While most people in the world of blockchain are paying attention to the top 10 projects on CoinMarketCap, new decentralized projects are being built behind the scenes, companies tackling the main issues that are important problems that have yet to be solved like scalability, security, regulation, trust, and adoption. In 2017, I attended a Hackathon for Blockstack held in New York City focused on building applications. At the time it was hard to tell which companies would become recognized because Billions were being raised for Initial Coin Offerings and the market was extremely crowded with different ideas. Blockstack did not come across like the typical ICO, throwing special events to attract investors and elaborate parties. It appeared they were just focused on delivering applications to be deployed on its network. The founder, Muneeb Ali is said to have been a childhood computer prodigy who built his first computer at age 13. He later went on to graduate from Princeton with a PhD in distributed systems. This is a common pedigree of leaders within the Blockchain world and people like Vitalik Buterin of Ethereum and Changpeng Zhao of Binance share similar talents for their vast computer engineering and programming talents. The world is currently going through a transition and seeing some major changes because of the technological landscape. Centralized organizations have been outed for data collection, privacy issues, and hacking. Younger generations are resisting old traditions and more and more people are vying for individuality and self expression yet at the same time, artificial intelligence and surveillance is rapidly expanding.

Is Decentralization Rising?

It is not evident at this time that the masses are interested in Decentralization. Most everyday people do not even know what this means. If it were explained to them they would probably agree it can be a good thing and would avail them the individuality and self expression they are keen to. If they knew that their information could be compromised by hackers, they would also agree that owning your own data is valuable. Centralization has been challenged many times over the years with companies like Napster in the early 2000’s which allowed anyone to openly share music with each other for free. This caused a major disruption with the music industry for several years until new strategies were initiated. We also saw the same occurrences with software being pirated on P2P networks. This clearly indicates how influential technology has been on the behaviors of its users, and how fast it happens. In 2008 we saw the implementation of decentralized money. While it never became adopted, Bitcoin cultivated a following of “Anarcho-Capitalist” and speculative investors hoping to become rich on this new technology.

When people heard about Bitcoin rising in value, the masses jumped on the bandwagon but it was too late and the bubble had bursted. What these FOMO investors did not realize is that this is an incredible piece of technology and the reinvention of money. They have not been paying attention to the technologies being developed by these world class Cryptographers. I was recently asked by a hedge fund manager “What asset globally is this most correlated to?” and what its backed by is Code. It is intended to change the old ways of doing things online. Blockstack believes the internet is outdated. They believe that most peoples data is at risk, security is weak, hackers have gained a huge advantage, and centralized organizations have not secured its users sensitive information and that is was used ruthlessly for data monetization. To solve this, Blockstack began building an infrastructure with three components: a blockchain using what they refer to as “virtual chains” used to bind digital property like domain names, to public keys. It aims to solve the problem of bootstrapping trust in a decentralized way. A peer network called “Atlas” that gives a global index for discovery information, and lastly a decentralized storage system called Gaia which provides high performance storage backends without introducing central trusted parties.

Using Blockstack Applications

Blockstack has over 80 decentralized applications under its umbrella. I went ahead and experimented with some of them, to get a feel of the ease of use. It begins with a registration for a Blockstack user name, you enter a name and receive a Keypair (Public Key & Private Key) to log in and out of the Blockstack system. When you are logged with your Blockstack user ID you can then proceed to deploy the different apps. Many of these are similar to applications that people currently use on the centralized web such as 1password, DocuSign, Flikr, etc. I began with “Blockvault” and it was easy enough to figure out. You simply enter the name of the site along with your passwords. You can add as many as you want for free. The UX is very simple and as the founder stated during a recent Keynote in New York City, the emphasis of this entire project is on security. They haven’t taken a deep dive into design but with time I expect to see more development on the look and UX of the applications.

“Encrypt My Photos” is the next application I used, uploading a few pictures was easy, it allows a secure place to store your memories and the keys are owned by the user, not Blockstack. Muneeb stated during his Asia Society Keynote in April that they are concerned about decentralization, privacy and security. Some of the attendees did ask the question about legality of activity within this ecosystem, and Blockstack responded that it is up to Law Enforcement to prosecute those who use their platform in a nefarious way and not Blockstacks responsibility to police its user base. It is fair to say that centralized platforms like Facebook can also have bad actors on its network as well. Nothing is immune to the bad behavior of individuals using an organizations network. “Blockusign” is another interesting application which mimics DocuSign in a decentralized way. I did not actually create any sort of document with another party, I simply explored the interface.

Another application of note is “SpringRole” which refers to itself as a verified professional profile on the blockchain. In early 2018 I heard about this project within the Crypto community as having great potential. “Zinc” a workplace reputation and identity system, and “Graphite” a place to share data. I find all of these fascinating, however I do not think the greater masses are interested yet in this technology. It could take many more years before the masses become interested in using decentralized applications and moving away from the centralized platforms they are comfortable with.

Incentivizing Developers to Build

As we are still in very early stages of Blockchain development, platforms like Blockstack need to incentive the development of applications or (dApps – decentralized applications) to be built on the network. Funds have been setup for this purpose which will allow for an Open Source growth model and that is one of Blockstacks goals. It is hard to tell what the killer application will be for Blockstack, or any Blockchain project. Some think privacy and being your own bank will be the harbinger of mass adoption, others think gaming will drive new users. It is too early to tell. Blockstack recently filed with the SEC for a $50 Million Token offering. They have already received over $10 Million USD from the Harvard Endowment Fund, which is a big endorsement. The team is made up of world class Cryptographers holding PhDs and they are expanding and building. Blockstack may one day be a globally recognized platform.

This past weekend I attended the Penn Blockchain conference at Wharton business school in Philadelphia. The conference brought together leaders in the Blockchain arena from all over the globe and in particular one of its earliest pioneers, Charlie Lee, the founder of Litecoin. 10 different panels were held, 2 happening simultaneously in different rooms. The sessions focused on Blockchain and Finance, China, Digital Securities, Investments, Legal landscape, Engineering, Ecosystem, and a final closing panel.

Bankers & Blockchain

One of the first panels was focused on Blockchain and Finance and participants included HSBC, Axoni, Nabartham, and OCC. Most of this panel shared the same opinion with the exception of HSBC. Nabartham believed that its important to keep trust or raise the level of trust without decentralized networks. The question they asked was how to provide immutability without massive decentralization. HSBC stated that they need a governing body controlling who is on and operating the legal enforceable of that rule book. Axoni felt that we are going back to the future with new tech but its important to study the past and realize decentralization was the wild west. HSBC is content with their current infrastructure and hyper efficient with centralization, that they are the biggest bank in the world and have built their own Blockchain but not at all interested in Cryptocurrencies and Digital Securities. Interestingly, HSBC did state that if Bitcoin became a globally dominant asset, they would just buy it.

Nabartham thinks operational efficiency is the future of growth. User experience is the most important aspect and data is the new oil. Interestingly, they would consider offering digital assets to diversify offerings, and believe Blockchain is the new paradigm of data infrastructure. Essentially, digital assets would create new revenue streams to keep new clients with them. HSBC is taking a step back from the Token economy because of the lack of predictability and a risk premium would need to be attached to the price if that ever happened. After hearing this panel I got the sense that the big banks are either accumulating digital assets behind the scenes and not ready to publicize their intentions yet as they dropped several hints of waiting for more growth in the market and letting the pioneers pave the way now before they enter.

Digital Securities – The New ICO?

One of the most talked about emerging ideas of 2018 and 2019 were “Security Tokens” or Digital Securities. While still brand new, they would allow digital shares of new companies that could be programmed with different functions and tied to real world assets such as real estate and fine art. They also have the capability to bring liquidity to markets that were not liquid before. One of the early pioneers of this idea was “Polymath” which did an ICO in late 2017. At the time, it had mixed reviews but now all of the talk is surrounding Digital Securities. The panels were lead by Securitize, Liquidity Digital, Verify Investor, NovaBlock Capital, Sharespost, Wall Street Alliance, Union Square Ventures and SIG.

Most of these talks had a mixed point of view, one side was for radical decentralization and the other was merging with Wall Street and operating under full regulation. Many of the developers have a keen interest in a decentralized economy while Security Token issuers are doing their best to follow the centralized systems to gain acceptance for projects looking to raise funds and establish a legal presence unlike ICOs which were a bit of a free for all, however they did represent decentralization. Union Square Ventures advised the audience to look up “Fractional Reserve Banking” to understand the future of Cryptocurrencies.

Tokenizing funds, real estate and fine art would allow global participation and automating the back end process according to NovaBlock Capital. Securitize tapped in by saying how complicated it is to buy and sell securities and code can solve this in just minutes, simplifying peoples lives and taking friction out of the market. What concerns investors right now is that this emerging industry is so new, and there are still many problems to solve. It may be a bit early for the startup scene and some of these companies hoping to offer a digital security may have to wait a bit longer for the market to come to fruition.

There were benefits to Tokenization according to Jor Law of Verify Investor. This was an interesting statement because he mentioned that it changed market psychology and human behavior. People became interested in something they were not interested in before. Comments were also made by NovaBlock about changing the current accreditation laws so that they are more lenient for specialist in certain fields who want to invest, instead of a general $200K per year or $1M net worth, thus designing the system for the rich to get richer and not allowing smaller investors to enter. This comment did make a lot of sense. Why can’t a specialist be allowed to participate in an investment if they have specialized knowledge in that field related to the investment.

Going Global

All over the world the discussion revolved around government regulations on the Blockchain space. Cities across the globe have delayed making decisions on Initial Coin Offerings, Security Token Offerings, ETFs, and a vast array of laws that are not even certain yet. I often think of Napster in the early 2000’s and similar P2P services that allowed music downloads. It was global and decentralized in a way but the music industry was furious. Lawsuits were served and the markets shifted in so many ways to break the free trading markets. I believe history will repeat itself in Blockchain but this time it is going to be much more vast. Governance models are still being decided, markets are still reacting to new processes, Decentralized Applications need millions of users, not thousands, protocols need to be defined and Layer 2 solutions similar to Lightning Network need to be established.

Jalak Jobanputra of Future Perfect Ventures stated that developing countries like Africa present a lot of opportunity and have interesting markets and although many of these countries have their problems, it allows experimentation. The debate went on about the “Crypto Anarchist” and how they will continue in this industry, and different ways to pick Crypto investments.

Ari Paul & Charlie Lee

I liked all of the panels but my favorite was listening to Ari Paul of BlockTower Capital and Charlie Lee, inventor of Litecoin. Ari Paul is a great orator and explains things in a simple way so that everyone can understand the statements he makes. Often when you attend a Crypto oriented event the presenters can sometimes get overly technical and this confuses the listeners. Paul built BlockTower in 2017 during the Bubble period and has continued to keep investing in the space while becoming a predominant figure. Charlie Lee appeared shortly after Satoshi Nakamoto disappeared from Forums and brought Litecoin. Fortune magazine asked Charlie what he thinks of a “Facebook Coin” and he stated that “it would not excite me” but believes Crypto is hard to use. He is fascinated with cross chain atomic swaps and how they “work like magic.” There are cool things being built on top of Bitcoin and Litecoin. He wants to make Litecoin more fungible and MimbleWimble is a trending protocol relying on strong cryptographic primitives. It uses what are referred to as elliptic curve cryptography that require smaller keys than other types, it also uses less data storage than the Bitcoin network. A popular example of this is the Grin Coin.

This conference provided a confirmation that the Cryptocurrency world is not going to die, it is going to continue to expand and grow. Blockchain is still in its very early stages and people are becoming more and more fascinated with this industry. I get the same impression and think it will take a few years before we do get adoption from the masses, popular decentralized applications and begin to operate in a more decentralized world. The foundation is being laid now and we should expect to see huge advancements in 2020.

Celer Network was one of the ICO’s that was raising funds throughout 2018 and recently on the Binance Launchpad. ICO’s themselves raised around $8 Billion USD in 2018 up from 2017. As the Crypto markets have been facing a long term bear market due to the big bubble burst in early 2018, projects have been building behind the scenes and continuing to raise funds. Some of these companies have shifted their focus as the technology capability has increased and Celer is one of these companies. The goal of Celer network is to add what are called “Layer 2 Solutions” and what this means is technology built on top of other technologies to improve its efficiency.

“Celer Network is the most advanced layer-2 scaling platform to build fast, easy-to-use, low-cost and secure blockchain applications at internet scale through innovations in off-chain scaling techniques and incentive-aligned cryptoeconomics.”

celer-network

Focus on Gaming + Scalability

When you attend Blockchain conferences, a lot of the talk has shifted onto gaming. One of the harbingers of Crypto could very well be gaming and if you look at the history of Cryptocurrency, the pioneers were people with backgrounds in IT, programming and gaming. Celer has released an App called “CelerX” and focuses on improving game play and transaction speeds. The problem with a lot of “dApps” (Decentralized Applications) is that they are too slow to use. Why would anyone want to play a game that is slow and laggy? This has been a problem Blockchain startups have been racing to achieve. The organizations that solve scalability will win and become the next giants in tech. Interestingly, a lot of Blockchain companies have improved scalability but they lack platform adoption and gaming was a key component in driving adoption by the masses.

Many hardcore gamers scoff at Blockchain games proclaiming “game play sucks” and “why would anyone want to use these with so many options already out there that aren’t Blockchain based?” This is definitely a true statement they are making. However this is experimental technology and companies like CelerX have tried to woo gamers with rewards for participating in this experiment. CelerX is not the only platform with this marketing strategy, other Blockchain companies have deployed this to gain a user base and it seems to work.

Celer Forming Alliances

Celer has been focused on solving Layer-2 solutions and not reinventing the wheel. They have been focused on forming partnerships with other startups like Dfinity, IoTex, QuarkChain, Qtum, ChainLink, Aelf, Nervos and L4. Celer has also reached some major milestones as far as building a community. Seldom discussed in 2018, they managed to get accepted onto the Binance Launchpad. This is quickly becoming the go to place to raise money using the ICO process. So technically the Initial Coin Offering game is far from over, because Binance has figured out a way to carefully vet and select certain projects it deems as worthy of using the Launch Pad.

The team at Celer is comprised of some pretty academically accomplished individuals including PHDs from MIT, Princeton, Berkeley, and engineers from Google, Amazon, Oracle, and HP. They state their main goal is mass adoption. This is nothing new as all Blockchain companies want to win adoption and become the next Googles and Apples in the Blockchain world. Celer also has its own wallet the – cWallet.

Cool Tech – Who Will Win Adoption?

Binance ushering Celer onto its platform is definitely a sign this company is going places in the long run and its a no brainer that Binance is also going places long term, they are focused on building a trading industry around Crypto and being the forefront of it. The way I see it, the companies solving the biggest problems will emerge at the top and acquire other Blockchain companies that are also advancing and solving problems. It may take a few years but the bear market is the wrong place to look for investors. They need to understand what is going on behind the scenes and under the hood and get educated on more than just technical analysis. For those who got into the Binance Launchpad sale for Celer, they were lucky to see 400% gains! It will be interesting to see what happens with the next offering. Celer Network is a company worth keeping an eye on long term.

The Next Wave In Blockchain

NFT.NYC was one of the first conferences of its kind taking place in New York City on February 20th. The focus was on what are referred to as “Non Fungible Tokens”. Simply put, they are digital collectables that have inherent value. If you want to dumb it down even more, think of Pokemon cards, Dungeons & Dragons, Magic The Gathering, Starcraft, League of Legends and the overall gaming world and its components. In 2017, there was a tidal wave of Blockchain startups raising capital through ICOs or Initial Coin Offerings. The goal was to finance the growth of the Blockchain ecosystem and businesses that could contribute to the improvement such as scalability, interoperability, storage, etc. It got a bit out of hand and the valuation of Tokens crashed significantly causing a Bear Market to initiate.

Fast forward to 2019 and a lot has changed since the craze of 2017. Non Fungible Tokens represent a one of a kind, like baseball cards, limited edition sneakers, or anything else that people contrive the value of something from. Early on in the conference this was emphasized through the analogy of art in a museum. Why does anyone consider a Van Gogh or Mona Lisa valuable? Perhaps because of its provenance, history of ownership and of course popularity with the masses. Rare items are special to collectors and represent a form of bragging rights and just like Gold, they are a store of value with long term stability.

Michael Casey, the CEO of Streambed Media described the psychology in depth as to why people perceive value in something. The slideshow entailed the typical items people collect and our desire for “Social Proof”. Value is important to humans as it represents many facets of survivability, strength and uniqueness. When people meet other people for the first time they generally like to exhibit what they have either directly or indirectly through fashion accessories like shoes and watches, job titles, location of specific neighborhoods, connections, and collectable items that are rare and special like artwork.

But, My Stuff Is Special Also…

Digital collectables are nothing new. For years, specifically gamers have traded digital collectables to increase their status and strength within the game. Gaming has attracted many wealthy hobbyist and some are reported to spend hundreds of thousands of dollars per year on these games. I think it is fair to say that gaming is a very real addiction embraced by millions globally. I myself was a gamer in the 1990’s playing “Doom” and figuring out how to get the BFG 9000 cheat code to improve my ability and win. Another game that captured my attention was “Sim City” which I still play to this day and find it to be therapeutic.

People also like to trade Peer to Peer (P2P) because it allows relationships to grow in the field and social engagement is a big aspect to the digital collectable world. Just like any hobby, whether it be jogging, riding a bike, going to the gym, collecting is an essential element. So at this point it all should make sense to you as to why NFTs could become something important in the next few years. “Decentraland” one of the ICOs that was launched in late 2017 has been a big hit with enthusiast and backed by some major league investors. It reminds me of Second Life or Sim City but a very early version as it does not contain much content at this time. I met some publicly traded companies at NFT.NYC that intend to build their own brands within the Decentraland world, and I heard some very interesting ideas that piqued my interest.

Other companies in the Blockchain world like 0x Protocol have initiated projects for Non Fungible Tokens. One of the dominant players right now is called “OpenSea” and serves as a marketplace to buy and sell different NFT collectables. I spoke to the founders in depth about this company and I think they have a great business model. The cool thing about OpenSea is that anyone can list their NFT for sale whether it has any status or not. I expect this to eventually change if these become more popular in a few years and the market to be more competitive.

The Crypto Kitty Craze Evolved

Crypto Kitties was one of the most popular creations in the NFT arena. Digital cats were “bred” and sold to speculative traders. In early 2018 at the Ethereal Summit, a rare Crypto Kitty Sold for over $100,000. Could it have been a publicity stunt? Sure, but as of 2019 data shows that Crypto Kitties is the most popular NFT on the market, with Decentraland closely behind. As a former gamer from the 1990’s, I am well acquainted with these ideas and believe as of now the only adoption to be gained is with gamers themselves. Most everyday people do not have the time to figure out the complications of Blockchains, Crypto Wallets, and add to that the constant volatility and no real world adoption (yet).

Speaking to a wide array of gamers, I was told that “Blockchain gaming sucks, and why would I do it when I can play popular games for free” and they do have a valid argument. Is gaming currently the only use case? At this point I will argue and say no it is not the only use case and there are many types of NFTs that can be developed aside from gaming pieces.

Linda Lu used the analogy of early mobile phone games when describing the future of NFTs. Whether you believe NFTs have a future or not, the designers of them seem to think so. I was very interested in combining art with NFTs. Some of the attendees came from artistic and creative backgrounds and presented some cool ideas with digital art. One group developed an NFT based on street art, and intend to build a gallery within Decentraland. I also witnessed an interactive mural that can be constantly added to forever by different artist.

The digital collectables industry is definitely real, and will continue to grow. As for Blockchain gaming, I am still not sold on it. Blockchains present too many problems and are slow databases. They do not scale (yet) but they do have a good use case for censorship resistance and store of value. This is why I am mostly interested in the art platforms planning to launch. I’m really interested to see what other use cases NFTs have than gaming or art. I do think there is a future in them and will continue to research some of these projects and see how they evolve.

In 2018 several young hackers were obtained by Federal Agents and charged for Hacking, Identity Fraud and Theft. The scheme is quite simple, Hackers will collect data through simple Social Engineering, meaning they will use pieces of data they have collected about you until they can call your cellular provider and change the SIM Card Data to a new device. At that point they can text people within your contact list and request funds using ploys such as an emergency and the need for fairly large amount of money, it is usually going to be in the form of Bitcoin.

The culprits can sometimes be narrowed down with classic methods such as the “Venn Diagram.” Usually they are people you may already know who have teamed up with a Hacker, or a Hacker working as an individual. This has been the case in the Cryptocurrency arena, which has been known to be ripe for Scamming and Fraud. These bad actors will befriend you, try and collect as much information as possible before engaging in an attack to separate you from your funds.

Is Paranoia the only measure to be deployed? If you are working in a new field such as Blockchain, then yes. I would go as far as saying some of the closest people you know through the “space” could be suspect. Never share too much information if you are not that well acquainted with the individual. Be wary of anyone asking what sort of projects you plan to invest in, or how much Cryptocurrency you currently have. These are all Social Engineering questions these predators intend to share with Hackers to scam you.

As I mentioned before, some of these individuals could represent the face of a trusted company, and still go after you. If you receive any odd messages or requests from close friends, be very cautious if this does not match their typical behaviors. Always verify by making a phone call to the person and avoid texting as you will be able to identify them through their voice if you know them well enough. Do not share your e-mail address as it may contain attachments which can harm you.

Luckily, this emerging field is small enough to be able to shake out bad actors as the initial perpetrators have created an obvious environment of mistrust. There is a saying in Crypto and also a known Russian Proverb:

“Trust but Verify.”