Day 2 at Distributed: Scalability, Social Impact, and Tokenization
July 20 was Day 2 at the Distributed conference in San Francisco. Check out summaries of scalability, social impact, and tokenization panels below. Missed out on our Day 1 recap? Check out Day 1 panels and speeches about TCRs, digital media, and more here.
Panels and talks summarized in this post:
Ethereum’s Roadmap [Elaine Zelby, ConsenSys; Alessandro Voto, EEA; Bharath Rao, Leverj; John Wolpert, ConsenSys]
Developing Markets for Underserved Communities [Robby Greenfield, ConsenSys; Tricia Martinez, Wala; Steven Becker, MakerDAO; Alex Gladstein, HRF]
Tokenizing Business Models [Alyssa Tsai, PANONY; Joe Vander Zanden, ConsenSys; Marcos Cunha, Wanchain; Raymond Chan, Alphaslot]
Panel: Ethereum’s Roadmap
The first panel of the day with ConsenSys members was a look into Ethereum’s Roadmap, with particular focus on scaling, enterprise adoption, and public v. private chains. Elaine Zelby, Lead Product Marketing at ConsenSys, moderated the panel. Speakers included Alessandro Voto, EEA and West Coast Director at ConsenSys, Bharath Rao of Leverj, and John Wolpert of ConsenSys. Recap of the panel below:
Zelby: There are two big elements of Ethereum’s roadmap in the short term. The first is the switch from Proof of Work to Proof of Stake. The other is scalability. Can you talk about the transition from PoW to PoS and the question of whether PoS will democratize access to Ethereum.
Rao: Proof of Work was the original consensus mechanism of Ethereum. However, it takes a lot of resources and time to maintain, and there is uncertain finality. We should switch to PoS, and are taking steps to do so. Casper is a method to switch to PoS and implement game theory to enable much faster and higher throughput without increasing the cost in terms of electricity. PoS is still experimental. But once it catches on, it will make a big difference for how transactions follow through. In terms of democratization, we don’t know how everything will turn out once Casper is actually implemented. The concern, of course, is people with huge stakes of Ethereum. Is game theory robust enough to ensure things don’t get out of hand? Will it start trending towards an oligarchy? The Ethereum community is well aware of these concerns. We are mitigating these issues.
Voto: Originally, mining algorithms were a step towards democratizing access. We will see if financial access is actually a driving force behind democratization, or if we will see a number of incentives drive democratization forward. It will be a major challenge for 2018, but the community is all working on it. Then again, we will have a transition period between PoW and PoS where we are testing out PoS while still maintaining PoW. That gives us time to observe and iterate as issues arise.
Wolpert: I’ve always liked the idea of Ethereum having started and bootstrapped itself with PoW to ensure decentralization as its core. No, PoW isn’t the most effective or scalable, but Ethereum’s first concern was to establish security and decentralization. Now, we can iterate and enhance. Starting off with some of these alternative methods — as some projects are — is troubling. Ethereum has a nice, reliable history of bootstrapping itself with PoW to prove itself and is now taking steps towards PoS.
Zelby: And with scalability, can you talk about scaling solutions such as Plasma and its development?
Rao: There have been lots of good ideas since the beginning of blockchain and crypto with the original white paper. Plasma is a great idea. It originated from Vitalik and from Joseph Poon, who wrote the Lightning paper for Bitcoin. What people want is simple; they want to place orders quickly and they want those orders to match even when they’re offline. We are at the cusp of seeing huge huge scale around the Ethereum world.
Wolpert: There is a difference between privacy and confidentiality. Privacy means obfuscating aspects of a transaction such as identity, amount, receipt/origin address, etc. The record of that transaction, however, still exists and is visible. In any kind of business or industry, you can have a contract where not only the details of the agreement must be confidential, but the existence of the contract itself must be as well. Confidential, therefore, notes the ability to shroud the record of a transaction as well, which is crucial for enterprise adoption. With Plasma, these nuances become possible. The ability to program individual chains with specific qualities such as privacy and confidentiality is one of the primary qualities of Plasma that will facilitate its adoption across the Ethereum ecosystem.
Zelby: Alex, given your involvement in the EEA, can you talk a bit about the challenges you’re facing and what you’re most excited about?
Voto: When discussing enterprise adoption, we are looking at what must be true of any Ethereum or blockchain implementation as far as scalability, privacy, security, and integration with legacy software. Some enterprises are compromising these requirements in order to adopt different blockchains that promise certain short-term deliverables (i.e. scalability). So we want to be as clear as possible with Ethereum — it’s current restraints and advantages as well as its near-term solutions. What I’m really excited about is the convergence of private networks with the power and safety of publ.ic chains and allowing people to leverage the benefits of both. I’m excited for people to start interacting with what will end up feeling like an Internet rather than these parallel but separate chains. It will be neat to see each of these industries identify what’s really important to them and then problem-solving for Ethereum to address those concerns.
Zelby: On that note, we’ve seen predictions that by 2020, we will see the convergence of public and private chains. What needs to happen from both a tech and cultural perspective for that to happen.
Rao: When something is private, it has a small network effect. It has some value, but as someone who wants to create a network of value, it is in your interest to create the biggest, widest network as possible. The Internet is a network of networks. The global Ethereum ecosystem will be a chain of chains. Each can have its own privacy features, own finality features, and own permission features. This enables people to innovate without being impeded by other people’s or businesses’ constraints. It will be great to see a future where blockchain is one once again; where you can choose the best properties of each. Convergence is not a point or a moment. It is a journey. Maybe 2020 isn’t when it “happens.” Maybe that’s when it starts.
Wolpert: It’s probably the 1980s, by comparison. We have a long way to go. We will go through cycles of convergence and divergence of chains. And that’s ok.
Voto: We have made a lot of progress with relay networks and ways to make chains. In 2016, Joseph Chow showed us interoperation between Bitcoin and Ethereum with BTC Relay. Until now, the blockchain space has been fragmented. People have been forced to choose between chains. Now, we are developing solutions to interchain protocols.
Further Reading: Just learning about the future of scalability with Ethereum? Or a long-time follower looking for a bit more information? Catch up on scalability issues and solutions: The State of Scaling Ethereum.
Panel: Developing Markets for Underserved Communities
On the main stage, a group of experts for the potential of blockchain technology and social impact sat down to discuss challenges, opportunities, and the future. The panel was moderated by Robby Greenfield of ConsenSys Social Impact. Speakers included Tricia Martinez of Wala, Steven Becker of MakerDAO, and Alex Gladstein of the HRF.
Greenfield: What is the current state of social impact in the blockchain space? What do we need to do?
Becker: At the end of the day, I like the idea that people are even developing for social impact. It’s like they’re throwing darts blindfolded. Even if it works just a tiny bit, everyone will learn as we continue to perfect applications.
Martinez: Technologists are different than executers. You can build anything, but execturers are needed to go out and evangelize and build a network. I think it is a misstep to ask for permission. Regulators aren’t well educated enough about this technology. We are in a time where we need to demonstrate the importance of this technology in order to drive proper regulation. If we can say “We have banked X people” and “We have served Y people”, that helps regulators see our impact and go from there.
Gladstein: We need to urge developers and investors to look at the bigger picture. When making dapps, you are competing against Facebook and WeChat. The goal is to win, not just to be a player in the space. You are up against absolute behemoths. On a basic level, these dapps believe you should own your data and decide who gets to see it and use it. We should strive for dapps with tens of millions of users. Remember, these platforms take everything from you. Phone calls, location, likes, everything. If we don’t want that world, we need to strive to build something to compete with the current big players. That’s what we’re up against.
Greenfield: There is a degree of tentativeness around social impact organizations. We have lots of past and current projects to learn from. Of what we’ve seen so far, we need to ask what have been the most misguided tenets of dapps when applied to social impact? Where are developers misstepping when they engage the world with the message “We are trying it X or effect Y change.”
Greenfield: When it comes to the blockchain space, we think it’s a different process. We forget the lessons from decades of startups. For entrepreneurs entering the space, what are some key suggestions you’d give them?
Martinez: The token sale bubble was a big issue. We essentially saw “ideas on paper” raising exorbitant amounts of money, which removes any urgency to deliver. Usually, as an entrepreneur, you need to always have that urgency. You need to deliver to get the next round of funding. Without that urgency, innovation slows down. The ecosystem is starting to correct itself, but it was bad for a long time. If you are getting into this space, you need to prove you can deliver something and that you can do it quickly.
Becker: To remedy the problems with society, you need to understand it. You need to study it and then iterate. At MakerDAO, we are more economic with a social bent. As an entrepreneur, you need to be able to clearly say what the underlying values of your platform are. At MakerDAO, it is a Universal Basic Income.
Greenfield: When a new product is developed, we now run into the issue of needing to implement it into countries and regions without getting persecuted by governments or groups. With the decentralization of blockchain technology, we are seeing a shift of power from old to new. A redefinition of governance and the source of power. How do specific blockchain platforms impact that?
Martinez: We at Wala are moving to a multi-chain asset strategy. We want to work with the best blockchain based off its specific use case and capability. Ethereum for instance, is the best blockchain for smart contract capabilities. Bitcoin is too expensive for developing countries and micro-payments. For us, it is about creating new systems that are actually built for these consumers. Bitcoin was not built for the emerging consumer market, and I’m not sure it will ever get there. When looking down the road as well, you have to look at developer movement. Wherever you see developers gravitating to, that’s where the innovation will happen.
Gladstein: What’s attractive about blockchain, at the end of the day, is that it’s not attached to government or business. That is very attractive for social innovators.
Further Reading: The ConsenSys Social Impact team is hard at work integrating blockchain solutions into social impact use cases. Read about the team’s most recent partnership with Hong Kong luxury retail venture LUXARITY.
Panel: Tokenizing Business Models
ConsenSys closed out its speaker presence at Distributed 2018 with a panel on Tokenized Business Models, describing the potential of future peer-to-peer networks and cheap, efficient investments powered by blockchain technology. The panel was moderated by Alyssa Tsai of PANONY. Panelists included Joe Vander Zanden of ConsenSys, Marcos Cunha of Wanchain, and Raymond Chan of Alphaslot.
Tsai: What kinds of business models make sense to adopt tokenization?
Chan: Use cases are a challenging topic in the blockchain industry. Each business has such unique requirements, nuances, and challenges that it’s difficult to say. Gaming and media, industries, are ripe for tokenization. Tokenization is great as a layer on top of these business models. It’s almost like a game on top of a game. It’s an ideal situation.
Vander Zanden: In order to answer that question, you need to ask yourself as an entrepreneur if you really want to use a token. Is the token driving value for whoever you’re trying to serve? The goal of this whole thing is to disintermediate…well, intermediaries. Are you truly driving better business models; is there value creation? When it comes to tokens specifically, how are these units being used to drive better business? This is a primary concern for us at ConsenSys and we strive to answer that question as soon as possible if exploring tokenization.
Cunha: We know tokenization works — particularly with liquidity and transparency. A tokenization model enables entrepreneurs not to give up equity or board sits as they innovate. Moreover, the model facilitates global entrepreneurship. You can build anywhere; that’s powerful.
Tsai: What is your vision of a tokenized world? What challenges, like price instability of tokens, could you anticipate and mediate?
Cunha: For price instability, there are three ways to mediate that in tokenization models. First, stablecoins. Stablecoins have received a lot of warranted attention, and they will be a major player in 2018. Second, you could peg the value of services to a fiat currency. Third, you could rely on governance (distributed governance) to allow the community to combat price instability.
Chan: With respect to a tokenized future, we see an exciting world within gambling and gaming. Right now, our industry is so centralized. Loyalty points, for instance, are not transferable between casinos. Blockchain technology is not just linking platforms together horizontally, it is aligning casinos vertically to facilitate interoperation, cooperation, and efficiency. Put another way, this has never been possible before blockchain.
Vander Zanden: I keep returning to this, but a tokenized future must answer the question “Why do you need a token?” We will see a future with lots of tokens, but a small subset of tokens that are dominant and then a long-tail of tokens that are better designed for niche use cases. Pareto distribution, look it up. That is what we will see in the future.
Further Reading: Tokenization is one of the most frequently-discussed topics in the Ethereum ecosystem. A few weeks ago at the RISE Conference in Hong Kong, Joe Lubin talked about tokenization, deep liquid markets, and business model efficiency. Check out a recap of those speeches and panels here.
That’s a wrap! Distributed 2018 ended on Friday and blockchain enthusiasts, technologists, investors, and innovators returned to their companies, cities, and countries to continue developing and iterating towards the goal of a decentralized future. ConsenSys is all around the world, constantly striving to build the Ethereum community and drive blockchain education adoption in areas and industries that can benefit from decentralization and security. Interested in learning about more events like Distributed? Sign up for our newsletter below and receive updates about upcoming hackathons, events, and conferences.
Disclaimer: The views expressed by the author above do not necessarily represent the views of Consensys AG. ConsenSys is a decentralized community withConsenSys Media being a platform for members to freely express their diverse ideas and perspectives. To learn more about ConsenSys and Ethereum, please visit our website.
