“No one owns it, and no one uses it.”
That’s how BlockTower Capital’s Ari Paul described bitcoin (and, really, cryptocurrency in general) multiple times during his keynote at PennBlockchain on Friday, the inaugural crypto conference by students at the University of Pennsylvania’s Wharton Business School.
While it might not sound like it, Paul emphasized bitcoin’s low adoption as a rallying cry. In fact, taken in total, the conference in West Philadelphia felt mainly like a day of recruiting pitches by crypto luminaries.
In saying that no one uses it, Paul was illustrating how, despite all the conversation and hype the technology has generated, in the grand scheme of things, the ecosystem is still very small. He compared it to the internet in 1995, when the number of websites online was only in the hundreds, but it was being prepped for an explosion in adoption.
Grayscale’s Michael Sonnenshein struck much the same chord during a panel, bemoaning the level of media attention in late 2017, contending that “the unfortunate result of all those touchpoints is that everybody thinks everybody who wants to be is already involved.”
But in fact, throughout the day, presenters emphasized there’s lots of opportunity for all kinds of talented people to work in the cryptocurrency and blockchain ecosystem.
Yet, the day wasn’t without its notes of caution. Regulatory uncertainty, especially in the U.S. cast a shadow over nearly every conversation. Additionally, presenters also commented on the plethora of ridiculous projects transparently chasing easy millions though initial coin offerings (ICOs), one of the reasons regulators are starting to get involved.
But these issues were presented more as disclosures than discouragement.
In other words, nothing in this space will be easy, but there’s a good chance it would be worth it; or as Sonnenshein put it:
“It’s new, it’s nascent, there’s bugs but it’s very exciting and also very risky.”
Not legal advice, but…
Probably no other project exemplifies the industry’s hidden treasures and pitfalls as much as Tezos, whose co-founder Kathleen Breitman (one half of the husband and wide co-founding team) was on hand for a panel about ICOs.
Last summer, the project raised more than $200 million to build what Breitman said was a blockchain that could “self-amend” in a way, in an effort to put a stop to the contentious upgrading debates most cryptocurrency communities have struggled with. It was an exciting endeavour, but one that came to a halt when the partner the Breitmans had chosen to run the project’s Switzerland-based non-profit foundation, refused to pay the developers.
If that legal battle wasn’t enough, large groups of Tezos’ former supporters started organizing to bring class action lawsuits against the Breitman’s, demanding refunds.
This hasn’t completely stopped the couple. According to Kathleen on stage, “We’re planning to launch the network,” in weeks or months.
But, the Breitmans, along with anyone else that’s a stakeholder to ICOs, might have more headwinds to worry about. The biggest, at least from what it seemed listening to the day’s talks, is the U.S. regulatory system’s sometimes aggressive approach to the space.
The issue that these conversations always come back to is this: utility tokens (or whatever entrepreneurs prefer we call them – as if the name matters).
Joe Guagliardo, a tech-focused partner at Pepper Hamilton, addressed regulators’ refusal to give clear guidance on whether all crypto tokens will be categorized as securities. “It’s stifling – not so much to innovation – but to companies trying to do the right thing,” he said.
Caitlin Long of the Wyoming Blockchain Coalition echoed that sentiment, telling CoinDesk in an interview that selling crypto tokens is the best way for new projects to bootstrap their business.
It builds an incentivized, motivated group of supporters, yet it will be difficult to operate in the U.S. in that way, she said, adding:
“Federal security law fundamentally conflicts with building an organic community.”
Once again invoking the internet in the days before it was a fixture of modern life, the Chamber of Digital Commerce’s Amy Davine Kim said that the U.S. needs forward-thinking leadership from the top echelons of government, and soon.
“We need a clear statement like we had in 1999 for the internet, saying this is important technology,” she said.
Still, even though there’s frustration with the political reality today, there’s currently no evidence of panic.
Elizabeth Stark, the founder of Lightning Labs, a company building a layer-two lightning network implementation for scaling bitcoin and other cryptocurrencies poked fun at the Silicon Valley adage of “move fast and break things,” defending the sometimes slow progress of updates with:
“Move slowly and build a more secure base layer.”
Cornell professor Emin Gun Sirer had similar things to say during the event, telling the students that based on layer-one demands, the industry is doing fine, but also prodding them by pointing out that if Venezuela shifted entirely over to bitcoin (this was mentioned since many worry about Venezuelan President Nicolas Maduro new “petro” crypto token), “every adult in the country could only make one transaction every 36 days.”
He continued, “It’s possible for new protocols to emerge that are strictly better than anything that came before them. We are far from having established the stack.”
It was as if everyone who showed up to the event had come to challenge the students.
Were they smart enough to get in on the ground floor? And even then, were they smart enough to pick winners now, in a world where, as Future/Perfect VC Jalak Jobanputra put it, “There are 10 altcoins for every business case.”
For his part, Paul told the students that while people will try to tell them that cryptocurrency won’t amount to anything, there are billion-dollar businesses in building tools for interacting with the technology. But he warned, “Many of these projects are on the wrong side of the Gartner Hype Cycle.”
Speaking in much the same way to blockchain’s potential to surprise, Amber Baldet (on her last day as the blockchain lead at JPMorgan Chase), reminded the audience that the most lasting ideas are sometimes discovered by someone just playing around with a technology they find interesting.
Sometimes the most important ventures aren’t born from serious people building serious companies or noble people taking on noble causes.
As such, Baldet said:
“You can’t underestimate things like CryptoKitties.”
Students via Shutterstock
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