Crypto technology will transform our economy, politics and society.
And in the process, it will offer investors some of the most amazing profit opportunities we’ve ever seen.
I’ll tell you about four major mega trends it will support. But first, some disclosure:
Unfortunately, the crypto space also has a dark side. It suffers from lax standards, murky operators, marketing hype and periodic market crashes. It desperately needs the clarity that only robust, impartial ratings can provide.
To that end, my firm recently became the first financial rating agency to issue grades on cryptocurrencies. They’re on a scale from A to F (similar to school grades), using a computer model that examines each crypto’s technology, adoption and investment risk/reward.
When we launched our cryptocurrency ratings in January, bitcoin initially received a C+, while no currency merited an A. This enraged crypto fans around the world, setting off a firestorm of protest on social media.
We were not surprised.
The industry reaction was similar to that of the nation’s large insurance companies and banks that we rated D years ago. When they went bankrupt, those who heeded our warnings avoided big losses, and the accuracy of our ratings was recognized, including by the U.S. Government Accountability Office (GAO).
Likewise, crypto investors who used our recent ratings could have avoided large losses as bitcoin plunged.
The Potential of Cryptocurrency Technology
Our ratings model tells us that older, tried-and-tested cryptocurrencies, such as bitcoin (currently B-) and Ethereum (C+), face challenges with slow speed and limited scalability.
But newer cryptocurrencies — such as EOS (B-), NEO (B-) and Cardano (C+) — which promise to overcome these issues with more advanced technology, are still mostly experimental.
Meanwhile, many cryptocurrencies, using copycat or buggy technologies, get D grades or lower.
And virtually every cryptocurrency suffers from price volatility.
However, neither investors nor policymakers should let these challenges overshadow the potential of cryptocurrency technology to help overcome four of the most serious threats to modern society.
The technology is based on blockchain, or, more broadly speaking, distributed ledger technology (DLT).
Essentially, what this means is that, instead of storing big databases in a central location, which can make them sitting ducks for hackers, DLT stores data across multiple sites.
So to penetrate DLT databases, hackers would have to break into an insurmountable number of computers all over the internet. In addition, DLT supports a broader, more efficient decision-making process for almost any kind of institution.
The potential benefits are vast.
4 Powerful Crypto Mega Trends Ahead
Mega trend No. 1. DLT could help modernize democratic election systems, largely eliminating voter fraud, vote count inefficiencies and hacks.
Mega trend No. 2. DLT could provide the foundation for a more stable financial system. Indeed, bitcoin was originally created in the wake of the 2008 debt crisis as an alternative system that would not require large government bailouts or massive quantitative easing. And today’s newer cryptocurrencies take this a step further by clearly defining rules of monetary policy.
Mega trend No. 3. DLT also supports a new kind of social media platform. One, already in operation, allows users to store their data on the blockchain and rewards them for their content contributions with cryptocurrency. Another still in development aims to add key features, such as user privacy and user control over data.
Mega trend No. 4. Overall, crypto technology could provide the ultimate in protection against hacking. Massive data breaches, such as those at Facebook, Equifax, Yahoo and countless others, would have not been possible if their platforms and business models had been built on DLT.
Nor would it be possible for foreign cyber actors to invade America’s critical infrastructure sectors, such as energy, nuclear, water, aviation and manufacturing.
Right now, the crypto markets are quiet. Although it’s too soon to say with certainty that it’s the big bottom, it’s clearly a much better time to start investing than during the buying frenzy we witnessed late last year.
For anyone willing to accept the risks, the profit potential remains enormous.
Martin D. Weiss, Ph.D., and Juan M. Villaverde