2019 has been an epic year compared to the depression of 2018. At the beginning of 2018 the Bitcoin bubble began to burst and prices crashed for most Token projects. The “Space” as many participants like to call it came under scrutiny from investors questioning the validity of these startups. However, Bitcoin has experienced many boom and bust cycles since its inception. Adoption has been slow and nobody really uses Cryptocurrency for anything other than trading what Crypto enthusiast and traders refer to as “Shitcoins”. Shitcoins are simply projects that don’t seem to produce much but have pump potential. Last year at Consensus, an event created by Blockchain media company Coindesk was a vast display of wealth generated from the bubble for those who sold the top. Lamborghinis parked on 6th avenue, extravagant yacht parties and after party after after party. Consensus 2019 was a toned down version of last year but with the same “Fomo” in the air in my view. Still, thirsty investors who missed the pump of 2017 lurk its hallways along with hungry startups looking to spread the word about their new projects and forge alliances. Behind the scenes many of these startups have been quietly building, shipping code and building applications that could one day change how the world conducts business believe it or not. Also, for those who did not “buy the dip” they are regretting it now. Ethereum was possible to purchase under $90, and now it is well over $200, Bitcoin was in the low $3000 range and has gone back over $8000 again, Binance which has been one of the strongest performers went from around $5 to now over $30. Bitcoin has been the best performing investment globally of 2019 and that speaks volumes.
Blockchain Infrastructure Is Being Built
The general environment at Consensus was the same as last year, enterprises seeking to learn what is happening in this hard to decipher world of Cryptographers, coders, investors, funds, traders, and researchers. Some famous names have stepped into the arena such as IBM, Deloitte, JP Morgan, HSBC, Rakuten, and other banks and institutions seeking to build their very own Blockchains and solutions for Blockchain. A multitude of “Stablecoins” have been launched aiming to secure your money into the USD when prices fluctuate. Aside from these already established organizations, hundreds of new startups independent and looking to solve problems like scalability (Blockchains do currently not scale very well) governance, many of these Blockchains have varying governance models on how they should be run and everyone has a differing opinion on ways to operate within them, Decentralized Finance (also referred to as DeFI) which is an arena looking to rebuild and remake finance and other areas like gaming and general mass adoption. Right now if you take an inside look at some of these decentralized applications you will see a lot of new features that didn’t exist in 2018. I am a big proponent of ease of use, but we are in such an early stage that ideas are still being thrown around on new things to build. Not everyone in the space has an answer to every problem.
I’ve met some visionaries who tell me that Blockchain is designed to disrupt the current system we live in, to turn everything upside down. It is a free market where anyone can contribute their vision and ideas. Some outsiders may question the validity of these projects but the point of it all is a decentralized world, where people interact directly with each other with the use of these new systems. There are many ways to spin Blockchain. While many newcomers have been perplexed by Blockchain, it is not that complicated to understand. A Blockchain is a chain of blocks of information that once created cannot be reversed. This information can be viewed by anyone instantly. Cryptocurrency on the other hand is simply a Keypair, think of your GMAIL login. The public key is your e-mail address, the private is your password. Once logged in you can specify or move where the Key points (your private Keys). This is pretty much what Cryptographic money is, a public key and a private key stored on the Blockchain and with this, many have been spinning a multitude of ideas to build on on various Blockchains. Bitcoin was the first Blockchain, but “Alt Coins” came in later – forked versions of Bitcoin with new names slapped on them, and new Blockchains all together like Ethereum.
As a matter of fact the founder of Ethereum – Vitalik Buterin was a huge proponent of Bitcoin and Ethereum was his own expansion on Bitcoin, he added “Smart Contracts” which was borrowed from Nick Szabo an early visionary. Each Blockchain respresents a different set of values and governance models. Bitcoin works by way of massive computing power called Proof of Work or PoW for short. Ethereum runs the same but has decided to move in the direction of Proof of Stake, which simply means those who “Stake” (hold Coins/Tokens) have voting power and influence over the network along with other mechanisms. This is why thousands of new projects have launched in the Blockchain space, and continue to launch. Most of these projects will fail but the few that will survive will have an absolute impact on how society functions. Facebook is gearing up to make a statement in the Cryptocurrency arena in 2020, and who knows what will happen. It is also obvious that every major centralized organization will follow suit with their own iteration of Cryptocurrencies. The problem with this is that the idea of Bitcoin was created to avoid these sorts of organizations, so it will be fascinating to see the clashing of 2 mindsets.
At Token Summit I heard some interesting panels, one of the speakers Ryan King is the founder of FOAM which is a mapping project. They held a very democratic Token sale in 2018 without any sort of pre sales to “Whales”. For those new to the investing arena, a whale is a high net worth individual or group of individuals that purchases large amounts of Tokens and then prepares to “dump” or sell at a pump. This can often create a negative ripple effect to the smaller buyers and has lead to more restrictions on Token release. If a presale occurs, these early buyers may be forced to wait 1-2 years before they can have their Tokens which prevents them from selling too early and hurting the image of the Token by selling too fast. FOAM created a model called “Proof of Use” which forced investors to use the Token within the ecosystem before having full access to their locked Tokens. Essentially what this did was weed out unhealthy users and create a loyal following with real enthusiast. In some instances a competition is created to win a rare NFT or Non Fungible Token.
FOAM is one of the few projects that I find interesting and engaging. If you are a user of Google Maps you will understand the point of something like FOAM and why it can be an important add to the Blockchain ecosystem. Also contributing to the discussion was Brian Hoffman of “OB1” which pioneered a company called Open Bazaar. This is simply a place to buy and sell real world items for Cryptocurrency. It is not new and has been around for quite a while. He stressed the importance of each user becoming a node on the network contributing to the functionality and code. Ted Livingston, one of the founders of “Kin” believes technology serves the solution and to build money for the digital world whatever pieces to make it work. Kin currently serves as a Cryptocurrency for applications within its ecosystem. However with the recent announcement that Facebook is launching its own Cryptocurrency, you have to wonder what the future of projects like these will be.
Decentralized Finance – “DeFi”
Decentralized Finance (DeFi) is one of the newest buzzwords in the Cryptosphere. What this simply means is Cryptocurrency oriented finance. Years ago “FinTech” was the hottest buzzword and this was merging tech with the world of finance. Companies like Plaid have grown exponentially catering to millennials to help them organizes their finances. Companies like Uniswap, Compound, Maker DAO, and Etherisc are paving the way and making the assumption that Cryptocurrency will become the standard of money. While Wall Street is probably laughing at this or in denial, it all seems inevitable to me. We are clearly moving into a fast changing world of technological innovations. Hayden Adams created Uniswap as a simple Ethereum based (ERC-20) Token standard exchange. It has a simple interface and fairly easy to use. It is still in Beta mode. Compound is a new open finance project that adds value to other projects and its founder Robert Leshner believes the network effect is going to increase despite how bad the Blockchain currently is. He believes Ethereum could work for the next 50 years. Also contributing to the discussion was Gregory DiPrisco of Maker DAO (Decentralized Autonomous Organization) which specializes in collateral loans, community governance and its own stablecoin. Maker believes that HTML is the primary web language and not changing. He also stated that if Layer 1 (the blockchain layer – protocol level) is working then it already gives them many things to improve upon.
Hayden Adams of Uniswap thinks that open finance will enable more people to participate in the financial system than before. However Compound thinks that you need to be a “geek” to use this stuff currently. I do agree that participation in the Crypto world can be a bit cumbersome. Wallets, keys, organization of data, different functionalities, all of it can be overwhelming for the non technical person, but this is a new world and usually the early adopters are more technical. User experience is important and the amount of steps required to perform a transaction should be reduced over time. As much as people in the Crypto world dread Facebook I believe they will be providing solutions to these many problems and will probably look to partner with some of these DeFi startups. I can already envision this happening.
Fred Wilson – a famous Venture Capitalist who heads Union Square Ventures had a discussion with Olaf Carlson-Wee who was featured on the cover of Forbes magazine during the ICO boom of 2017, discussed the future of the space. Wilson proposed creating a fund for hackers to attack various Blockchain startups to test out the networks, which seemed very interesting. It was sort of a joke but makes total sense. These networks need to be secure in order to function. Olaf believes the next big thing is Web Assembly also known as WASM. He also wants to invest in more DAOs (Decentralized Autonomous Organizations) and feels that it is a promising area. He wants to see more decentralized governance. How will people behave when given capital, game theory behavior economics. DAOs are appealing in many ways because they do lean in the direction of what decentralization stands for. One of the early DAOs which launched in June of 2016 was hacked for over $50 Million in Cryptocurrency. Clearly security of these DAOs is an important factor and needs to be examined with each project. As I write this, Bitcoin is approaching the $9,000 mark. It is a clear sign that there is belief in Cryptocurrency and a more decentralized future. However, Facebook will be appearing very soon with its very own Currency and governance model. I expect Amazon to follow suit. eBay displayed multiple banners around Consensys hinting at a accepting digital currency as payment options. Which one is not yet clear. Overall I am convinced that Cryptocurrency is here to stay and this is just the beginning of a Blockchain based world.