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Consensus 2018 Roundup


Consensus 2018 was the world’s largest ever blockchain conference, breaking their own 2017 attendance record of 2400 with a massive 8500 delegates. The Hilton in Midtown Manhattan was packed wall to wall with interest groups from all over the world; from entrepreneurs and developers to corporate executives and government workers. It’s no surprise then, that the content attempted to appeal to everyone and remained broad and high level, with the best discussions taking place outside of the main conference rooms. Despite this, as well as a call to a boycott the event, the speakers and panellists represented all the key growth areas in the industry: Joseph Lubin on enterprise blockchain (Ethereum), Jack Dorsey on payments, Jameson Lopp discussing privacy/development and Erik Voorhees, Jesse Powell and the members of the SEC/CFTC/DOJ on regulation. It was a heavyweight lineup, and although there was disappointingly few major announcements, the conference as a whole gave a good indication of some of the more important developments in this space.

Big companies are taking blockchain seriously

Consensus 2018 was another major step in validating the importance of cryptocurrencies for securing and and sharing data. Not only was the audience filled with staff from major consulting firms, but the panellists and speakers included senior staff and executives from the likes of Microsoft, FedEx, Deloitte, Koch and IBM among others. Of note, Deloitte revealed a survey of 1,000 executives from large corporations ($500m annual sales) that showed 43% considered blockchain to be a critical (top 5) strategic priority with 29% classifying it as “important”. From the same survey, 39% considered regulatory issues as the largest barrier to greater investment, followed closely by implementation challenges and security concerns. Another insight came from FedEx CEO, Fred Smith, who commented that to ignore blockchain technology was to “risk extinction”.

The level of adoption and interest shown by major players from traditional industries demonstrated to me that there is simply no going back from this point. The risk of this technology self-destructing and returning to a pre-blockchain world is – in my opinion – zero.

Interoperability and its impact on price

Interoperability was a major talking point for a number of panellists and speakers. There now seems to be an inevitable shift to frictionless transactions across blockchains, whether it be through “cross-chain atomic swaps” (particularly useful for decentralized exchanges) or separate protocols like AION and Polkadot. For example, it will eventually be possible to send Bitcoin to an Ethereum smart contract, or use the privacy features of Monero to make a Litecoin transaction. For the time being, interoperability is focused largely on peer-to-peer decentralized exchange of cryptocurrencies, requiring no middleman and therefore no custodian of funds. On this note, yesterday Coinbase announced the acquisition of Paradex, an ERC20 (Ethereum token) decentralized exchange, which could eventually branch out to trades across blockchains.

Interoperability clearly has implications for the price of all cryptocurrencies. What would be the point in holding any crypto if a user could just hold Ethereum and interact with any other blockchain. I asked this question to Charlie Lee, Samson Mow, WhalePanda and Riccardo Spagni and – while the answer wasn’t totally clear – Riccardo was of the opinion that holding any utility token whose only purpose is to act as a transaction fee was pointless. Interoperability would seem to guide users to hold store of value coins like Bitcoin and Ethereum whose price (in the years to come) remained relatively stable, and interacting with utility tokens only as and when their utility was required. This is an interesting topic of discussion that I don’t believe has been explored in much detail at all, please don’t hesitate to leave a comment with your thoughts.

Utility tokens have limited returns

While there was no direct connection with the value of utility tokens being diminished by interoperating blockchains, there were a number of panels which questioned the long-term investment potential of utility tokens.

Don Tapscott split cryptoassets into 7 groups (my examples added): Cryptocurrencies (BTC), Platforms (ETH), Utility Tokens (REP), Security Tokens (debt, equities, derivatives), Natural Asset Tokens (carbon credits), Crypto-Collectibles (CryptoKitties) and Stablecoins (DAI). Of these groups, the assets with the most potential for upside were considered (in other talks) to be cryptocurrencies, platforms and security tokens – assets whose market value could easily extend into the trillions over the coming years. Utility tokens – which are so widely hyped during the ICO process – may well have a good upside, but the potential for astronomical returns appears to be far more limited whilst also carrying higher risks than cryptocurrencies or platforms. This was elaborated on by Alex Sunnarborg in his presentation (see slide 12). Alex suggests that dApps (utility tokens) have greater risks than alternative assets as investors are reliant on a team (which is often just a handful of people) and that regulators are better equipped to target particular tokens. dApps also have a much smaller total addressable market (TAM) which – by its own account – is a major ceiling for price appreciation; for example, a cloud computing or prediction market token could well be worth billions, but certainly not trillions.

Enterprise and regulation

It was clear that of all the blockchains attracting enterprise interest, Ethereum was the only one being taken seriously, and the launch of Kaleido (and their partnership with Amazon Web Services) was a testament to how far the Ethereum ecosystem has come. Kaleido, which offers rapid deployment of private Ethereum blockchains, allows businesses to build, govern and operate their IT in a new form of blockchain-based organization. Following the introduction to Kaleido by Joseph Lubin, UnionBank took the stage to announce their pilot of Kaleido in the Philippines to help integrate rural banks with the country’s major financial networks through a blockchain-powered retail payment platform. A member of the Enterprise Ethereum Alliance (EEA) also announced the launch of their v1.0 specification for developing on Ethereum, establishing a new set of standards and best practices for the industry.

Regulation was also a key topic, and with so much enterprise interest and opportunity, it is unsurprising that the CFTC and SEC were keen to support rather than stifle the industry. Sadly, discussion from the panel – which included members from the CFTC, SEC and Department of Justice – gave no additional insight other than what was broadly known already.

In summary

Having first taken an interest in Bitcoin in 2011, I have to constantly remind myself of how far this space has come since then. The idea that there would be a major conference with thousands of delegates and Fortune 500 companies discussing the merits of cryptocurrencies would have been absurd; yet still it seems like the industry has barely even started. For all the fantastical talk about how great blockchains are, the real talking point is how few use cases are in production. We are still at a point in time where the only significantly adopted dApp involves collectable kittens and the only working use case of all this hard work are highly secure self-sovereign currencies in the form of Bitcoin and Ethereum. Next year I hope we’ll see the first real-world implementation of identity platforms (Civic, Uport), prediction markets (Augur), decentralized exchanges and supply chain management on Ethereum. Despite no ground breaking announcements, the fundamentals – as attested simply by the turnout – are stronger than ever.

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Nick Founder