While the crypto 2.0 sector of the digital currency industry is showing strong signs of maturity, it has also begun to attract its share of controversy.
Following their emergence in late October, rumours that major projects in the space could soon face additional scrutiny from the US Securities and Exchange Commission (SEC) have continued to persist into November.
For all the conversation surrounding the possibility, however, major publications have struggled to find evidence that any crypto 2.0 projects have received letters. At press time, however, at least one lesser-known investment project had reported being contacted.
That said, this week's developments prove that there is equally strong positive attention being paid to this sector of the community.
Techstars invests in Swarm
The Colorado-based investment fund will invest $118,000 in Swarm, with $18,000 paid upfront and another $100,000 to be paid as the project advances, according to founder Joel Dietz. This staggered payout aside, Dietz framed the funding as evidence of the appeal of crypto crowdfunding.
“Techstars decided that it really believed in cryptoequity and its future possibilities,” Dietz said, adding that the incubator had been persistent in its attempts to invest in Swarm.
“They really tracked us down and said we like what you’re doing, we’ve been looking at the space in particular and we haven’t really seen anything that was as compelling,” Dietz said.
Techstars, in turn, suggested it sees platforms like Swarm as a way to disrupt the traditional venture capital industry, by providing companies and projects with direct access to the retail investment market.
“We believe that Swarm's innovative fundraising model has the possibility of completely transforming the venture capital industry and we want to be the first movers in making this happen," Techstars CEO David Cohen said.
Dietz also responded to criticisms that the initial batch of Swarm projects – which included a decentralized dance party – were more silly than serious, suggesting it intends to be less formal until the regulatory picture for the project is more clear.
Ethereum’s talent grab
Ethereum, the decentralized publishing platform invented by bitcoin wunderkind Vitalik Buterin has been in relative stealth mode since raising an estimated $15m–$18m through a pre-sale of the network’s native token, ether, this September.
According to Ethereum COO Stephan Tual, however, much is happening behind the scenes as the growing project prepares for an early spring 2015 launch. Tual told CoinDesk that the recent funding has given Ethereum the necessary funds to increase its employee base as it grows its global operations.
Tual reported that Ethereum is conducting the majority of its hiring in Europe – Berlin, Amsterdam and London to be specific, the latter of which has seen the addition of at least four employees dedicated to its Mist browser, a decentralized app store.
London will be the base of the company’s outreach and communications, while Berlin will be focused on development for Whisper, Ethereum’s peer-to-peer messaging platform, and Swarm, its client file distribution network.
Tual, however, was quick to stress that the hirings may only be temporary owing to Ethereum's long-term goals.
“Now with the Ether sale, we’re in the position to hire a lot of people. Not necessarily for 10 years, but a couple of years, because ultimately we’re a not-for-profit organisation,” he said.
Elsewhere, Tual sought to stress that Ethereum is not a 'bitcoin 2.0' project, but rather one that is more broadly concerned with enabling decentralized applications through technology.
“We want to see everything from decentralized Airbnb to decentralized Uber to decentralized financial markets.”
The significance of sidechains
While the crypto 2.0 sector works toward its own particular future, the bitcoin ecosystem is advancing as well, most notably with the much-lauded sidechains white paper – a proposal funded in part by VC-funded Blockstream that could allow assets to be exchanged across multiple blockchains.
Although it has been branded as a concept that could have drastic implications for the altcoin market, members of crypto 2.0 sector sought to frame sidechains as a development that takes some inspiration from its own experiments, particularly the launch of Counterparty.
The crypto 2.0 project famously “burned” bitcoins, destroying a certain set amount of bitcoin to create value for its native token, XCP.
DigitalTangible founder Taariq Lewis told CoinDesk that the “beauty of sidechains” is that they allow project developers to 'freeze' bitcoin on the blockchain, thereby gaining the ability to store value as a way to create new tokens, while ensuring this value could be recoverable.
“With a sidechain. the difference would be that we could create XCP on a sidechain by pegging bitcoin to XCP and we would have this new XCP that would be its own currency, on its own chain,” Lewis explained.
Ethereum’s Tual called sidechains “a major plus” for bitcoin, but stressed that they don’t replace the ability crypto 2.0 platforms offer for users to create a whole ecosystem of new products including decentralized applications (Dapps) and decentralized autonomous organisations (DAOs).
“We have no problem with somebody creating a sidechain for Ethereum that will represent the value of Ether,” Tual said. “But, it won’t copy the ecosystem across, and I think that’s been the misunderstanding in the media lately.”
NXT’s Bas Wisselink noted that his community has been working toward a similar goal, and that it is close to launching its NXT Monetary System, which will allow developers to release coins on top of the NXT blockchain.
Others like Counterparty’s Adam Krellenstein and CoinSpark’s Gideon Greenspan were more critical of the idea, arguing that some key security questions surrounding sidechains have yet to be fully resolved.