The Revolutionary Implications of Blockchain
Important social impact projects are receiving less attention and funding than they deserve.
E. David Ellington, the Founder and the Executive Chairman of the Silicon Valley Blockchain Society, thinks the blockchain revolution is inevitable.
“Every aspect of who you are is going to change,” said Ellington at a recent What’s Now: San Francisco event hosted in partnership with Capgemini’s Applied Innovation Exchange. Ellington asked audience members if they could imagine life without the Internet—a rhetorical question, since many audience members did experience life before the Internet, but one meant to suggest the ways Ellington believes blockchain will soon permeate our lives.
The Internet revolutionized the way humans communicate and interact, Ellington pointed out. Then the Internet created a way for trillions of dollars of value to be created via platforms like Google and Facebook. The natural evolution, says Ellington, and the third wave of this development, is digital currency.
Blockchain, the technology underlying bitcoin, often gets less attention than the cryptocurrency that sits on top of it. But the implications of blockchain, and the system of decentralized trust it represents, extend far beyond bitcoin and other forms of cryptocurrency. This is Internet 3.0, says Ellington, and automated trust is the mechanism underpinning it. Having lost faith in humanity’s ability to get along and solve fundamental problems, he sees blockchain as “a dream come true.”
One year ago, Hyperledger Project Executive Director Brian Behlendorf discussed the potential benefits of the then even less understood blockchain at another What’s Now: San Francisco. With blockchain, Behlendorf explained, even if you don’t trust an individual actor to manage a system — say, the supply chain of diamonds — you can trust all of the actors working together through distributed ledgers and smart contracts. Behlendorf even suggested that blockchain technology could have helped avert, or at least mitigate, the housing crisis of 2009.
The organization Ellington runs, the Silicon Valley Blockchain Society (SVBS) is invite-only, and focuses on helping institutional investors, corporations, and governments transition to blockchain-related investment. SVBS has numerous global chapters, and claims $1.5 trillion in member assets after just 10 months.
Ellington believes that the governments of many countries will move quickly to regulate blockchain, in large part because it has the potential to take significant power away from the government. Its potential implications on banking and financial markets are profound, and Ellington argues that its possible implications in healthcare and identity are just as profound. What if refugees could carry currency, proof of their digital identities, coordinates of properties they own in their home countries, and their health records on their phone via blockchain?
These are the types of questions that need more attention and funding diverted to them, says Ellington. At What’s Now, Berkeley Vice Mayor Ben Bartlett and Innovation 4.4 Executive Director Lina Constantinovici shared examples of ways in which blockchain has already influenced the social impact space.
Issuing municipal bonds on the blockchain to combat homelessness
Berkeley’s Vice Mayor has a problem, and that problem stems from the impact of President Trump’s budget on affordable housing funding. Lowering the corporate tax rate from 39 percent to 18 percent has put the tax equity finance market in jeopardy, Bartlett says. He wants to find a solution to this problem that will help Berkeley’s homeless population of around 1,000 people, and also address the “zero asset problem of the next generation,” or the decreasing likelihood of younger Americans to own financial or physical assets.
Bartlett’s proposed pilot program—which Berkeley’s city council voted for unanimously on May 1—is to issue municipal bonds on the blockchain in order to fund affordable housing. Typical bonds cost around $5,000, Bartlett says, but these blockchain-enabled bonds can be issued for much smaller amounts, like $5 or $10. Bartlett envisions a system of programmable tokens through which community members can receive interest payments on their bonds. Berkeley residents can earn tokens by doing things like volunteering at food banks, Bartlett says, and these tokens can then be used as currency in local stores, or to vote on upcoming projects.
“It’s not a speculation tool,” Barlett told CityLab in February. “It’s like a non-profit, special purpose vehicle, meant to fund social good.”
Leveraging blockchain to raise money for clean energy platforms
Initial coin offerings (ICO) seem to be all the rage these days. E. David Ellington (as well as John Oliver) warns gullible speculators about being taken in by the proliferation of ICOs offering get-rich-quick schemes. In the last few years, Ellington says, writing a white paper about blockchain has been all it takes for a company that doesn’t offer an actual product to generate enough credibility to host an ICO and generate tremendous amounts of capital. He thinks this is changing as investors are becoming more knowledgeable, and more cautious.
Lina Constantinovici, Founder and Executive Director of Innovation 4.4, offered an example of a company that does provide an actual product using an ICO to further its business goals. Restart Energy Democracy bills itself in its promotional video as the “fastest growing private energy and gas provider in an EU-regulated environment in Romania” — or, in a slightly snappier self-descriptor, “the Amazon of energy.” Restart Energy seeks to eliminate unnecessary costs and intermediaries from the energy market by building an energy trading platform.
When Constantinovici met the company’s founder a year ago, he was struggling to raise enough capital to keep up with his rapid growth. His best offer at the time, Constantinovici says, was to accept $500,000 in capital for 60 percent of his company, despite the fact that he had reached $12 million in revenue that year. Constantinovici proposed an ICO, a concept that Restart’s founder wasn’t familiar with. This January, Constantinovici says, Restart raised $30 million in 8 days, and was singled out as the hottest ICO of 2018 by Huffington Post contributor and blockchain investor Mihai Herman.
“From an impact perspective, it’s not just about investing in blockchain companies that have an impact mission,” Constantinovici said, “it opens up access to capital in a way that’s currently not available in certain markets.”
The blockchain revolution is inevitable, Ellington argues. But the question remains: Who is going to be responsible for determining what blockchain’s moonshots should be?
