Guest view: Technology, Hype, and the Future:  Cryptocurrency


By James H. Lee

The view is always better from the edge. In this new column for Delaware Business Now, I’ll cover new technologies and growth investments. As a professional futurist, I keep my finger on the pulse of change. My background as a financial analyst helps me to distinguish between hype and opportunity.

This month, I’d like to cover an emerging technology with an enormous generational divide… cryptocurrency. Never before have I seen anything create such excitement for young traders while generating complete confusion amongst experienced investors.

When Bitcoin was introduced to the world in 2009, it was built on an entirely new technology known as the blockchain.

A blockchain is simply a distributed public history of transactions. Each new transaction adds another link to the chain. Those transactions are stored anonymously on thousands of computers. It is a secure network, because in order to break into it to change the records, you would need to hack all the nodes simultaneously—provided that you can even find them. New bitcoins were issued to “miners” for their services in verifying new transactions as they appeared on the blockchain. As the system grew in complexity, more bitcoins were gradually introduced into circulation. In this way, the blockchain paid for its own maintenance.

There are at least four breakthroughs that happened here:

Breakthrough #1: The introduction of an entirely new form of money

Cryptocurrencies are a computational store of value. Instead of being backed by gold or the taxing authority of a government, cryptocurrencies are only as useful as their software code. They have the advantage (or disadvantage) of being almost entirely unregulated. As such, crypto can also be transferred much more quickly than conventional money. Because the amount of currency being introduced into the system is predetermined via algorithm, some have a limited supply and may be better able to maintain value over time. Others may quickly become obsolete.

Breakthrough #2: The same technology used to track the movement of Bitcoin could be used as a secure means to track the change of ownership of any other asset, physical or digital

This means that the chain of ownership for anything could be tracked using blockchain technology as a way that is resistant to hacking and forgery.

Joi Ito of the MIT Media Lab says, “My hunch is that The Blockchain will be to banking, law and accountancy as The Internet was to media, commerce and advertising. It will lower costs, disintermediate many layers of business and reduce friction. As we know, one person’s friction is another person’s revenue.”

Some of the potential applications include:

  • Global transfers and payments (banking)
  • Securities trading settlements (investments)
  • Recording of real estate transactions (property)
  • Crowdfunding and microfinance
  • Management of health records (hospitals, insurance)
  • Shipping and logistics (manufacturing)
  • Identity verification (cybersecurity)
  • Digital rights management (media)

Bitcoin was the first cryptocurrency to achieve major success. However, it also has some real limitations.

There are constraints to the number of bitcoin transactions that can be made per second. The platform also consumes remarkable amounts of computational energy to maintain. As more transactions are added to the blockchain, the amount of energy required to maintain records will increase.

Ethereum is a competing cryptocurrency that was designed from the ground up to compensate for Bitcoin’s limitations. While the focus of the Bitcoin is on the currency, the focus for Ethereum is on building a sustainable blockchain platform that could eventually be used as a decentralized world computer.

Perhaps most importantly, Ethereum opened the way for….

Breakthrough #3: Smart contracts

Think about what can happen with self-executing legal agreements written as software. In this way, legal contracts could be self-monitoring, with payments made automatically when certain conditions are met. Smart contracts work even better when 5G and the emerging Internet of Things are considered.

Something fascinating is happening at the intersection of finance, law, and software coding. Imagine everything that can happen with programmable money that can follow instructions using Boolean logic (if/and/or/then). This leads us to the most recent game changer for cryptocurrency…

Breakthrough #4: Decentralized finance (DeFi)

The first killer app for cryptocurrency was being able to send money around the world in seconds versus twenty-four hours for a bank wire. Fast, cheap, no middleman required. This creates a financial world with no borders or regulations.

As the ecosystem evolves, smart contracts built on Ethereum are able to perform many other functions previously controlled by banks. But unlike banks, DeFi apps are open-source. Anyone can create DeFi apps, and anyone can use them, regardless of where they live. It is now possible to exchange currencies (via the Uniswap app), borrow and lend (Compound), create futures contracts (Synthetix), run a predictions market (Augur), or raise startup funds by going public via an initial coin offering (ICO).

Some stablecoins built on the Ethereum network (such as Tether and USD Coin) live in both worlds—they have their value pegged to the U.S. dollar, but they are compatible with DeFi apps and can be transferred easily between digital wallets.


The U.S. finance industry is ripe for revolution. Fees are too high, and settlements are too slow. Roughly 80 percent of all transactions are still processed in COBOL, a programming language that goes back to the days of cardboard punch cards.

It’s time for a serious update.

Is Ethereum the next big thing in digital finance? Possibly. There are other smart contract platforms worth watching, too, including Cardano, EOS, Stellar, Tezos, Hyperledger, Chainlink, and Waves. It could be a wild ride—and a whole new way of doing things by 2030.

James H. Lee, CFA, CMT, CFP, APF, is the founder of StratFI, Wilmington.

Disclosure: Information contained herein is for educational purposes only and is not to be considered a recommendation to buy or sell any security or investment advice. The securities listed herein are for illustrative purposes only and are not to be considered a recommendation. The author may personally hold positions in the securities mentioned.

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