an interesting area to watch. Lots of people are bearish about Libra, but I’m excited to see new forms of doing business and how they’ll work. It will likely go forward in one way or another. With lots of people abandoning it, Facebook is still very publicly supportive. It is exciting to see marketplaces, even if there is a concern of a large central player in the system, and is the first experiment in weaving social and digital money.
CP: What do you see happening outside of the purely crypto space?
TL: Large consortiums are interesting for how established businesses begin to use blockchain for supply chain and other areas, and there is more pressure to crack digital identity.
One year from now, I believe that there will be a lot of the tools needed to seamlessly transact. Issues around notarisation will begin to fall into place. One such element that could see a boost is crowdfunding, which is more needed at this time than ever before. Finding ways to get capital to small businesses in a clever way would be useful.
CP: Wow, that was a whirlwind, thank you very much for sharing that.
TL: Thank you.
As always, nothing here should be construed as financial advice, recommendation or endorsement of any project or cryptocurrency.