There is one topic that seems guaranteed to create a traffic jam along the usually uncongested road leading to the Skolkovo innovation centre, and that topic is blockchain and cryptocurrencies. This week, bitcoin approached a value per coin of $10,000, and despite constant comparisons to everything from tulip mania to the dotcom bubble and pyramid schemes, the cryptocurrency industry continues to soar. On Tuesday, over 1,000 people came to the Skolkovo Technopark for the CryptoConference organised by CryptoEvent to learn more about investing in cryptocurrencies, holding initial coin offerings (ICOs), cryptocurrency mining equipment and the legal prospects of cryptocurrencies in Russia.
This week, bitcoin approached a value of $10,000, having only broken $2,000 for the first time earlier this year. Photo: Pixabay.
There’s no doubt that blockchain technology – a linked series of secured blocks that create an encrypted record of transactions – offers a wealth of new possibilities, such as electronic bank cards, passports and other documents, but blockchain also brings with it new challenges, and cannot be the answer to everything, said Nikita Musalov, a 14-year-old programmer and hackathon winner who teaches cryptography for Cyber Russia, a federal educational programme.
But in a country where banks have their licenses revoked for money laundering and other infractions on a regular basis, the technology could be used to make transactions more transparent, including in public spending, said Dmitry Vasilyev of the WEX bitcoin exchange.
“There is a lot of hype around blockchain, but it will change our lives,” he told the conference.
The capitalisation of the seven biggest cryptocurrencies increased more than eight-fold this year to reach more than $100 billion. But high profitability is inextricably linked to high risk, warned Dmitry Karpilovsky, founder of CryptoNet, an organisation that brings together professional crypto-entrepreneurs.
“If you don't see any risks, that doesn't mean there aren't any,” he said.
“Remember the saying: ‘Always look for the fool in the deal. If you don’t find one, it’s you,’” he cautioned.
“This market is the wild West; you're sitting on a powder keg,” Karpilovsky told the conference audience in a talk titled “Strategies for investing in cryptocurrencies. Risks and opportunities.”
“It's not about how to earn money, it's about how not to lose the money you earn,” he said.
Pavel Novikov (left), head of Skolkovo's fintech centre, with Ethereum founder Vitalik Buterin (centre) outside the Skolkovo Technopark earlier this year. Photo: Sk.ru.
“People don't understand the market, but they still take decisions. They make the market chaotic,” said Karpilovsky, an investor who first entered the blockchain market in 2009. The aim of CryptoNet is therefore to increase the number of professionals on the market. To this end, the organisation offers various courses devoted to investing in cryptocurrencies, aimed at helping newcomers to the market to hone their professional skills and reduce their risks.
Karpilovsky outlined seven risky strategies of investing in cryptocurrencies, ranging from what he calls “the samurai strategy” (buying bitcoins and then doing nothing, certain that they can do nothing but increase in value), to bitcoin mining (the process of verifying and recording transactions), investing in ICOs, and investing in cryptocurrency and ICO funds. Each strategy has its own pitfalls, he explained – often citing personal experience.
As for the ideal strategy, there are two approaches, he said.
“If you believe in the bright future of the cryptoeconomy and understand why it is growing, and why it should keep growing … combine the seven non-ideal strategies and find your own individual ideal one,” said Karpilovsky.
“And if you don’t believe in the cryptoeconomy? Sell shovels,” he said, referring to the age-old gold rush strategy.
“Build the infrastructure, sell equipment, sell investment funds, open offices, or whatever. There is a rush on this market. Everything is for sale, so start selling,” he advised the conference audience.
On the conference’s second stage, a series of speakers shared their advice on holding an ICO, including Ilya Obushenko, an expert from Skolkovo resident cybersecurity startup Group-IB, who was due to talk about cybersecurity, the audit of smart contracts and anti-fraud measures when holding an ICO.
Skolkovo resident Project Bartini, which has designed a flying car, uses blockchain in every aspect of its work. Photo: Project Bartini.
Back on the main stage, Pavel Novikov, head of the Skolkovo Foundation’s fintech centre, was due to moderate a panel discussion on the legal implications of holding an ICO and the future of cryptocurrencies in Russia, where they are widely used but currently have no legal status.
“The legal aspect is a crucial question for the world of cryptocurrencies and ICOs,” said Novikov. “Technologies are developing faster than regulators can keep up with them. The legal jurisdiction that provides the best conditions for the digital economy will be victorious in attracting talented researchers. Any country needs this, above all ours,” he added.
Anton Pushkov, head of Skolkovo’s centre for legal support for deals, was also due to take part in the panel discussion on legislation.
Three Skolkovo startups were due to present their blockchain solutions at an ICO battle within the conference. They were Project Bartini, talking about the infrastructure for the company’s design for a flying taxi, Gbooking, which was due to share its vision of how to offer more effective interaction between doctors and patients, and Playkey, which allows gamers to play the latest games on old computer via cloud infrastructure.
Project Bartini uses blockchain technology in virtually every aspect of its work, and is part of the Blockchain Aero consortium, a business platform for all participants of the mass urban aviation market, the company’s business development director, Ilya Khanykov, told Sk.ru earlier this year.
“Blockchain is fantastic,” he said. “From manufacturing to maintenance to resource measurements to passenger recognition, blockchain can be used to streamline processes.”
The CryptoConference also comprised a large exhibition of dozens of startups working with blockchain technology and cryptocurrencies. They included Keep Pet, a project that aims to make lost family pets a thing of the past by introducing digital unitized pet passports containing all the pet’s information and using blockchain technology to make sure the passports cannot be forged or lost. The passports would be linked to microchips fitted in animals’ necks, which are already obligatory in some countries.