Photo Credit: Kobi Richter / TPS
Bitcoin ATM in Tel Aviv

By Yona Schnitzer/TPS

In January of 2017, a small fishing town in central Switzerland by the name of Zug saw the establishment of what may potentially be the single greatest tech ecosystem since the San Francisco bay area was dubbed Silicon Valley. This is Crypto Valley.

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The nickname was given to the town of 30,000 after several major developments in the field of Cryptocurrency emerged from it – most notably, the Ethereum Project, a Blockchain network second in value and prestige only to the Cryptocurrency gold standard of Bitcoin.

Following the success of Ethereum, an independent government-supported organization called the Crypto Valley Association was established in Zug, aimed at cultivating an ecosystem of Cryptocurrency and Blockchain-based developments.

While the self-proclaimed world capital of Cryptocurrency does indeed show promise, there is one other city vying for the prestigious title – Tel Aviv.

Since the emergence of the High-Tech sector, Israeli firms have been at the forefront of innovation in any given technological field – be it microchip development, self-driving cars, biotech solutions, or even just plain old USB storage. Israel has blazed trails in fields before they were even considered fields. With the emergence of Blockchain and Cryptocurrency technologies, the Start-Up Nation sees no reason why it should be trailing behind others, instead of heading the charge.

In recent years, several Blockchain startups have been established in Tel Aviv, with a select few already reaching the global spotlight. One such example is Zen Protocol – a project which aims to simplify the integration of a technology called Smart Contracts into financial deals.

Most financial dealings require the reliance on a third party to enforce the agreement. What a smart contract does is provide a form of digital collateral, which is programmed into the agreement, revoking both sides of the option of not fulfilling their end of any given deal, essentially terminating the need for a third party enforcer.

“Imagine something like a flight cancellation, where sometimes you need to fight the airline or rely on an insurance company to get your money back. If there were a smart contract in place, you would get your money back automatically if that’s what the original deal dictated,” a source familiar with smart contracts told Tazpit Press Service (TPS).

The Zen team envisions a future in which all business is done on the Blockchain, and all deals are enforced by smart contracts, with Zen providing the infrastructure to simplify the process.

Zen, like many other Blockchain oriented startups have come up with an ingenious method of fundraising which effectively bypasses the traditional channels of startup investments – Initial Coin Offerings.

An Initial Coin Offering (or ICO) is a sale of digital Blockchain tokens developed by a startup, in which investors can purchased said tokens, using either Bitcoin or Ether. The purchase of the tokens acts as a cash injection into the company, as well as a potentially high yielding investment for those willing to risk it. Ethereum was developed using this very method, costing a mere $0.15 per unit at the time of offering, and Zen Protocol are currently in full swing of their own ICO, having raised nearly $25 Million in just over two weeks.

A fine example of an outrageously successful ICO would be Bancor – another Israeli Blockchain startup which raised a record breaking $153 million from 10,000 investors within just three hours. Bancor developed a technology which allows users to exchange and even create their own tokens on the Ethereum Blockchain network, embodying what the company calls a “Decentralized Liquidity Network”. Bancor also stands as a fine embodiment of the competition between Zug and Tel Aviv – being based and established in Israel, but also functioning as a member of the Crypto Valley Association, with representatives based also in Zug.

At a recent conference put on by the Israeli Securities Authority, outgoing Chairman Shmuel Hauser spoke of his high hopes for Israel to become a global blockchain leader. Speaking about possible regulation on ICOs, Hauser stressed the importance of blockchain technology, saying: “We’ll have to define for ourselves as well as for the market just what this thing is. Among other things, we’ll have to consider extending supervision to currency securities and defining an appropriate regulatory framework different from the one we know for securities offerings.” However, Hauser expressed his hopes of seeing a ‘friendly’ and ‘almost daring’ form of regulation on digital currency, ‘in order to create the possibility of developing an international financial center for currency securities of the ICO type [in Israel].”

For companies like Zen and Bancor, the ICO stage is only the beginning. While 2017 may have seen Cryptocurrency being brought to mainstream attention, the future is where the real action lies. Experts are conflicted as to whether or not the prices of Bitcoin and other Cryptocurrencies are representing a bubble, but there seems to be a consensus surrounding the solidity of the Blockchain technology and few doubt that it is here to stay.

“Look at the internet bubble in the early 2,000s,” a source close to several Israeli Crypto companies told TPS. “Yes, there were companies that grew astronomically and then disappeared, but 17 years later, we have Google, we have Facebook, we have Amazon and we have Netflix. No one can deny that the internet boom changed everything. Just look at Email and how it became the standard method of communication. There is no reason to believe Blockchain won’t do the same for money.”

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