Cryptocurrency has been touted as the second coming of the Internet, ushering in a new era of technology, finance and many other cross-applications. But it is unlikely that there will be a single Silicon Valley equivalent driving change - since the first ledger issuance of Bitcoin in 2009, we now already have thousands of other crypto currencies, developed by different sectors and countries.
In this second era of the Internet, it is likely that we will have to embrace a future where economic value is pre-distributed via blockchain developments. If so, then we should be watchful as to where economic order is created through robust but flexible regulation. Such regulations are unlikely to be localised in precincts or nations - given that blockchain technology is decentralised by nature, we should expect sensible regulation to transcend national boundaries and involve international collaboration.
So the question is, if not a single Silicon Valley hub where innovation takes place, where can we expect to see innovation and development flourish? No easy answers, but there are four key indicators we should look to.
Government support should not be taken to mean strictly investments but more broadly, whether government has supported the use of blockchain technology or even taken the initiative to be model users of the technology itself. While funding is likely to be derived from market- and community-based initiatives, government as first-mover lends confidence. For example, in the wake of COVID-19, many world governments have turned to blockchain-issuance of vaccination and testing certificates to facilitate safe travel. In Hangzhou, China is channelling billions into blockchain development (https://www.scmp.com/tech/big-tech/article/3136793/beijings-blockchain-supremacy-plan-gives-shot-arm-start-ups-although), a clear forerunner in the Smart Nation narrative. Even smaller nations like Singapore are also trailing this wake, championing the same Smart Nation narrative. Blockchain has come a long way (https://consensys.net/blog/enterprise-blockchain/which-governments-are-using-blockchain-right-now/) but it's clear that regions with clear government support will champion the development ahead of others.
Closely related to government support is the immediate regulatory environment, where we need a correct balance of regulation to be struck. Initial Coin Offerings (ICOs) have taken off as a new source of funding which is now the norm, and blanket bans on cryptocurrency, ICOs, trading and exchanges are likely to be areas where innovation is hampered. That's not to say where countries have accepted cryptocurrencies as legal tender will be anywhere nearer to fostering innovation. Sensible regulation needs to follow the actual drivers of cryptocurrency adoption (e.g. central bank policies, remittance demand, advancements in clean energy adoption) and develop around the actual use cases of cryptocurrency and blockchain. For all the arguments against blockchain transactions being used for illicit money laundering, they could also result in transparency of transactions. All in all, we must remember that we are trying to shift transactions from the informal economy to the formal economy, where larger economies of scale may be reaped.
Communities & Talent
This should not be confused with just having a country with high education levels, but also how welcoming a country is to global talent and innovation. More broadly, we should also be looking at jurisdictions that are pro-talent and pro-business - not necessarily tax havens, but places where the incentives are clear for blockchain companies to thrive and collaborate. Again, if we can shift talent from the informal developmental space to formal structural spaces, that is where development will be accelerated. One should not discount higher learning institutions and universities as hotbeds of development - after all, coins such as Zilliqa have made their way out of humble universities (https://www.nus.edu.sg/alumnet/thealumnus/issue-113/perspectives/frontiers/better-than-bitcoin).
Rather than say coin marketing, or advertising hype, which trivialises the entire concept, corporate leadership is important. Behind every blockchain technology and utility token is a good company agenda (hopefully!) and what we want is good thought leadership to influence and drive change, to bring the right people on board, and to nurture the correct investment climate. Eventually, the current billion-dollar market cap of the cryptocurrency world should grow to a trillion-dollar one, where there are clear development roadmaps backing up the growth of the sector - as co-investors, we must support such areas where corporate leadership is demonstrated.
Take pause to see where your investments and efforts are spent, they should be aligned with these four indicators as well.