Takeaways from World Crypto Economic Forum 2018

The WCEF is a 2 day conference in San Francisco that centers around general discussions, panels, interviews, and token pitches in the emerging space of crypto economics and asset development. You’ve heard of Bitcoin right? Yeah, that stuff – kinda…

The stages were primarily either VC/Angel investors, Sales Reps for crypto projects, or Developers of the projects themselves.

This article is split into 5 primary sections to be more easily digested and for those who are too busy daytrading to take 10 minutes to read the entire summary (I’ll bet you’ve never read a white paper either).

  • Blockchain Futurism
  • Terminology
  • Trends
  • Project Highlights
  • Investment Advice (From the pros, not me)

Full Disclosure: Before we get started, if you see a * next to a coin, it means the author of this article (Hi!) holds a position in this asset and will benefit from its success.

Blockchain Futurism

Blockchain technology offers 3 major value adds to the world:

  • Decentralization that allows for shared governance and decreased downtime of a system built on it
  • Audit trails with transparency and immutability
  • Instant value exchange of digital assets

All of those benefits are being looked at by private businesses across industries right now with investors jumping in with both feet (and without looking where they’re jumping), but blockchain futurism gets exciting when you start considering how this tech will be affecting the details of our every day lives.

Much of blockchain futurism begins with and relies on the concept of “Identity” and how we as humans store this information. Passports, Social Security Numbers, and Birth Certifications are the big 3 that are currently stored “server-side” within centralized, government-owned databases and “client-side” in the form of pieces of paper. Between those papers and your government, there are 2 total entities that know and can verify you exist.

At this point you might be thinking

“It’s not like my government is going to dissolve tomorrow and worst case scenario I have to go the DMV to get my identity sorted.”

True. Besides the horrors that lay within government offices like the DMV in the United States, many of the most basic problems associated with identifying people have been solved using this centralized server-client model. But what about moving forward? This “series of tubes” we call the Internet has changed the game and paper is being outdated industry by industry. When will it be outdated in the industry we call our Government and its interactions with citizens?

“Lets be real. You’ve spent millions of dollars updating a fancy spreadsheet.” -Toni Lane Casserly, on legacy database systems

Chelsea Palmer envisions a world where individual rights are stored on a blockchain. Toni Lane (co-founder of CoinTelegraph) spoke on the ability for smart contracts and the forking nature of software to be used as the digital foundations of laws and partnerships within and between nations. And not just nations we know now in meatspace, but nations that consist of our digital selves, being built in spaces like VR or even on the web as we know it now. Consider Facebook as a nation. They’re governing over a billion people right now. They’re collecting “taxes” on our existence in the form of monetizing our attention with advertisements. Their Terms of Service supersede the governance contract of the physical nation in which they operate. Freedom of Speech is whatever Facebook chooses to define it as, not what the US Constitution says it is. This concept of “digital governance” is not a wild stretch of the imagination. It’s already happening. Add the blockchain’s ability to naturally handle governance concepts like voting and the transactional nature of money and we’re talking about a future of digital citizenship.

“You can’t go back in time 20 years and add a piece to the blockchain to claim you’ve been born.” -Vinny Lingham, Civic, on putting Birth Certificates on a blockchain

Leah Callon-Butle of Intimate.io imagines a future where criminal records are stored on a blockchain in order to allow the industry of sex workers to more quickly and conveniently assess dangerous situations in the world of escort services and pornography employees. Combine this with healthcare records about things like diagnosis and treatment of sexually transmitted diseases and you’re starting to see the possibilities. She defined privacy as “the voluntary disclosure of information” and blockchain may very well be the technology that underpins the shift in our ability to own that information and disclose it at our own will instead of the will of credit institutions, social media platforms, healthcare systems, government agencies, and scores of other organizations that act as authorities to profit from the safeguarding or dissemination of the components of your identity.

Your identity. Your ownership. Your choice. That’s the power of blockchain.

Allison Clift-Jennings of Filament talked about blockchain-enabled semiconductors being built into IoT devices to allow for machine-to-machine transactions. Your thermostat exchanging temperature data with your electric warming blanket. Your refrigerator transacting with an autonomous grocery delivery service vehicle. Your blockchain enabled bottle of milk automatically charging your roommates a fee per ounce “borrowed” while you’re away.

Blockchain is the sci-fi future no one promised me, but one that I want to live in. It’s a leap in the direction of both increased privacy and increased transparency where each is needed. It’s better than hoverboards and jetpacks and the technology is already here.

Terminology

The words and phrases being tossed around in the Crypto space right now are new, malleable, technically mysterious and still changing. I feel like I could write a new article on this every month. Like we need an Urban Dictionary just for Crypto economics vocabulary. In the meantime, here’s some thoughts gathered at WCEF.

“HODL” — Misspelling of ‘Hold’ and also an acronym for “Hold On for Dear Life.”

This is one that’s been around for some time, but more important than the definition or history is the cultural implications of terms like this. HODL isn’t just a word, it’s a chant. It has permeated far and deep in the world of Crypto asset investors. It’s the antithesis of the “Buy low, sell high” mantra of traditional finance. It is “Buy now, and never sell, because this is the future of money, not the fiat you’re selling for.” HODL is hope. In this one bastardized word holds a safeguard to a community of people taking loans and leveraging mortgages to invest in this space. HODL is a religious tenet of the investor class. Warren Buffet once said “The stock market is a device for transferring money from the impatient to the patient” and the crypto market is much the same. HODL wraps this knowledge up into an easy to digest, easy to transmit package.

“Asset Classes” — Understanding project value and how to diversify your Crypto portfolio.

Ready Set Crypto recently defined the Crypto space of early 2018 to be comprised of 7 different asset classes, each carving their own space out to enhance or upend industries that existed pre-blockchain. At WCEF, I took note of 2 additional asset classes beyond this 7, for a total of 9.

  • Store of Value: Bitcoin* (BTC) is the big one, but I’d argue any Proof of Work coin could act as a Store of Value asset right now based on how much resources are required to mine the asset. Gold is an obvious analogy here, with it costing money in terms of labor to mine, therefore creating price floors for mining companies to sell it at. No one is willing to sell Gold for less money than it costs to mine, otherwise people would just stop mining it. Similarly, Bitcoin* and other PoW coins require electricity to mine, creating price floors based on how much money that electricity costs in relation to the digital asset it produces.
  • Payment: These are the coins racing to fastest transactions, most scalable networks, and least fees. They’ll also soon be racing to Brick and Mortar and e-Commerce giants to partner and get accepted alongside players like Credit Cards and Paypal. Who knows, maybe one of those players will buy into or develop their own blockchain assets to enhance or replace their existing business model.
    Examples: Bitcoin*, Bitcoin Cash*, Litecoin, DASH, any masternode coin really.
  • Privacy: People are used to cash and its physical payment predecessors. Cash provides many good use cases, one of which is privacy of transaction. Most crypto currencies in early 2018 have publicly transparent blockchains, allowing visibility into wallet addresses. Naturally, not everyone likes this fact, so privacy coins like Monero have been created to fill that market. Also, DarkNet markets (Silk Road clones) that sell illegal goods and services are trying to smarten up after their users realized Bitcoin is a publicly transparent ledger. With Dash and its clones’ ability to publicly and privately (“DarkSend”) payments though, I’m not sure how long this space will be divided out from Payments.
    Examples: Monero, PIVX, ZCash, also most masternode coins
  • Platform: Also known as “Protocol” tokens, these assets provide the ability for projects to be build on top of them using new or existing programming languages. At WCEF, Ethereum was called “The TCP/IP of Crypto Assets.” The most popular item built on top of these platforms is referred to as a “token,” with Ehereum’s called ERC-20 tokens. As of the time of this writing, there are over 26,000 ERC-20 token projects including EOS, BAT, and SALT*. This is a 4x increase in token projects since just 4 months ago.
    Examples: Ethereum*, Neo*, Quantum
  • Utility: Speaking of ERC-20 tokens, most of them fall into the category of Utility assets. Utility tokens are used as a means of access to a product or service. For example, FileCoin tokens (FILs) let you use FileCoin’s decentralized cloud storage network. The more coins you have, the more access to the service you have. These are less considered “investment” assets and are more about getting use out of the service itself.
    Examples: BAT, STEEM, FILS

“The majority of projects we see have tokens that just add friction to the process.” -Spencer Bogart, Blockchain Capital

  • Fraudulent: Also known as “Shit Coins” or “Garbage Coins,” these are typically fully fraudulent (do not exist), claim they’ll have a product some time in the future but are somehow worth millions without white papers or roadmaps, or are fork clones of existing projects that add no value to the crypto space beyond being a competitor to a Top 20 coin that will likely be crushed out of existence.
    Examples: BitConnect and Ponzicoin as pure, unadulterated scams. Plenty of top 50 coins like Cardano* and Tron* are worth billions without a product. Fork clone examples are almost every masternode coin besides Dash.
  • Dividend: Coins that allow for the next level of HODL by paying out extra coins just for holding them over time. SMARTcash* does this with their own tokens. NEO* does it using GAS*. Ethereum* is set to do it after it switches from PoW to PoS through Casper. Masternodes with coins like DASH are, imo, a type of Dividend coin. Coins that allow for both staking rewards and masternode rewards are the next level of Dividend assets (SMART* is one of these, for example).
    Examples: Already gave a few
  • Lending: If you walk into a bank to request a cash loan, they will look at many factors to determine their decision of how much they’ll lend you and at what interest rate. They’ll look at assets like cars, property, stocks…but if you have $100k in Bitcoin, they’re not going to care. Lending projects have positioned themselves to fill this gap. They will secure your crypto assets as collateral to lend you fiat and release the collateral after the loan is repaid. Note: Some have speculated that Crypto Lending will be a pin that helps pop the “crypto bubble” as investors leverage digital assets to invest in more digital assets, which will compound losses as markets dip. Please don’t do that.
    Examples: SALT*, EthLend
  • Securities: If you do a quick search for this term in regards to old financial terminology or crypto terminology, there’s a lot of vagueness around it. From only what I had heard at WCEF, “Securitized Tokens” refers to physical assets in meatspace (property, gold, oil, even patents) being tokenized on a blockchain. This would drastically increase an asset’s liquidity and divisibility and allow otherwise “singular” assets like a building to be held and traded between thousands of investors. Your condo may be a tokenized asset on a blockchain one day, who knows?
    Examples:
    LAToken, Brickblock, TrustToken

“Liquidity Crunch.”

Miko Matsumura of Evercoin defined a Liquidity Crunch as “Investing on presumed downstream liquidity that will not be realized.” Go check out his writing, he’s a smart guy.

“Be careful out there. If you havent met the people behind the coin, go watch them on youtube. These are the people in control of your money. Will this person sin or swim” -Matsumura, Evercoin

“…goes to zero.”

No trade volume, no coin value and/or unable to trade due to delistings or negative press. Previous to WCEF, I had taken “X coin goes to zero” to only mean no coin value, but the inability to trade a coin might as well be the same thing, and I hadn’t considered that. Decentralized exchanges may reduce this likelihood.

“Everyone in this room is wondering if it’s 1996 or 2000” -Gil Penchina, in reference to DotCom era

WCEF #TRENDS

Discord.
Im new to Discord and there was a lot of talk at WCEF about it being one of the primary spaces where crypto folks gather. It’s been embraced largely by gamers (their icon is a game controller), but its basically like slack/IRC so anyone can use it.

Ive found a few masternode sharing communities there and it seems like most crypto projects have a Discord channel where you can go to get support for things like wallets and real-time updates from the team. Chalk this up as yet another spot to go visit and read over before investing in a project on top of their website, team history, bitcointalk thread, twitter announcements, reddit community, youtube hype and you know…what they’re actually doing that’s adding value to the world (probably not in this order, though).

Back-end enhancement vs front-end disruption.
Many of the presenters at WCEF didn’t talk much about consumer facing products.

For example: As a consumer I can click 1 button to buy a thing on Amazon and have it at my doorstep in 2 days. There is a HUGE interconnected system that makes that experience seem simple and easy even though it’s neither. With that said, those backend systems can still be improved. Amazon using autonomous robots for factory work is an example that’s already happening. They’re also looking into autonomous delivery. These are backend enhancements.

A lot of these companies are looking at blockchain as a means to continue enhancing their existing business. Just because your experience at Amazon may not feel impacted because you’ll still click 1 button and get a package in 2 days doesn’t mean Amazon isn’t looking for ways to improve the backend to save resources using technology like a blockchain or a service that runs on a blockchain. Ripple, for example, is looking to replace an existing b2b product called SWIFT. You’ll never use Ripple as a consumer, but banks might use it behind the scenes.

Crypto securities.
Using the blockchain to invest in and provide governance for meatspace objects. This was covered in the Terminology section, but I wanted to include it here because it felt like every 4th person that knew what they were talking about mentioned being excited about “Securitization” and it happens to fall within the blockchain future I want to live in. ;-)

Regulatory compliance.
Everyone on stage at WCEF was trying to make it very clear that they know the rules and are playing by them. Is it the truth? Probably a case by case basis. But the trend is clear that it’s at least a virtue signal in the Crypto space. As CEO of Cashbet, Grant Hummer, said:

“My motto is: Don’t go to jail.”

Project Highlights

Presentations were mostly a mixed bag of engineers with microphones and shaky salesmen. A lot of technical details about what they do and what tech they’re using, but very few presenters talked about why they’re doing it. For example, one pitch included a slide that simply read:

“Mission: To convert AI to cash.”

Newsflash: That’s not a mission. Everyone wants to turn profit, but very few were able to articulate what real world problems they were hoping to solve.

That being said, it wasn’t all doom and gloom. Here are some project highlights.

BeeNest

BeeNest seeks to disrupt the sharing economy of services like AirBnB. I recognize 1/3 of that sentence is made of buzzwords, but stay with me. Bee’s angle is that using blockchain can subvert the need for a centralized company to move from city to city and understand each areas regulations. Decentralization hinders the ability for local governments to shut down the service, as they have with AirBnB. Their ICO whitelist is unfortunately closed, but we could have an opportunity at the exchanges.

If you’re a crypto-anarchist, this one is right up your alley.

SALT*

Salt* is part of the Lending space for crypto. If you ask a bank for a loan, they usually want collateral. Car, house, savings, etc. However, if you tell them you have 100k in Bitcoin…they don’t care.

Salt* is looking to service people looking for loans who have crypto assets as collateral. Salt Lending trusts the crypto space and knows investors don’t want to cash out their positions.

For what it’s worth, it’s been foretold that lenders like Salt* will ultimately be part of the domino effect of the biggest Cypto space crash by enabling investors to use crypto assets to get loans to buy more crypto assets, which may magnify volatility. Be smart out there.

Trust Token

“Imagine if you could do a token sale for any asset and trade it on a global exchange.”

Trust is a platform that hopes to use blockchain technology to tokenize real world assets like real estate, timeshares, oil, and even patents. Imagine being able to buy small shares of property instead of needing huge amounts of upfront wealth to invest in an entire plot of land. This would also allow for easier diversification of investment, as buying in smaller shares would allow investors to split their money between several types of assets instead of needing to go all-in on a single property or even asset type. The tokens would act as smart contracts of ownership.

Trust is going to be a platform/protocol that other tokens are built on (think ETH*, NEO*, etc).

Sagecoin

Amy Wan (Bootstrap Legal) came through for Sagecoin and spoke about how the crypto space is building out trust through smart contracts, but disputing, changing, or breaking one of these contracts aren’t things that our current judicial system can handle. Sagecoin hopes to be the platform to resolve these smart contract disputes. Feels like this is helping the whole space close in on legitimacy.

Kodak

Kodak is partnering to use blockchain technology to find photo copyright violations on the web and send notifications to the users of the copyright content to send money (ahem…extortion). Could work in the favor of photographers…could just be another fist in the ass when it comes to an already overreaching copyright law. I’m not personally looking forward to more algorithmic/AI-driven copyright reach, but considering the draconian state of copyright in the US, there’s little doubt these types of projects (Kodak has several competitors in this space, some reaching far beyond just photos) will be profitable at the cost of concepts like fair use.

Now let me tell you how I really feel about the state of copyright law… 😜

Hadron AI

Hadron AI is a web and mobile minable asset set to power AI. Supposedly takes 30 seconds to set up. Alpha stage mining began Jan 15th and they’re not using crazy computations that are hard just to be hard. Their computations come from real world deep learning problems (that’s the AI powered part). According to their website, Bee Token (previously mentioned) is using their service.

Intimate

Leah Callon-Butler of Intimate.io went in several directions while speaking on the uses of blockchain in the adult industry.

  • Tokenizing payments
  • Embedding criminal history into blockchain
  • Reducing middle-men in pornography industry

Tokenizing Payments: Businesses and workers in several areas of the adult industry find themselves outside the moral and sometimes legal fringes of society such that interacting with traditional banking, lending, and credit institutions is next to impossible. Intimate.io hopes to launch a token that would allow for the ability to sidestep these institutions and their denials of service.

Criminal History: Harkening back to the Blockchain Future where elements of identity can be stored on a blockchain, Intimiate.io dreams of a future where escorts and pornographers can interact with clients and talent in a way where criminal histories can be made more easily available through an individual’s right to disclose rather than needing to move through the bureaucracies and fees of 3rd parties and government organizations.

Middle-Man Reduction: Some estimates claim that Porn makes up 5–15% of the content on the Internet and 30% of its overall traffic. Yet, while Porn is a highly sought after commodity, it’s paid for so sparsely outside of advertising space and the occasional subscription service. The online Porn industry is dominated by free alternatives that pay nothing to the talent in front of the camera. Intimate.io imagines a future where these middle-men are cut out of the industry. I imagine a future where assets like Intimate’s token become mineable by web browsers and mobile devices (already happening) and where the mining of these assets takes place in real time as you watch Porn. Taking this one step further, the assets could then be tied to wallets of the pornstars you’re watching (or more likely, the agencies that represent them or who own the rights to the production you’re viewing). The more time you spend, the more the asset is mined using your CPU/GPU, the more money the industry makes. And no one’s wallet is the lighter.

Investing advice

Many of the speakers at WCEF were Angels/VCs and between their presentations and panels, were asked for or simply gave investing advice. Here’s some tips that came out of that.

  • Jeremy Gardner put up this great slide. It’s very incomplete, but the concept can get us all thinking about where to place crypto assets when considering risk/reward. Where do other asset classes go?
  • ICOs extremely dangerous. Most ICOs are companies that don’t meet requirements to get VC money. They don’t have strong products, teams, or management — sometimes they don’t even have whitepapers or roadmaps. Asking people for money without these things is ludicrous in a healthy economy, but people are sidestepping these avenues using ICOs to generate wealth from many smaller, less experienced investors with less visibility into the inner workings of those who they’re investing in. Before an Angel or VC firm gives money to a project, they’re meeting the team, bringing technical analysts and lawyers with them to cut through the tech and legal jargon involved, talking about the company’s mission and how they’re going to achieve it. And to add insult to injury, these Angels/VCs are often guiding startups into success and away from pitfalls using their past experience…none of which happens with ICOs that use average-joe investors to get off the ground.
  • Miko Matsumura (Evercoin) talked about considering 2 extremes in vesting.
    - The good extreme is Dogecoin moons (“all dogs go to heaven” is the shorthand for this). If this happens, its likely a signal that the entire market is doing well and we’re all getting Lambos. In this instance, all you have to do is show up to the party and hold.
    - The bad extreme is a crash to zero and we’re all broke. In this instance, all you have to do is show up to the party and hold.
    So what does he advise? Do more work than each end in order to get to the middle. The middle is that there will be winners and losers and the way to get to the middle is due diligence.
  • “As a project moves forward, is de-risks.”
    -Grant Hummer, Chromatic Capital on buying pre-ICO, post-ICO, and post-exchange
    Choosing your investments in the app layer has a fundamental reliance on the underlying protocol (ETH*, EOS, QTUM, etc). Grant says he’s an “Ethereum maximalist” and doesn’t believe anything out there will displace it anytime soon based on their tech, team, and their lead in the market.
  • “HODLing mechanics” are the next-next for 2018. Things like NEO’s* GAS for example. Coins that both stake and allow for masternoding like SMARTcash*, as well.