San Francisco Blockchain Week at a Glance
For the first time, San Francisco Blockchain Week (SFBW) brought together projects, developers, and investors from major cities all around the world. Similar events were held back in July in Seoul, Korea, and in September in Singapore.
Aside from the sessions and panels taking place on the main stage, there were individual events hosted by various projects and organizations. You can find a comprehensive list of all events held at SFBW here.
Here is my take on the hottest issues at this year’s SFBW.
Blockchain enters the mainstream
Despite a massive decrease in transaction volumes, a 90% decrease in ICO investments[1], we are seeing more traditional investors and entrepreneurs entering the space. Additionally, we are seeing the emergence of more crypto hedge funds[2].
Perhaps the biggest news of the week was Yale University’s chief investment officer David Swenson’s decision to invest in a16z Crypto and Paradigm, two crypto asset funds.[3] This news is likely a sign that there will be growing interest from traditional LPs in crypto asset funds in the future. Apple co-founder Steve Wozniak also announced a blockchain venture capital EQUI Global[4], which makes non-organizational investment possible through its EquiTokens.
SFBW also featured Naval Ravikant, angel investor in Uber and Twitter, as well as crypto-related ventures like CryptoKitties, Chia Network, and crypto custody service Vault12.
A session also featured prominent crypto venture capitalists from all over the world, including David Lee from Refactor Capital, Michael Arrington of XRP Capital, and our very own Alex Shin, who provided insights on how blockchain is evolving in the Asian market.
Security Tokens
Security tokens are tokens constructed from investment contracts. There isn’t clear guidance from US lawmakers on how to treat these tokens, which may be classified as securities. The US Congress recently requested the US Securities and Exchange Commission to establish a concrete set of standards that would draw a clear line between utility and security tokens[5], which is critical distinction because many cryptocurrencies take the method of rewarding users for increased contributions.
SFBW featured sessions that pitted utility tokens against security tokens and introduced ERC1404, Ethereum’s new token standard. ERC1404 takes on the characteristics of a security token, and restricts fund transmissions, unlike more traditional tokens.
Many in San Francisco agreed that most platform coins issued in the future will be classified as securities, mostly since profits are based on the success of specific projects.
On the other hand, Bitcoin and Ethereum will likely stay as utility tokens. SEC senior counsel Zachary Fallon says that “with Bitcoin, there was no offer of investment opportunity in way that would trigger the Howey test,” and that Bitcoin, in that sense, “wouldn’t pass the Howey test.”[6] SEC’s director of corporate finance William Hinman also stated that he doesn’t classify Ethereum or Bitcoin as securities, considering their current levels of transaction and decentralization[7].
Proof of Space and Time
Proof of Space and Time generated a lot of buzz during SFBW. It may become the go-to consensus protocol, replacing Proof of Work and Proof of Stake. Proof of Work, which Bitcoin employs, was a source of much criticism for its waste of energy during Bitcoin’s “mining” process, which is used to grant block production rights and maintain security[8].
On the other hand, proof of space and time assigns block generation rights by lending leftover storage space to blockchains. Block generation is awarded according to the time for which the user has rented the storage space. Spacemesh, Chia Network, and Filecoin, among many, currently use Proof of Space, or Space Time.
Where we go from here
As the hype dies down and overall speculation decreases, the blockchain industry is looking for ways to solve some of its deep-rooted issues. Points of discussion at SFBW were whether blockchain could achieve more fairness across the world, and how it could be applied to democracy, as well as possible improvements in consensus protocols, dApps, and related technology.
DApps
According to DAppRadar, many top DApps in Ethereum and EOS are concentrated in gambling rings, games, and exchanges. Binance Labs CEO Ella Zhang states that they “are dedicated to identifying the real use cases to implement blockchain technologies”[9]. On a related note, SFBW hosted sessions such as “How Will Crypto Affect Content Creators” and “What’s a DApp”, featuring Jon Choi, formerly of the Ethereum foundation.
Public Blockchains
Alongside well-known projects like Quarkchain and Zilliqa, newcomers including Spacemesh, Solana, Coda Protocol, and Klaytn, were introduced to the public. Klaytn is a public blockchain platform developed by Kakao and accelerated by Hashed. It seeks to tackle the fundamental issue of blockchain speed. Klaytn held its first developer meetup at SFBW, and used the opportunity to share their vision and technology as well as announce their private testnet launch.
Knowledge Protection Technology
On blockchains, unlike the traditional internet client-server model, anyone can gain access to any transaction history. Zcash responded to the need for privacy protection with zk-SNARK (zero-knowledge, Succinct, Non-interactive Argument of Knowledge) in 2016, which provides the means to prove one’s possession of certain information to another party without revealing what the actual information is. With zk-SNARK, block transmissions speed may become much faster.
Dawn Song of Oasis Labs kicked off SFBW with the announcement of Privacy-Preserving Smart Contracts at Scale. Ethereum and Coda Protocol have also announced the implementation of personal information protection and layer 2 expansion based on zk-SNARK[10].
Layer 2 Solutions
Aside from Ethereum’s zk-SNARK-based Layer-2 expansion, there were several other notable sessions on implementing additional layers. Layer-2 is one of the many ways to solve the slow blockchain speeds, by separating the layer that deals mainly with transactions and storing only the summary in blocks. Liquidity Network uses additional layers to eliminate double-spending, claiming that by improving its payment channel system, users may participate at a lower transaction fee.
References
[1] Helms, K. (2018, October 9). ICO Activity Down 90% This Year, Research Shows. Retrieved from https://news.bitcoin.com/ico-activity-down/
[2] Mizrahi, A. (2018, October 15). Research: 1 of 5 New Hedge Funds in 2018 Is a Crypto Fund. Retrieved from https://news.bitcoin.com/research-1-out-of-5-hedge-funds-launched-this-year-is-a-crypto-fund/
[3] Arvanitis, L. (2018, October 16). Report reveals that Yale investes in cryptocurrency. Retrieved from https://yaledailynews.com/blog/2018/10/16/report-reveals-that-yale-invests-in-cryptocurrency/
[4] Partz, H. (2018, October 15). Apple’s Steve Wozniak Co-Founds Blockchain-Focused Venture Capital Fund. Retrieved from https://cointelegraph.com/news/apples-steve-wozniak-co-founds-blockchain-focused-venture-capital-fund
[5] Congress of the United States. (2018, September 28). https://www.scribd.com/document/389686729/Congress-SEC-Letter#from_embed
[6] Mearian, L. (2018, June 14). SEC official says Ethereum is not a security, freeing it from oversight. Retrieved from https://www.computerworld.com/article/3269875/blockchain/sec-decision-on-ethereum-cryptocurrency-could-affect-others-funded-by-icos.html
[7] Hinman, W. (2018, June 14). Digital Asset Transactions: When Howey Met Gary (Plastic). Retrieved from https://www.sec.gov/news/speech/speech-hinman-061418
[8] Proofs of Space Time ASICs. (2018, June 18). Retrieved from https://spacemesh.io/post-asic/
[9] PR: Contentos Announces investment from Binance Labs. (2018, October 3). Retrieved from https://news.bitcoin.com/pr-contentos-announces-investment-from-binance-labs/
[10] josojo. (2018, September 15). Plasma snapp — fully verified plasma chian. Retrieved from https://ethresear.ch/t/plasma-snapp-fully-verified-plasma-chain/3391
