Citations, interviews, and events for the final third of 2016

Presenting at Bitcoin / Ethereum Meetup in Hong Kong

I ended up traveling a lot more than I expected last year, including 9 times just to East Asia.  The level of interest in that region will probably increase this year — especially as more projects and companies are funded — though I probably won’t do the Trans-Pacific shuffle nine times again this year.

As of right now there are probably just a small handful of startups in APAC that have the capital, connections, and capability to execute and build the commercial products and applications that are discussed at the plethora of fintech events.  And almost none of them have anything to do with a cryptocurrency itself either… because cryptocurrencies weren’t designed to solve most problems financial service organizations have.

Below are the interviews, events, and presentations I participated in the last few months of 2016.

Note: according to their stats, my “Settlement Risks Involving Public Blockchains” was one of TABB Forum’s top stories of 2016.

Quoted:

Cited:

Interview:

Events:

  • Smart Cloud Show 2016 from Chosun Ilbo on September 21, 2016 in Seoul, South Korea.
    • Keynote: “Blockchain and Financial Big Bang”
    • Coverage: Naver
  • Global Blockchain Summit event held by Wanxiang Blockchain Labs on September 23, 2016 in Shanghai, China
    • Presentation: “Opportunities and Challenges for Financial Services in the Cloud: Trade-offs in digitizing and automating finance” (R3 Blurb)
  • Fujitsu Laboratories of America Technology Symposium annual event on October 11, 2016 in Santa Clara, California
    • Panel: “The Blockchain Future – Challenges and Opportunities Ahead”
  • Fórum Blockchain event jointly held by Itaú and Bradesco on October 13, 2016 in São Paulo, Brazil
    • Presentation: “Smart Contracts: cryptographically secured, automated business logic”
  • MIT Fintech Course: Future Commerce on October 18, 2016 (virtual)
    • Discussion: “Distributed Ledger Technology Landscape and Regulations”
  • GAIM OPS West Coast annual event held on October 25, 2016 in Rancho Mirage, California
    • Panel: “Blockchain: What Exactly is it disrupting? Will it Negate Counterparty Risk?” (Photo)
  • CIO Study Trip hosted by the Capgemini Applied Innovation Exchange Lab on behalf of the IT Management Association on October 26, 2016 in San Francisco
    • Presentation: “Distributed Ledger Technology” and “Legal and Regulatory Challenges”
  • Day long discussions on November 9, 2016 at Cornell University in Ithaca, New York
    • Presentation: “Code is not law” (Photos)
  • Guest lecture at the Boston Economic Club on November 16, 2016 in Boston, Massachusetts.
    • Presentation: “DLT as Financial Market Infrastructure” (Photo)
  • Global Trade Review: West Coast Trade & Working Capital Conference on November 17, 2016 in San Jose, California
    • Panel: “Fintech investment and evolution of the trade finance sector” (Photo)
  • The Future of Financial Payment Services Driven by Technology Innovation on November 22, 2016 from Korea Finance Telecommunications & Clearings Institute 30th Anniversary Seminar in Seoul, South Korea
    • Presentation: “DLT as Financial Market Infrastructure” (Photos)
    • Panel: (Photos)
  • Inside Fintech on December 8-9, 2016 in Seoul, South Korea
    • Presentation: “Why Building Financial Infrastructure is Different than Building a Social Media App” (Photos)
    • Panel: “Regulating the Unregulated: How is Regulation and Compliance Impacting the Adoption of New Technology and Innovation” (Photos)
  • Ethereum and Bitcoin joint meetup on December 12, 2016 in Hong Kong
    • Presentation:  “On Consortiums: R3’s Tim Swanson in Conversation”
  • 13th annual China International Finance Forum on December 15, 2016 in Shanghai, China
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Citations, presentations, and panels

Below are a number of events, presentations, panels, and interviews I have participated in over the past three months.

Academic citation:

Quoted:

Presentations:

Interviewed:

Panels:

Cited:

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Some housekeeping of events and interviews

It has been a little while since I posted the events, panels and presentations I have been involved with.  Below is some of the public activity over the past 5-6 months.

Interviews with direct quotes:

Indirect quotes:

Academic citations:

Presentations, panels and events:

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Cryptoeconomics for beginners and experts alike

This past week Koinify and the Cryptocurrency Research Group (CCRG), a new academic organization, held a 3-day event — the first of its kind called Cryptoeconomicon, an interdisciplinary private event that included a cross section of developers, entrepreneurs, academics and a few investors.  It was purposefully scheduled to coincide with O’Reilly Media’s own “Bitcoin and the Blockchain” conference which took place in the middle of it.

I attended what amounted to four days of seminars, brainstorming and networking sessions.  Below are my summarized thoughts.  Note: these are my opinions alone and do not reflect those of other participants or the companies I work with.  You can view pictures/info of the event: #cryptoecon and @cryptoecon

Rather than going through each session, I will just highlight a few areas that stood out to me and include outside relevant content.

What is cryptoeconomics?

According to Vlad Zamfir, of the Ethereum project, cryptoeconomics as a field might be defined as:

A formal discipline that studies protocols that govern the production, distribution and consumption of goods and services in a decentralized digital economy.  Cryptoeconomics is a practical science that focuses on the design and characterization of these protocols.

Zamfir discussed this at length (slides) (video) and rather than going too in-depth with what he said I wanted to reiterate his main points he gave:

Cryptoeconomic security as information security

  • Mechanisms are really programs
  • They can distribute payoffs
  • The programs have a certain behaviour in the Nash equilibrium case
  • The NE has a cryptoeconomic security
  • We can be assured that a program will run a particular way

He also argues that “cryptoeconomics” should be see as more economics for cryptography rather than cryptography for economics:

  • Economic mechanisms can give guarantees that a program will run in a particular way that cryptography alone can’t provide.
  • Incentives are forward facing, cryptography is a function of already-existing information
  • How do we provide custom cryptoeconomic guarantees?

The last part in relation to his talk that really stuck out to me was on the final day.  In his view (slides) the technical term that should be applied is, “distributed cryptoeconomic consensus” which would assuage concerns from the academic “distributed consensus” community that uses different terminology.  Under this definition, this means:

  • A cryptoeconomic mechanism with the Nash equilibrium of assuring distributed byzantine fault tolerant consensus
  • We should be able to assert and prove the cryptoeconomic assurances of any consensus mechanism
  • Distributed consensus mechanisms can create a pure cryptoeconomy. Even the execution of the mechanisms is has a measurable assurance.

Most interesting comment of the event

I think the most apt comment from the economics discussion came from Steve Waldman, a software developer and trader over at Interfluidity on the first day of the event.

While there will likely be a recording posted on Youtube (video), in essence what he said was that in the blockchain space — and specifically the developers in the room — they are creating an enormous amount of supply without looking to see what the corresponding demand is.  That is to say, there is effectively a supply glut of “blockchain tech” in part because few people are asking whether or not this tech actually has any practical consumer demand.  Where are the on-the-ground consumer behavior surveys and reports?

Again, if Bitcoin (the overall concept) is viewed as an economy, country or even a startup, it is imperative that the first question is resolved: what is the market need?  Who are the intended consumers?  So far, despite lots of attention and interest, there has been very little adoption related to blockchains in general.  Perhaps this will change, maybe it is only a temporary mismatch.  Maybe it these are the chicken-egg equivalent to computing languages like Ruby or PHP and eventually supply somehow creates the demand?  Or maybe it suffers from the Kevin Costner platform trap (e.g,. if you build it, will they come?).

To illustrate this contrarian view:

why startups fail

Source: David Norris https://twitter.com/norrisnode/status/561262588466839553

Maybe there is no real market need for these first generation concepts?  Perhaps the network will run out of block rewards (cash incentives) to the miners before these blockchains can gain mainstream traction?  Maybe the current developers are not quite right for the job?

Or maybe, blockchains such as Bitcoin simply get outcompeted in the overall marketplace.  For instance, there are currently 1,586 Payment startups listed on AngelList and 106 P2P Money Transfer startups listed on AngelList.  Most of these will likely burn out of capital and cease to exist, but there are probably at least a dozen or so of each that will (and have) gained traction and are direct competitors to these first generation blockchains.

Perhaps this will change, but then again, maybe the market is more interested in what William Mougayar (who unfortunately was not part of the event) pointed out a few days ago.  Simply put, maybe there is more room to grow in the “Blockchain Neutral Smart Services” and “Non-Blockchain Consensus” quadrants:

Crypto_Tech

We cannot know for certain a priori what market participants will decide.  Perhaps Bitcoin is good enough to do everything its enthusiastic supporter claim it can.

Or maybe, as Patrick Collison, CEO of Stripe, wittily stated in Technology Review:

“Bitcoin is kind of a financial Rorschach test; everyone projects their desired monetary future onto it.”

Now, to be fair, Collison (who was not part of the event) has a horse in the race with Stellar.  Fortunately there was not much emphasis on token prices going to the moon at the Cryptoecon event.  When incentives did come up, it was largely related to how a consensus mechanism can be secure through a self-reinforcing Nash equilibrium.

Perhaps a future event could discuss what Meher Roy (who unfortunately was not in attendance either) adroitly summarized and modeled in relation to how actors are betting on crypto-finance platforms:

meher roy table

Source: https://medium.com/@Meher/a-model-to-makes-sense-of-beliefs-and-associated-crypto-finance-platforms-f761a7d782cb

Back to the show

There were a number of startups at the event, probably around a dozen or so.  In my view, the most concise overview was from Sergey Nazarov co-founder of SmartContract.  The interface was clean, the message was clear and “issuance” can be done today.  I’m not necessarily endorsing the stack he’s using, but I think he has clearly talked to end-users for ease of use feedback (note: be sure to consult a lawyer before using any ‘smart contracting’ system, perhaps they are not recognized as actual “contracts” in your jurisdiction).  Also, drones.

It would have been nice to see a little longer debate between StorJ, Maidsafe and Filecoin groups.  I think there was probably a little too much “it just works” handwaving but thought that Juan Binet-Betez from IPFS/Filecoin gave the most thorough blueprint of how his system worked (he also showed a small working demo).

It was not recorded but I think messaging for Augur (a variation of Truthcoin) was pretty poor.  Again, just my opinion but I was vocal about the particular use-case (gambling) proposed as it would simply bring more negative PR to a space smashed with bad PR.  The following day other members of the team discussed other uses including prediction markets for political events (similar to what Intrade did).  I am skeptical that in its current form it will become widely adopted because futures markets, like the CME, already do a relatively competitive job at providing this service for many industries and these decentralized markets could likely just attract marginal, illicit activities as has been the trend so far.  I could be wrong and perhaps they will flourish in emerging markets for those without access to the CME-like institutions.

Things that look less skeptical

  • There were about 10-12 people affiliated with Ethereum at the event, all of them were developers and none of them seemed to push their product as “the one chain to rule them all” (in fact, there was a healthy debate about proof-of-stake / proof-of-work within their contingent).  I’ve been fairly skeptical since last summer when their team looked gigantically bloated (too many cooks in the kitchen) but they seem to have since slimmed down, removing some of the pumpers and focusing on the core tech.  This is not to say they will succeed, but I am slightly less skeptical than I was 3-4 months ago.
  • I also had a chance to sit down with a couple members of the IBM ADEPT ‘Internet of Things’ team.  They held a ~3 hour workshop which was attended by around 20 people.  The session was led by Henning Diedrich (IBM), David Kravitz (IBM) and Patrick Deegan (Open Mustard Seed Project).  Again, even though I’ve paged through the ADEPT whitepaper, I was hesitant to believe that this was little more than marketing on the part of IBM.  But by the time the session was over, I was a little less skeptical.  Perhaps in the future, when more appliances and devices have secure proplets, they could use a method — such as a blockchain/cryptoledger — to securely bid/ask on resources like electricity.  B2B and machine-to-machine ideas were discussed and piggybacked on.  Obviously there are all sorts of funny and sad ways this could end but that is up for Michael Bay to visualize next year.
  • This also intersects with another good comment from Stefan Thomas (CTO of Ripple Labs).  In a nutshell, on a panel during the first day, he thinks there is some confusion and conflation of the terms “automation,” “decentralization,” “smart contracts” and “blockchains.”  That is to say, while blockchains are automated, that is not to mean that it is the only means to achieve automation.  Nor is decentralization necessary for automation to be achieved in every use-case.  Nor are smart contracts the only way to control automated devices.  When the video is posted I’ll be sure to link it (video).
  • Ethan Buchman, lead dev for Eris, was both witty and on top of his form, noting that in practice users don’t need a new browser every time they go to a new site, so they shouldn’t need a new client to view a different blockchain.  Let’s keep our eye on Decerver to see how this germinates.
  • Lastly, the two investors that attended the VC panel on Wednesday included Shahin Farshchi from Lux Capital and Pearl Chan of Omidyar Network.  What I liked about them is they weren’t pushing a certain binary viewpoint.  They were both upfront and honest: neither had invested in this space, not because they hated it, but because they were taking their time to see what opportunities actually fit within their mandate.  Perhaps they will at some point.  One joke that Farshchi mentioned was that back when cellular telephony was growing, “everyone and their mom” was selling base station equipment and chips.  Similarly there were over 300 companies creating thin film solar cells before bankruptcies and mergers.  So the type of euphoria we see in the Bitcoin-space is not necessarily unique.

Room for improvement

Perhaps if there is a next event it could include representatives from Blockstream, Bitfury and other Bitcoin-centered projects.  It would be nice to have some perspective from those deeply concerned about with maintaining secure consensus and the Blockstream team has some of the most experienced engineers in this space.  Hearing their views next to what Peter Todd (who attended and had some interesting calculations for the estimated costs to attack a network), could help developers build better tools.  Similarly, developers from Peernova, Square, Stripe, M-Pesa and Western Union would also likely be good resources to provide empirical feedback.

Additional clarity for what a decentralized autonomous organization (DAO) actually is and is not could be spelled out as well.  And how do these intersect with existing legal jurisprudence (can they? as Brett Scott might ask).   For anyone who has read “The Cookie Monster” by Vernor Vinge, both Matt Liston and Vitalik Buterin made some not-entirely-unreasonable points about machine-rights and whether or not machines should trust humans (e.g., humans expect bots to provide truthful information, but can the reverse be expected?  And what happens if a bot, like a DAO, is deemed too successful or broke a law in some jurisdiction — does it get “carted” away in a truck?).

Lastly, I think by the time there is another event, there will hopefully be more clarity for what a “smart contract” is.  One panel I moderated, I tried to get the participants to use the word “banana” instead because the term “banana” is overused and often conflated to mean many things it is legally not.  Primavera De Filippi from the Cryptolaw panel made some good comments too about whether or not “bananas” are actual legally binding contracts; she previously did a workshop with Aaron Wright (also in attendance) at the recent Distributed Networks and the Law event held at Harvard/MIT.  Steve Omohundro also spoke realistically about these scenarios on the final day, where does liability start and stop for developers of DAOs?

[Note: I would like to thank Kieren James-Lubin, Vitalik Buterin, Tom Ding, Sri Sriram for organizing the event, Robert Schwentker for acting as emcee/photographer, and CFLD and Omidyar Network for sponsoring the event including the delicious food.]

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