As Cryptocurrencies Reach New Highs, The Ethereal Summit Paints A Rich Future
From January 1 to today, the cryptocurrency Ether has gone from $8 to $130
— a 16x return.
Ether is the currency of the Ethereum network, a smart contract platform which currently has a market capitalization of $12 billion. Generally considered the second-most successful cryptocurrency after bitcoin, it has been the launchpad for myriad new tokens that make up the hot “initial coin offering” trend. Even companies such as JPMorgan Chase, Microsoft, Intel, BBVA, Santander, UBS, Credit Suisse, Accenture, and others have joined an Ethereum enterprise effort. These are remarkable feats for a cryptocurrency not even two years old.
One of the companies doing the most to promote the development and usage of Ethereum around the world is Consensus Systems (ConsenSys), which bills itself as a “venture production studio” devoted to building Ethereum-based software, whether in the form of decentralized applications or private blockchains for the enterprise.
Aside from its unconventional structure, the self-funded ConsenSys, founded by Joseph Lubin who is also one of the co-founders of Ethereum, stands out for the location of its headquarters: in the heart of hipster Brooklyn, in an area once known for underground dance parties at warehouse venues that went only by addresses. In recent years, the neighborhood has gotten trendier, with juice bars, top restaurants and even proper clubs that have actual names. (ConsenSys also has five other offices around the world.)
On Friday, in keeping with its offbeat nature, ConsenSys held the Ethereal Summit, a blockchain event with 650 attendees that, instead of centering like most others, around financial services, shined a spotlight on culture projects. “Blockchain events are either enterprise-focused or IT-focused. We thought, Why not do something culture-focused?” said Amanda Gutterman, ConsenSys’s chief marketing officer. Some of the industries aside from financial services that the
Event aimed to touch on were sustainability, arts, and humanitarian aid.
A panel on financial inclusion
I was invited to speak on a panel about what it’s like for media covering this technology, and in situations like these, since I freelance, the conference often covers my transportation and hotel. Aside from the somewhat atypical speaker lineup, the first clue I had that this wasn’t going to be a normal conference was when my Lyft pulled up to the hotel. Just from the look of it, I knew it would rank as one of the nicest places this budget traveler has ever rested her weary head. (As were the lodgings for this cryptocurrency-related conference.) When checking in, the friendly men at the front desk told me the hotel had Teslas that I should take for a spin. When I demurred, citing the challenge of driving in New York City, they said the Teslas came with chauffeurs. These first few minutes of my trip underscored one of the themes that have recently permeated coverage of the crypto space: that there’s money to be had in this new token-based internet.
Ethereal capped off a week in which the rampantly speculative ICO (“initial coin offering”) market grew by at least $50 million to total just under $470 million over two years, bitcoin's market cap as a percentage of all cryptocurrencies fell below 50% for the first time, the price of ether jumped from $90 to $126, and bitcoin surged from $1,762 to almost $2,000. And it may be just a taste of what is to come, with the largest industry conference, Consensus, organized by trade publication CoinDesk, to be held the next week, and right on the heels of that, Token Summit, a daylong conference dedicated to the new blockchain-based internet. Plus, in the coming days or weeks, the Tim Ferriss podcast, one of the most popular business podcasts, will be featuring a couple of prime guests from the cryptocurrency world.
The excitement over rising prices may have prompted these comments about the frothy ICO markets from one of the first keynotes, London-based Vinay Gupta of Hexayurt Capital, who could not fly to the U.S. due to visa issues and so sent his remarks in a video instead. “My hope for the ICO markets is that people will be extremely well-behaved and well-disciplined so there isn’t a mess for regulators to clean up,” he said to a standing room only crowd. “The price of freedom is to be effectively self-governing. We really, really want people to take that serious message, figure out how to keep those markets clean and then you protect the entire ecosystem.” (It looks like that is already happening to some extent.)
Comments about the bubble-like activity evident across the crypto space peppered the day, which had a packed agenda of panels and presentations on two stages, plus bean bags in both venues for worn-out attendees. “We’re living in a really speculative market right now,” said Jalak Jobanputra, founder and managing partner of FuturePerfect Ventures, adding that the market cap of all cryptos just surpassed that of Netflix. “I’ve been through two bubbles and crashes in my venture career — one was in ’99/2000, and the other was 2008. But as we saw with the internet, we’ll see some real value being created out of the experimentation happening right now.” As for what that would look like, Gupta said Ethereum was “moving toward a system where you can see the entire world reflected in the digital in a simple computing surface.” Comparing it to how maps made geography easier to understand, he said, “So it’s possible to look at the world with the blockchain mapping the geography with the institutions visible as actors. … Then you could get an overview of how the system as a whole, works.”
Underpinning the speakers’ visions of a blockchain future were at least optimistic if not utopian hopes that these new networks would also positively impact society. Joel Monegro, on the investing team at Union Square Ventures, contrasted tokens with stocks. “At a high level, a share of stock in a company means a proportional right to the profits of a business,” he said, adding that this, however, drives the holders to increase profits. “The problem is when companies are driven to increase profitability, they end up creating market failures because they expand too broadly or vertically into new business areas where they find it difficult to compete or amass market power,” he said. “The other problem with equity is it incentivizes the holders of that equity to hold as much of it as possible to concentrate the equity because it represents a perpetual right to profits.”
Tokens, he said, invert those incentives. “A token has financial value when the network or service it represents is being used an increasing amount, so you’re not incentivized to get a company to increase profits but rather incentivized to get as many as people as possible to use the service,” he said. This then leads to the value being distributed more broadly. William Mougayar, a venture capitalist and author of The Business Blockchain who is organizing next week’s Token Summit (and was a recent guest on my podcast), said that everyone has three jobs: First, the traditionally defined job — work you do for a paycheck — and then the work of taking care yourself and your family. “Then the third job was the work given to us by another company,” he said, “whether it’s buying a ticket or renting a car — all kinds of jobs are being given to us, and we’re not being compensated. However, in the future, more and more, the work we’ll be doing, whether it’s passive or active, will be compensated by a token of some sort.”
Other panels and presentations discussed everything from conscientious consumption via supply chains (in which SlaveFreeTrade president Brian Iselin removed his clothes on stage) to getting identity on the blockchain from birth; from whether the media has a responsibility to give a new technology like blockchain positive coverage to what it looks like to have many city functions run on blockchains; from what a decentralized entertainment network looks like to why this may be cryptocurrency’s “Netscape moment" (built, not on bitcoin, but on Ethereum).
The wide range of applications made possible with blockchain technology was reflected in the crowd, which seemed more creative and diverse than most blockchain conferences. On Thursday night, at a pre-conference cocktail party, while enjoying spicy snapper ceviche, black bean taquitos and steak, an economist and Singularity University graduate talked up his work on Crowdjury, a network that will enable us to serve as arbitrators in other people’s disputes using tokens, and a virtual reality artist showed the art he had created using data from NASA and NOAA.
It was a scene reflected in Lubin’s closing remarks the next day. Remarking on how he majored in computer science and electrical engineering as opposed to economics, he said, “I was a computer nerd growing up on Star Trek … It was obvious to me that the geeks would inherit the earth.” Then, describing how 9/11 represented, for him, a loss of innocence that led him to explore the global economy and conclude that it was morally bankrupt, he talked about how top-down command-and-control methods had gotten society to a certain level of progress but “decentralized economic, social and political systems will be more effective, more fluid and far less susceptible to corruption.”
He finished with, “Many times, people have said to me and other ConsenSys members, You guys are going to dominate, you guys are going to take over the world. The whole point of decentralization, the Ethereum project, the work we do with ConsenSys is the exact opposite. We’re working to enable the planet to better organize itself, and we are building technology that we believe will make it impossible for any subset of actors to take over the world. Welcome to the decentralized future.” A whoop of cheers went up. Across the street, beers, bites, and beats awaited the attendees, who continued spinning up their dreams of the future in the summer night breeze. Ether, having started the day at $97, finished it at $127.
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