Today, you will likely never hear anyone utter the phrase “I’m using a cryptographic technology from the 1980s to share media with my family and friends.” Instead, as Ethan Heilman, co-founder and CTO of Commonwealth Crypto, reminded the audience, they would say, “I’m using Facebook.”
At Underscore VC’s recent Core Summit, which happened on Oct. 18, Richard Dulude hosted a panel of technologists and entrepreneurs on the topic of the future of blockchain. The panelists included:
- Anders Brownworth, chief evangelist at Circle
- Jeremy Kauffman, co-founder and CEO of LBRY
- David Vorick, co-founder and CEO of Sia
- Ethan Heilman, co-founder and CTO of Commonwealth Crypto
The Future of Blockchain audience represented a tale of two cities in many respects. To set the context for the discussion, Richard asked the audience who owned a cryptocurrency. On one hand, more than 50 percent of the 100-plus people in the room raised their hand when asked if they owned a cryptocurrency. However, the number of hands shrunk down to just two when the follow-up question — “who owns more than 10 cryptocurrencies?” — was asked, highlighting a potential new form of digital divide still in its infancy.
Unsurprisingly, the panel discussion was far-ranging. Here are my takeaways from the Future of Blockchain panel session:
Blockchains are simply a means to an end
In all likelihood, and in the not too distant future, we will stop talking about blockchains as they are a means to an end. Before we know it, blockchain will be another technology built into the application fabric that we use — in business applications, as individuals, when we engage with banks and potentially when we engage with the government. Today, it is new and unfamiliar and, most noticeably, complex. But so was SMTP, and we never talk about that protocol either, yet we use it every time we hit send on an email.
How many blockchains? Too many to count
There was consensus, at least on this panel of four, that there will be a massive, perhaps immeasurable, number of blockchains powering public, party-to-party and private use cases. The concept of a few blockchains to rule them all, analogous to the public cloud dominance by AWS, Google and Microsoft, seemed unlikely, if not ridiculous. According to Jeremy Kauffman, CEO of LBRY, the question of how many blockchains is like asking the question, “how many databases will there be?” Richard Dulude, from Underscore, posed a parallel question in response: how will all these blockchains interoperate when needed to complete a transaction?
Usability and scalability are the most near time priorities for growth and adoption
While there are many competing opinions about how to solve problems, there is consensus that transactions should be “click and done” in blockchain applications — as opposed to waiting from ten minutes to an hour. And the on-ramps must get better. Getting started shouldn’t be an endurance test. Blockchain has not had the benefit of the many years that banks have had to teach us, the consumer, how to use checks and credit cards as mechanisms of value exchange. Much of that “common sense” — as described by Anders Brownworth, chief evangelist at Circle, in terms of systems, communication and protocols — does not exist yet in the practical application of blockchain technologies, but it is coming. This is why Michael Skok, founding partner at Underscore, and the rest of the team have been focusing investments in blockchain on fundamental infrastructure companies, like SmartContract.
ICOs are THE hot topic
Given the fact that some $2 billion has been raised since July 2017 via initial coin offerings or ICOs (that’s right, two followed by nine zeros!), there was much discussion on the topic.
- The consensus was that if there is a (practical) utility to the token, then maybe an ICO makes sense. However, if the utility is not clear, or is well off into the future, then a founder should question the need for an ICO.
- In the ICO run-up, it has been too easy to issue what would be considered a security, and there are important reasons that issuing a security should be difficult. SEC guidance on whether a token should be considered a security and passes the Howey Test is a very dynamic topic and guidance is evolving in real-time.
- The paradox of whitepapers is that they can mean nothing to a technical reader while seeming like magic to a business reader, resulting in the frenzy we have witnessed in recent ICO offerings.
- As a result, managing the expectations of a community after the ICO sale can be a challenging to say the least. See the drama surrounding Tezos.
- Liquidity is both a pro and a con. With startups increasingly taking eight to 10 years to achieve some liquidity for founders and employees, the instant liquidity an ICO provides is an attractive carrot to hire talent. At the same time, that same liquidity has the potential to undermine the alignment new ventures need to achieve great things over a period of years.
- ICOs come with none of the benefits early-stage equity investors can bring: advice, board members, and access to advisors, talent and customers — things that founders focused on building a company care deeply about.
- Sadly, the prevailing wisdom in the room was the likelihood that a bunch of people will get screwed is already accepted doctrine. No one denies it, they hope it won’t be them.
Ironically, while ICOs are clearly the hot topic in the world of blockchain these days, they should not distract from the most important entrepreneurial challenge: building great technology companies.
Open source really has won the day
Ten years ago when we founded my previous company Acquia, open source was a still rogue for avowed hackers and hobbyists, along with industries like higher education and publishing, with substantive economic incentives driving them towards free software. Now open source not only powers the foundation of cloud-based SaaS businesses, but open source protocols and software are also powering the blockchain revolution. In 2007, Michael Skok kicked off the Future of Open Source initiative to help the market understand the disruptive potential of open source software. At Underscore VC, we are embarking on a similar mission of discovery in the world of blockchain. At our Core Summit, we announced the Future of Blockchain initiative.
Continuing the Future of Blockchain discussion
In addition to the discussion, the panel session also served as the launch of Underscore’s Blockchain Core community. In an effort to continue the discussion beyond the event, we have launched the Future of Blockchain initiative and Twitter account. To learn more how you can get involved, follow Future of Blockchain on Twitter.
Bryan House is an entrepreneur-in-residence at Boston-based VC firm Underscore.VC and was previously a longtime executive at Acquia.