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.”

Most of 2018 had Crypto investors worried that they would not see gains again and many investors left the space. News article after news article had painted a bad picture of the Crypto space, and even calling Blockchain an “overhyped” technology. At the beginning of the year many investors and traders were excited that it would all be temporary and a bull run would soon arrive. Although some Bull Traps and head fakes took place,  that never did happen. I remember attending the famed Consensus conference in New York City and it was packed to the gills. Attendees were everywhere, and “FOMO” (Fear of Missing Out) seemed to prevail. Towards the end of the conference I realized most of the people I had networked with were not really investors but founders, funds, exchange owners, social media influencers, and other characters. I began to question why there were not so many investors and reflect on this question to myself. 

The Bleeding Never Stopped 

The ICO space was a massive one in 2017. Billions upon Billions of dollars were raised for peoples ideas, without working products, without proper leadership teams, without experience other than having a fancy college degree from MIT as a reference point for some. Some of my own personal friends were pioneers in Silicon Valley developing Apps for the iPhone when it was new, and made millions, some Billions. They knew that applications were the future and began to build. These applications had a real use case and were valuable to society in general. When consulting with one of these friends, he told me he felt that most of the Blockchain arena was filled with bad actors, people who intend to build nothing except marketing hype. Throughout 2018, many of the ICOs that were released to trade dropped way below ICO price, angering all of their investors with the exception of a few true believers. “Buy The Dip” became an exhausted phrase, as the dip went below the dip and did not see any sort of gain. 

FUD Dominated The Crypto Arena & Blockchain Questioned  

Blockchain is a revolutionary technological idea which can create absolute truth in records. This is valuable for just about every industry in existence. The only apparent threat to Blockchain would be what is called “Quantum Computing” and although possible, humanity is far from being able to achieve it. Both the United States and China have invested Billions of dollars to research Quantum Computing. Cryptocurrencies, while still not adopted by mainstream are advancing, but in 2017 many speculators and traders decided to invest in “Alt Coins” (Alternative Coins/Tokens) which saw massive spikes in value earlier in 2018 and then dropped in value significantly. One good example was “ICON” (ICX) which is a Korean Blockchain protocol. The ICO price was .12 Cents and it went to nearly $12. Many who invested into this became Millionaires in just a few months if they had cashed out their winnings. Those who held (HODL) ended up getting burned bad as the price went back to around ICO price. 

People began asking questions about these Tokens, why they were valued so high, other than market making and fake pumps. Traders became more cynical and began to question whether or not they were all scams. Teams of 3-4 people were raising millions and millions of dollars in just a few minutes, and it became apparent that these people did not intend to build anything and just raise a bunch of money for an idea and a good well thought out White Paper. The Crypto community, is made up of a certain niche of people who were interested in Bitcoin tech early on. This is a small niche, but highly influential. Some of these people are found across Twitter, and underground trader communities. Some of the leadership in these groups began to really grill projects and ask hard questions, referring to Alt Coins as “Shitcoins”. 

Human emotion is what TA (Technical Analysis) is all about. Charting the behavior of traders to make decisions on how to proceed with a trade. This emotion was magnified in 2018 as FUD (Fear Uncertainty Doubt) was so widespread, people began giving up and dumping what investments they had left, including Bitcoin. Attacks on social media took place and all ICOs were perceived as scam artists. 

Scam Artists, Hackers & Regulations 

Another factor which contributed to the bear market was the rampant scamming that took place. The community began to prey on each other through Twitter, Social Media channels, and some brazen enough to perform these in person. Exchanges had also faced vulnerabilities, founders of ICO projects were arrested for fraud and faced jail time and fines. Although the technology has been incredibly fascinating to study, in my opinion most of the Crypto community became cynics about new Tokens and most became “Bitcoin Maximalist” proclaiming Bitcoin to be the only true Cryptocurrency. 

What was also uncertain were the regulations in various jurisdictions that had not been established or made clear. Those in regulatory bodies have been trying to understand the Blockchain space, use cases, and how the technology even works. This has been a very slow process and caused a slow down in the markets. If you really take a hard look at Bitcoin, it allows people to be their own bank so to speak. What this simply means is that Bitcoin is competition to banks if that comes to fruition. Banks earn money from their customers, and if everyone begins adopting Bitcoin, that is a direct threat. Can Bitcoin and banks co-exist? Value has been exchanged in various ways since the beginning of existence. Sea shells were once used as a form of currency. In my view, this is the advancement of human trade, it is pretty amazing. 

Another event which contributed to the bear market were social media influencers being questioned for “Shilling” Tokens and being paid to do so. This is classic affiliate marketing and this is how the world operates, through sponsorships, partnerships and various affiliations. When this became more apparent investors became angry that they had been duped into believing their tokens were an investment vehicle when they were being used to pump the price of the Token.

Crypto Community Is Trust Based 

In my honest opinion, we are a very long way from adoption. Yes, Bakkt will be launching a Nasdaq powered Crypto platform which will bring in more mainstream adoption eventually, ads like the recent ones from Gemini will be placed on New York City subways and billboards, people will become more aware of Bitcoin and Crypto and the sentiment will continue to grow. As of now, trust needs to be put in place for the masses to feel comfortable in this new frontier. As of today, it is still not easy to manage Cryptocurrencies, wallets have advanced features that have a learning curve, most people do not want to hold such responsibility to not lose their private keys or learn how not to lose them. People want things to be very easy. I do see these innovations coming and they eventually will happen. 

When we begin to see Bitcoin acceptance, more adoption will come. The Lightning Network is an example of a piece of technology meant to improve the speed of Bitcoin transactions. If this is secured and used by convenience stores such as 7-11, then I can see Bitcoin becoming incredibly valuable down the line. Right now trust needs to be built for the masses to enter this arena and feel comfortable enough and confident enough to hold their own Keys. The Crypto community has been very insular in my opinion and I will go as far as saying an elitist club. This needs to change in order for this tech to advance and change the world. 

Bitcoin has been facing price drops for the past year since its all time high (ATH) and many have left the market in fear of losing their investment. However, while this is all happening projects are being built that were funded by Initial Coin Offerings in 2016 and 2017. Some of these projects turned out to be duds, empty shells producing nothing of value and others that have yet to prove their worth. ChromaWay is one of these projects that considers itself to be a Blockchain pioneer and sustainable, but only time will tell. One of the advantages ChromaWay has is its partnerships with the public and private sector, specifically in real estate and finance.

Some of these projects include “Sofitto” a Swedish project aiming to build an e-currency. The project is currently under evaluation by the bank of Sweden. UIH – Universal Identity Hub is a solution for the United Nations Women Blockchain Live Test and Simulation and the goal is to connect women and families in “fragile contexts” they work with Abt Associates another social impact organization and Cadasta, a technology platform focusing on land and resource rights in developing countries such as Indonesia.

ChromaWay has strategic partnerships with well known non profits and social impact organizations like Habitat for Humanity, Seed Change, Uttaran, Landesa, Jei, Namati, and more. Some of these organizations have outlets throughout the world and have considerable influence on these various communities.

Dapps for Social Impact

The idea of Blockchain and what it enables organizations and people to do is vast. One of the best use cases is the supply chain. ChromaWay is focused on Social Impact and organizations that improve humanity and I see this as a real need in the world today. One of ChromaWay’s undertakings is called the “Green Asset Wallet” and this will be used to validate investments in the green sector. Trusted verification is needed and this will be a major contributor to the development of these goals. ChromaWay is partnering with the German Federal Ministry for Economic Cooperation and Development, GIZ and Emerging Markets Dialogue on Finance.

Postchain – another project being built by ChromaWay will be the worlds first consortium database. It is a more mature blockchain with advanced and powerful features for managing validation and integrity and other features that make databases ubiquitous. It will be SQL and make it easier for developers to become Blockchain developers, security that is BFT enabled (Byzantine Fault Tolerance) and will allow developers to build on top of it.

Real Estate Transactions

In 2016 ChromaWay investigated how Blockchain and Smart Contracts could be used for real estate transactions along with Mortgage Deed Transfers. This project gained attention globally and pursued further development of this niche. What is cool about ChromaWay is that they actually have working test results and a demo of this project available for anyone to try. ChromaWay is clearly focused on Swedish markets and some parts of Europe and if they can manage to gain a user base and a successful working product it could become useful for verifying transactions.

Chromapolis – “Where Dapps Thrive”

ChromaWay developed a second platform called Chromapolis focusing on decentralized apps. It will use ChromaWay’s Blockchain tech to bring Dapps mainstream. It is whats called a “Relational Blockchain” meaning it will allow developers to understand how to build on it universally in large and small formats (enterprise, games etc) Some of the features are:

• Mainstream Scale – horizontal scaling with side chain sharding, flexible governance
• Programming – Ad hoc queries and complex constructs
• Virtual Worlds – Interchain asset and data transfer, processing power

Some of use cases are games, such as game assets and business applications using their own “Esplix” business contracts allowing businesses to implement Smart Contract workflows without running their own private Blockchain. The team behind ChromaWay is quite accomplished and includes one of the first Bitcoin Devs pioneering Bitcoin 2.0. The team has several accomplished scholars in the field and some other well known figures such as Vinny Langham and Litecoin’s Charlie Lee. The market has looked quite bad in terms of price of the past year but this is definitely one of the projects to keep an eye on.

 

On October 2nd I attended “Economist Disrupt” in New York City. The event was focused on the future of finance and held panels from a wide range of industry leaders. Although the Crypto markets in particular have been in a bear market for most of 2018 because of a wide range of factors such as BitMex shorting, lack of adoption, and regulatory uncertainty, the Blockchain space continues to develop and events surrounding Blockchain keep happening every month all over the world. New York City has not been a very hospitable place for Cryptocurrency but it is still one of the leading centers of finance. The panels took place from 9am until around 6pm and focused on Data, AI and Blockchain, with a few comments on Bitcoin and Ethereum. What drew me in the most were the discussions on Blockchain technology.

“This fall marks ten years since the Lehman Brothers collapse – the straw that broke the global financial system into shambles. Now, ten years later, regulatory and technological changes have transformed finance. New laws designed to rebuild confidence in the system inadvertently gave rise to the ecosystem of fintechs that, among other changes, challenge the fundamentals of a highly regulated financial system. Financial technology has empowered customers and led to greater financial inclusion around the world.”

-Economist Disrupt

Panelist from Banking, Blockchain and AI.

Lawrence Summers the Charles W. Eliot University Professor and President Emeritus of Harvard University believes we are moving in the direction of deduction of regulation. He believes the biggest risks are generalized complacency, long lag and over adjusting, and geopolitical uncertainty. He believes we should have a more systemic flow of capital. I like to hear from these sort of people regarding economic development but we did not hear much about Blockchain. What he said could be applied to Bitcoin as it has helped people in countries like Venezuela, but he did not bring this up.

Kai Fu Lee, the author of “AI Superpowers” gave his stance on data. He said China is the Saudi Arabia of Data and that China is moving in the direction of a cashless economy. WeChat and TenCent rule Chinese payments. Kai believes that China is taking the lead on the implementation of AI and will exceed the US in revenue and market value. He believes mobile payments are more important than artificial intelligence. On a side note, when I was in China I did not have a problem paying with cash, whether it was a cab ride or convenience store. Kai believes that being a late mover for China has had its advantages. It was also very interesting to hear his perspective on the future regarding education, loans and AI replacing doctors and how the only role human doctors will play is an empathetic guide. I laughed at that statement. Lastly, he says convenience now outweighs privacy in China and Chinese gladly accept this.

Oliver Hughes of Tinkoff Bank says they are focused on AI, Fraud, Risk, Biometric Data, Facial Recognition and Voice. On this panel was also Elizabeth Kelly of United Income, Avid Motjatabi of Wells Fargo and Kathryn Petralia of Kabbage. Filtered, my general impression of this panel was that they seemed most concerned about Biometric data, AI and the collection of data. They didn’t comment much on Blockchain.

The Blockchain Advocates

Several leaders from the Blockchain space spoke such as Mike Novogratz of Galaxy Digital, a fund that invests in Blockchain assets, Perianne Boring who is the founder of the Digital Chamber of Commerce, Sandra Ro CEO Global Blockchain Business Council, Amber Baldet founder of Clovyr. What was most interesting to me were the people not interested in Blockchain at this conference. The moderator asked the audience to vote what was most important – AI, Blockchain or Quantum Computing. Most people raised their hands for AI, very few for Blockchain and maybe 1 for Quantum Computing. What they fail to realize is that AI/Data can be integrated with Blockchain. The representatives from several major banks had very little interest in Blockchain and were most interested in the collection of data and biometric data. Overall it was a great insight into what the leaders of finance think about the future of finance and worth the time spent there.