Fig: Digital currency won't be what makes blockchain go mainstream

Like a swarm of furious locusts, cryptocurrency and blockchain technology is sweeping the tech industry.

You could argue that unlike locusts cryptocurrency doesn't leave vast swathes of devastation in its wake but, considering that nearly half of the 902 companies which attempted an Initial Coin Offering in 2017 have already folded, you could also argue its a fairly apt analogy.

According to a survey carried out by Bitcoin.com, 142 startups failed before completing an ICO, and another 276 failed sometime afterwards. Furthermore, another 113 projects were found to have "semi-failed" which, considering their teams have gone silent and their communities have died, one could reasonably call just a regular failure. In all you're looking at a failure rate of 59 per cent from 2017 alone with at total cash sink into those companies of $233 million.

Of course, it gets worse. One figure that's been suggested a few times is that a good ICO should provide around three years of runway for a startup. Without wanting to sound fatalistic, nine in ten startups fail; the survivors of 2017 have yet to crumble but, as one developer told me, the sector is "full of charlatans". Basically, it doesn't matter how long the runway is if you don't know how to fly the plane.

Speaking with Alex Amsel, head of blockchain strategy at equity crowdfunding platform Fig -- ahead of his panel discussion at Gamelab Barcelona this week -- I asked if we're heading toward a bubble burst with blockchain and how sustainable this oncoming tide of doomed startups might be.

"It's inevitable in one sense because you've got lots of startups and most startups will fail," he says. "In this case you've got lots of startups and a new technology where it's really complicated so 95 per cent, if not 99 per cent are going to fail. The ones that don't will be massive, that's the difference. Will people get jaded? People were jaded about ICOs virtually at the start, so I don't think that's going to change."

If you're working in the tech sector right now, even if you don't care one iota about blockchain, it's difficult to believe that it will be anything other than a massive success. When and how? Those are different questions entirely, but Amsel believes it's not going to be a currency like Bitcoin or Ethereum that cracks the mainstream market; cryptocurrency simply too esoteric, and the barrier to entry too high for your average consumer right now.

"There's various problems around transaction fees, transaction speed, network reliability and scalability that are yet to be solved in any good way," Amsel adds. "What you need is a game or project that goes mainstream. It's not going to be done by buying Ether; it's going to go mainstream because it's a project people really like that happens to use blockchain somewhere.

"There's various problems around transaction fees, transaction speed, network reliability and scalability that are yet to be solved in any good way"

"It might be because it uses blockchain, but it won't be because people are using cryptocurrency to interact with it. Like Minecraft, it will be becauses people just really like it, and it just happens to be that the way it was implemented is using blockchain and people see the benefits but they don't have to go through that awkward route of owning Ether....it's the product that will win, not the fact that it's on the blockchain. In the end, it just gives you features that you turn into benefits."

Amsel heads up a team at Fig working on a secretive, unannounced blockchain-related project. While not forthcoming with the details, he did elucidate what makes a blockchain project successful, and what is little more than a ponzi-scheme.

"What we're doing, unlike a lot of the projects out there, is designed from day one to be given to the community and it's theirs to essentially look after and work or fail based on what they do," he says. "That community is developers, brands, gamers, stores, and publishers; that's what we call the community."

The uncharted frontier that is blockchain makes it rife for exploitation and misadventure. Applications that are simply a centralised company just building its own currency for use on its own store "is just a bad idea" says Amsel. Another common and questionable application of blockchain tech, he adds, is using games to mine cryptocurrency.

"I don't really believe in cryptocurrencies where the only use is to buy stuff, there has to be more to it than that"

"This is usually a poor idea ripe for exploitation of either users or the system," he says.

Essentially, the success of a blockchain project rests on its community Amsel explains; if you build a currency for use in a single game, it's much harder to find value and encourage growth. Blockchain is all about decentralisation, and it's important to play to those strengths.

"It's a complex issue," says Amsel. "I don't really believe in cryptocurrencies where the only use is to buy stuff, there has to be more to it than that. Having said that, if you have strong community that is invested in a currency, it will work. Dogecoin is the best example of that. It's been a very successful currency for many years; they sponsor NASCAR, they've done all sorts of crazy stuff. It's always only had value because it was one of the early currencies and it has a strong community."

A strong community, Amsel explains, is the key to success in a decentralised ecosystem where top-heavy prosperity is contrary to the nature of the blockchain. His advice: build a platform that can facilitate others to create, reward you early adopters and incentivise your community to hold onto the currency and give it value, and to "do interesting things, and create."