The Ledger: IPOs to Rival Dotcom Bubble, Facebook ‘GlobalCoin’ Coming Soon, Billion-Dollar Blockchain Buybacks

2019 is poised to be the biggest year for U.S.-listed initial public offerings since the dotcom bubble.

That was one of the findings in a piece I contributed to the recently published Fortune 500 issue of the magazine. As Kathleen Smith, cofounder of Renaissance Capital, an IPO-tracking firm, told me: “We think we can get to over $ 100 billion in issuance,” or money raised by capital market debutantes. The last record was set in 2000, when companies pulled in $ 97 billion.

This projected record-breaking year has been propelled, in part, by so-called unicorn tech companies. Venture capitalists, looking to wind down their outstanding funds, have at long last dug their heels into the fattened flanks of their portfolio companies, compelling them to list on stock exchanges, though years later than usual. The urgency to raise money from public investors had been forestalled by a new breed of deep-pocketed private investors ready to shower firms with ample, late-stage funding. The trend is perhaps best epitomized by the mega-sized cash injections of Softbank impresario Masayoshi Son, the Don Corleone of Silicon Valley, whose offers, doled out of a $ 100 billion, Saudi-soaked “vision fund,” are not to be refused.

The rise of Goliaths has made life more difficult for the Davids. Barry Silbert, who runs Digital Currency Group, a cryptocurrency conglomerate, told Fortune during an appearance on a recent episode of Balancing The Ledger that, since selling SecondMarket, a marketplace for people to trade private shares in startups, to NASDAQ in 2015, he has kept his distance from, and been disappointed in, the world of public equities. “I continue to think the public markets are broken in that they’re no longer accessible for smaller, fast-growing companies,” he said. “I think that’s a shame.”

How will the financial industry adapt to such toughened conditions? Like many techno-optimists, Silbert has set his sights on software solutions. He is looking, unsurprisingly, toward innovations sprouting from blockchains and digital currencies. Binance, the cryptocurrency exchange giant, has been testing out “IEOs,” or initial exchange offerings, a descendent of the speculative token sale or initial coin offering (ICO), for instance. (“I wasn’t a fan of ICOs,” Silbert noted on our show. “But I do think that experimentation like that is important,” he added, describing himself as “philosophically supportive.”)

Regulators are less sure. Especially in the U.S., recent guidance has forced entrepreneurs into tough spots. Jeremy Allaire, CEO of Circle, a cryptocurrency outfit that recently laid off 30 employees, said he was “deeply frustrated” by the U.S. Securities and Exchange Commission’s stance on digital assets. Fred Wilson, an investor at Union Square Ventures, called U.S. securities laws “very damaging policy” in a post on Twitter. Kik, a chat app on whose board Wilson sits, has vowed to battle the SEC over a $ 98 million ICO the startup held in 2017. (The company is soliciting cryptocurrency donations to pay legal costs associated with the fight.)

It’s unclear what the future of capital formation, public markets, and equity investment will hold, but there are guaranteed to be big changes–or at least a blossoming of alternatives–in the years ahead. As Silbert forecasts, over the next decade or so, the financial industry “will look a lot different.”

The Ledger team tends to agree. Indeed, we’ll be discussing the multifarious possibilities with the industry’s top minds at Brainstorm Finance, our invitation-only, seaside retreat in Montauk later this month. Do email us if you’re interested in an invitation.

GOT TIPS?

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Robert Hackett
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DECENTRALIZED NEWS

To the Moon… Facebook’s GlobalCoin is coming. Transferwise doubles valuation to $ 3.5 billion. Goldman Sachs-backed Marqueta reaches $ 2 billion valuation. Mike Novogratz’s Galaxy Digital reaps a handsome return from Block.one. Robinhood opens cryptocurrency trading in New York. Startup Zero raises $ 20 million for a debit card-like credit card. AT&T is accepting cryptocurrency payments via BitPay. European Central Bank: “crypto-assets do not currently pose an immediate threat to the financial stability of the euro area.” Bitcoin for foreign aid? Wall Street isn’t sold on Silicon Valley’s blitz-scaling unicorns.

…Rekt. Circle lays off 10% of staff. Binance sues Sequoia Capital for reputational damage. IBM and State Street lose top blockchain execs. Uber and Lyft drivers artificially inflate surge pricing. Google stored passwords in plaintext. Snapchat employees spied on users. Real estate giant First American leaked hundreds of millions of mortgage-related documents. An engineering manager at BitGo lost $ 100,000 to a phone hacker. Young people aren’t saving their money because climate change. Witness Breaker Magazine’s swan song.

BALANCING THE LEDGER

?Click to watch.

In lieu of Balancing The Ledger, here’s a clip of Fortune’s Jen Wieczner hosting a debate about the investment prospects for gold vs. Bitcoin at the SkyBridge Alternatives Conference, or SALT, in Las Vegas earlier this month. The contenders were goldbug Peter Schiff, chief economist and global strategist at Euro Pacific Capital, who squared off against Bitcoin bull Barry Silbert, founder and CEO of Digital Currency Group (and recent guest on Fortune’s show).

Skip ahead to 3:42:40 for the interview.

BUBBLE-O-METER

6,567%

That’s the return early investors in Block.One, a much-hyped cryptocurrency startup and main developer of the EOS blockchain, are set to reap from an unusual buyback program, Bloomberg reports, citing a letter to shareholders. If someone bought $ 100,000 worth of Block.one shares less than three years ago, that stake would now be worth $ 6.6 million. Block.one is proffering $ 150,000 per share for up to 10% of its stock, valuing itself at about $ 2.3 billion, despite 2018’s market downturn and the company having no real product.

MEMES AND MUMBLES

Bend the knee. For the Game of Thrones fans here (if there are any left after that last season): Jerome Flynn, a.k.a. Bronn of Blackwater, is advising a cryptocurrency startup for vegans. Yes, you read that right. As Gizmodo jeered, “no we didn’t just throw darts at a wall covered in buzzwords.”

Now if you’ll excuse me, I have to get back to recording myself lip-synching “Old Town Road” while busting out Fortnite dance moves on an electric scooter for my devoted TikTok following.

FOMO NO MO'

Cracking the time capsule. In commemoration of the 30th anniversary of the World Wide Web, Ars Technica republished a 2011 retrospective tour of the earliest web browsers. Mosaic and Netscape were not the first attempts, even if they were the most successful (at least initially). It’s interesting to contemplate the origins of this crucial bit of technology as we look to the onset of “Web 3.0,” the web’s next phase of development, which is anticipated to involve decentralized services and, potentially, cryptocurrency.

When Tim Berners-Lee arrived at CERN, Geneva’s celebrated European Particle Physics Laboratory in 1980, the enterprise had hired him to upgrade the control systems for several of the lab’s particle accelerators. But almost immediately, the inventor of the modern webpage noticed a problem: thousands of people were floating in and out of the famous research institute, many of them temporary hires.

“The big challenge for contract programmers was to try to understand the systems, both human and computer, that ran this fantastic playground,” Berners-Lee later wrote. “Much of the crucial information existed only in people’s heads.”

We hope you enjoyed this edition of The Ledger. Find past editions here, and sign up for other Fortune newsletters here. Question, suggestion, or feedback? Drop us a line.

Fortune

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Québec Allocates 300 MW Power To Blockchain Industry

Canadian province of Quebec has allocated an additional 300 MW of electricity to the region’s blockchain industry.

In a much awaited decision, Régie de l’énergie, the French speaking region’s energy regulator, lifted the moratorium on electricity supplies to the blockchain sector.

This 300 MW will be in addition to the 158 MW already granted to existing customers approved by Hydro-Québec, and to
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Nestlé, Carrefour Team Up With IBM To Put Mashed Potato Brand On Blockchain

Swiss food major Nestlé and French supermarket chain Carrefour have teamed up with IBM Blockchain to track a popular mashed potato brand in Europe on the Blockchain to bring consumers greater transparency of its supply chain and manufacturing. Nestle Maggi’s Mousline instant mashed potato will be tracked using blockchain-based Cloud network IBM Food Trust.
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EU Launches International Association Of Trusted Blockchain Applications

The European Commission launched the International Association of Trusted Blockchain Applications (INATBA) to foster the development and global adoption of blockchain and Distributed Ledger Technology (DLT) by developing a regulatory framework. The launch took place at the European Commission in Brussels, Belgium on Tuesday, with more than 100 founding members.
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Ex NATO Chief Joins Blockchain Startup Concordium As Strategic Advisor

Former NATO chief Anders Fogh Rasmussen joined Switzerland-based blockchain identity startup Concordium as its strategic adviser. Concordium, the world’s first identity-validating, regulatorily compliant blockchain network, is led by Saxo Bank co-founder Lars Seier Christensen. Rasmussen served three terms as Prime Minister of Denmark from 2001 until 2009. In the same year, Rasmussen was elected
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Denver and West Virginia Deserve Praise for Voting on Blockchain

As the world waits to learn what is contained within the Mueller report, the culmination of Justice Department special counsel Robert Mueller’s investigation into Russian interference in the 2016 U.S. presidential election, it seems appropriate to expand on last week’s column about the security of electronic voting systems.

I recently spoke to Nimit Sawhney, CEO and cofounder of Voatz, the blockchain-based, mobile voting software provider, whose technology West Virginia piloted during last year’s general midterm election. Sawhney came up with the idea for the project with his brother when the two competed in–and won–a hackathon at Austin’s SXSW festival in 2014. Since then, Sawhney has formally established a company, based in Boston, to develop the product.

Voatz’s technology is making inroads. Sawhney’s 14-person team recently won over Denver, Colo., as the second testing ground for its voting system. The city is trialling the app in its May 7th municipal election, early voting for which starts–today!

I asked Sawhney why he decided to incorporate a blockchain into his system. He says it’s so that IT administrators within and outside his company can’t manipulate or delete records at will. Voatz uses so-called permissioned ledgers, meaning only authorized parties can operate them. In this case, the voting database is distributed across 32 computing nodes running the Linux Foundation’s Hyperledger Fabric and Hyperledger Sawtooth software on machines hosted by Amazon Web Services and Microsoft Azure. Voatz stewards the nodes alongside select nonprofits that act as independent monitors, a small cadre Voatz hopes to expand to include other major stakeholders–political parties, media entities, and others–over time.

While Sawhney says he’s excited about the potential of public blockchains, like Ethereum, to become part of the infrastructure of elections, his prospective customers are more wary. “Early feedback we received from election officials was that they were very uncomfortable with nodes running in potentially unfriendly part of world,” Sawhney tells me.

Sawhney believes blockchains can imbue the electoral process with greater transparency. The technology “gives citizens the ability to audit an election,” he says, noting that ballots submitted through Voatz return digital receipts that allow voters to verify their intentions. “You have a sense of trust that is backed by irrefutable mathematics rather than somebody telling you, These are the results and you must believe them,” Sawhney says.

Electronic voting systems are not bulletproof, however. Threats resulting from vulnerabilities, hackers, and physical coercion raise grave security concerns. Yet, conversely, these systems bear obvious benefits. They’re much more accessible than paper-based ballots, at least to smartphone owners. And they hold promise for enfranchising citizens who are disabled, traveling abroad, or serving in the military.

Despite the advantages, many security professionals find it impossible to overlook the risks. Sawhney understands critics’ objections. “No system is 100% safe,” he concedes. But, to this, he adds an addendum: “That’s true of paper-based systems as well.”

“We realize there are lots of opposing forces–people who hate and disapprove of what we’re doing,” Sawhney says. But, he continues, “we feel this is really important and needs to be done for progress to happen.”

All technologies are double-edged swords. The trick lies in blunting the blade when one falls into the hands of adversaries.

Besides, if Estonia can do it, maybe the U.S. can too.

A version of this article first appeared in Cyber Saturday, the weekend edition of Fortune’s tech newsletter Data Sheet. Sign up here.

Fortune

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SAP Unveils Blockchain Project To Help Eliminate Counterfeit Drugs

erman software giant SAP SE announced the launch of its blockchain-based supply chain tracking system that helps eliminate counterfeit drugs along the pharmaceutical supply chain. In a statement, the company noted that its blockchain-based solution helps customers comply with the U.S. Drug Supply Chain Security Act or DSCSA.
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Tech Icon Steve Wozniak To Be Co-founder Of Blockchain VC Firm EQUI Global

Tech giant Apple’s co-founder Steve Wozniak was named the co-founder of blockchain-powered venture capital firm EQUI Global. He will work alongside serial investor and EQUI founder Doug Barrowman as well as entrepreneur and EQUI co-founder Baroness Michelle Mone OBE. In his role, Wozniak will head up technology investments and help in finding tech talent for the new technology focused VC fund.
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