Crypto Invest Summit: Great Lineup in L.A., So How Do The Stars Line Up?

Crypto Invest Summit: Great Lineup in L.A., So How Do The Stars Line Up?

CryptoOracle partnered with Crypto Invest Summit (CIS) to put on a well-attended and informative event in Los Angeles last week. Everyone involved in the attempt is to be commended, and I ’ ll citation in particular those closest to my corner of the crypto community, CryptoOracle ( CO ) co-founders Lou Kerner and James Haft, CO team members Jennifer Litorja, Caron Kramer and Pablo Gonzalez Ruiz, american samoa well as CO ’ south man from the future in health care, Dr. Alex Cahana, who organized a great health care track .Crowds were up from the spring The goal here is to serve some glasses of insight from the fire hose of content at the event. The resulting takes ( for example, mocking views of U.S. regulation and security tokens ) and errors ( none, hopefully ) are mine, while I try to cite particular sources and presenters where helpful. To give more context on the contentedness here, the sessions of concentrate during my whirlwind were : The future of Blockchain Gaming ; The Brooklyn Project & Regulation ; Building A Crypto Community ; Selling & Marketing Your Token offer ; Bootstrapping Network Effects Open Discussion / Q+A ; Liquidity : The True measure of the Success ; Lessons Learned From Security Token Offerings ; Bringing Blockchain to the Masses ; When Will Crypto Replace Fiat ? ; a know tap of the CNBC Crypto Trader Show ; CryptoHealth Landscape 2018 ; How Will Blockchain Disrupt Health ? ; Invest like a VC ; and Healthcare and Data : privacy, Security and Ownership. FYI, television for CIS sessions will be available soon at the CIS site and CryptoOracle TV.

Speculation still dictating tone of the market

Fundamentally, the crypto market remains driven mostly by speculation. This invites chartists, and one predicted from a CIS phase that the stock certificate market ’ s rising bomber convention and bitcoin ’ sulfur descending chock radiation pattern would mean a clang for the erstwhile and a soar for the latter by year-end. You see crypto funds in bull markets, and VCs in hold markets. so say hello to my VC friend, who would barely american samoa soon invest in fairness now, thank you identical much, and take tokens “ for free, ” to quote another presenter. To its credit, Pantera says it is sticking to steady investment in utility program tokens, despite the result excitability of results ( down possibly 70 % this year vs. up 350 % survive year ) .

Looking for use cases

Unsurprisingly, Tim Draper painted with a broad brush on a sweeping canvass of opportunity: the combination of Bitcoin, blockchain, smart contracts, and big data applications should create a platform to disrupt industries in the trillions of dollars. His hit number of sectors included the common suspects, like finance, venture capital, deposit, department of commerce, insurance, and actual estate. however, he made a point of highlighting two others — health care and government — which he sees providing peculiarly inadequate overhaul at high price. As if on cue, Dr. Cahana ’ sulfur presentation in the late health care track showed the U.S. below the global life expectancy/cost curvature. If beating an opioid addiction saves the health care arrangement $ 25,000 per year, then crypto can help cut the patient in on some of the savings ( for example, through recompense for data on conformity ), for a win-win. But back to Draper, who added the insights that most government functions ( in finical transfer payments and policy ) are virtual, and therefore more desirable for crypto dislocation, and that the individualized discussion facilitated by big data analysis of blockchain data could face resistance from incumbents like drug companies, which look for one-size-fits-all blockbuster drugs prescribed at scale. Those expansive views aside, although crypto is global, don’t expect it to attract the best and the brightest to solve the problems of the developing world. At least the experience of the large incumbent technical school platforms supports this chauvinistic view. Each FANG hardy started with the develop markets as the value engines. For example, in its first full year after going public, Google generated 75 % of its tax income from the U.S. and the U.K. Bitcoin is the most valuable crypto, but its prize is driven by store of value and cross-border payments use cases that are relatively insignificant in train economies. In the U.S., talk of the travails of censoring, and surely the censoring of value, courses through neither coastal cocktail parties nor fly-over barbecues .The undeniable power of censorship resistance Turning from censorship resistance leaves our focus on auditability, verifiability and accessibility as the promises around which to build crypto use cases, per a ConsenSys exec. Everpedia looks to improve on Wikipedia ’ second base of only approximately 10,000 regular contributors, but is this small band very doing that bad a job ? Although Everpedia fans argue yes, Lunyr ’ s modest traction whispers no. Per a ConsenSys white house, the main smart-contract-inspired use cases thus far are for exchanges and gambling. From outside the crypto-verse, exchanges look like omphaloskepsis applications, helpful for measure transfers among those who already have tokens, but does the liquidity from exchanges drive keepsake adoption in the first home ? possibly the argument is that all these exchanges are built-in to the necessary infrastructure, but again, infrastructure to support what applications ? Gambling would seem to have breakout potential as a mass-market dapp, but only if it can drive gamification at scale, namely the use of crypto transfers to incentivize new, valuable activities. What are these activities? That is, Mr./Ms. Economist, assume that you have a can opener, i.e., you have solved crypto ’ mho problems of scale, administration, ache contracts and whatever else, what would crypto ’ s killer dapps be ? One presenter suggested an uncensorable global video recording platform. But would the hazard of permanent wave child porn in truth be worth an immutable global read of the next Tiananmen Square ? Ethereum purists seem to look down at tokenized frequent aviator miles as killer dapps, questioning their motivation for censorship-resistance and the benefits of separating the value of one ship’s company ’ south loyalty economy from another ’ second. Staking appears in many proposed dapps, but it calm seems an unfold question whether stakes can sustainably support the reputation and authentication management for which they are frequently brought into service. What new features would crypto bring to gamers? Yes, some benefits fall within the subset of better cross-border rate transfers discussed previously, although largely dismissed as a driver of adoption in develop economies. Gaming is tantalizingly close to gamification, and one donor offered that one practical avenue for EOS in detail could be gaming. But does crypto per selenium expand the use cases for gamification ? For exercise, there is evidence that intrinsic rewards better motivate creativity than extrinsic rewards — does tokenization of those rewards change that ?

Breathless boosterism (2017) vs. matter-of-fact skepticism (2018)

The Bitcoiner Black Hole: from which no oracle or smart contract can escape The smart contracts thesis looks to break free from the shackles of the “Bitcoiners.” The goal is to unleash trustless systems for value transfer in the service of incentivization, not just of the resources necessary to maintain decentralized computer networks ( for example, from the miners ), but besides of off-chain actors and actions. A counter-thesis of the Bitcoiner ( for example, Jimmy Song ) — that the centralization, oracles, and other means necessary to create networks for measure transfers of non-digital-bearer-instruments well undercut the viability of using crypto — seems more wide held than seen. however, like a total darkness hole, even if inconspicuous, this thesis leaves attest of its being, namely in a broader incredulity about use cases .“So, Miss Simmons, why did your address book need to be on the blockchain?” Consider some cross-examinations from the CIS stages of the following crypto projects and concepts: · Crypto-fiat tethers fair combine the worst of the worlds, per Tim Draper. · many protocols, like 0x, flounder for miss of associate business models. · Crypto volatility is a barrier to enterprise adoption. · Steem ’ sulfur experiment in crypto-incentivized message suffers from a number of issues, such as the use of witnesses, government and keepsake economics. · Attempts at large token-curated registries ( for example, a tokenized yelp, Zagat ’ s or Wikipedia ) may be biting off more than they can chew, given : 1 ) their tendency to devolve into popularity contests may make them inferior to expert-based approaches, 2 ) low voter participation rates can make the cost of manipulating results excessively moo, and 3 ) the potential to manipulate validators through the habit of high stakes. · There seems some case for solving data problems of social networks, and one CIS presenter, metame ( disclosure : adviser ), has an intriguing approach encompassing this. Nevertheless, Vitalik himself has questioned whether there ’ s adequate value in mere social network data, thus : “ Paying people for personal data is matter to, but there are concerns about adverse selection : to put it politely, the kinds of people that are volition to sit around submitting lots of data to Facebook all year to earn $ 16.92 ( Facebook ’ s current annualized gross per exploiter ) are not the kinds of people that advertisers are will to burn hundreds of dollars per person trying to grocery store rolexes and Lambos to. ” Thus, personal data solutions in crypto may have to aim higher or more broadly. · The many protocols relying in some way on repute confront the persistent prospect of Sybil attacks.

· Related to repute is vouching for the choice or authenticity of data, but the project solutions of oracles and token-curated registries face incredulity, particularly from the Bitcoiners ’ black hole. · The proportion of discussions about how to overcome crypto ’ randomness challenges ( consensus mechanism, scale, legality, etc. ) to discussions about how crypto could solve problems vexing enterprises remains high, marking possibly one of the more confuse bubbles in the blockchain distance .

The need for decentralization

Maybe the most common question which the unconverted pose to blockchain evangelists is “does the project need to use the blockchain?” — but is this query an acid test or a red herring? The most valuable “ app ” for the blockchain is Coinbase, a centralized token switch over reportedly raising $ 500 million at an $ 8 billion valuation. even ConsenSys execs concede that decentralization is frequently a buzzword. The centralization introduced by the Lightning Network may well be worth it to dramatically reduce requital transfer costs. CryptoKitties are cute, but some wondered whether they would be less so even if produced by a centralized network, and their technical school is clever, but does it drive value ? True, decentralization aids in censoring resistance, but do loyalty points need such resistor ? The office of decentralization to win the “ hearts and minds ” of entrepreneurs and developers, through incentives enforcing immutable promises to forswear the “ bait and switch ” of the centralize platforms ( a process well described by Chris Dixon ), is seen as pendent on first solving key infrastructure problems .

The need for a native token

Core to the value of native tokens is their “abstraction of value” — per a ConsenSys exec — of the utility of the network. For case, ERC20 tokens can avoid fluctuations of the respect of quintessence, which are driven by a a lot more complex provision and need equality. Pantera ’ s co-founder asked rhetorically “ why buy a keepsake that is not useful ? ” and said that bitcoin was the beginning utility nominal ( to scale, surely ), only valuable if people find it useful ( agreed ). A blockchain solution without a native token would seem to have difficulty competing with a bare database. If a fundamental invention of crypto as a technology is to allow for decentralized transfer of value, then you need a means of effecting and tracking these value transfers — that ’ s what native utility tokens do. By contrast, “ security tokens ” ( more on those later ) are by definition not utilitarian. Rather, they are crypto receipts for transactions in rights that ARE utilitarian. For exemplar, if you arrive home to find a strange squatting there, the deed to your sign of the zodiac — tokenized or not — is not what ultimately gets the police to arrest the strange for trespass. rather, what does the trick is the verification of your possession on the place ledger, and the legal rights associated with that ownership, which are ultimately enforced off the chain by the courts and the police .The intuitive appeal of the native currency

Continuing U.S. legal quagmire

The consensus view seemed to be that the door to legal U.S. token sales without registration with or exemption from the securities laws is closed. One presenter said the SEC had put the “ kibosh ” on utility tokens. Another, a lawyer, tsk than anyone thinking the SEC might change its stance on utility tokens was kidding themselves. Several key constituents in the crypto community do not want to take “no” for an answer on utility tokens, however. A number of presenters said that a top precedence remained clear guidelines as to when a token sale was, or was not, a securities offer. One concern is that the regulators may not sufficiently understand the engineering ( which is not much of a knock, considering the technical school ’ randomness complex and quickly switch nature ), and that better explanations here could release at least some utility tokens from their current D.C. holding penitentiary. The Brooklyn Project is trying to build a global consensus about how to treat token projects under the laws ( and not plainly the securities laws ). Among its tools are antique, in-person legislator education, adenine well as more tech-savvy Telegram channels and Google Docs circulated for comments by concern parties. To some extent, regarding token sales, the SEC has crafted a position that it is there to help, but in reality it is not doing so. A helping hand apparently appeared in the alleged Hinman speech in June, but a ConsenSys white house ( hailing from a white shoe law firm ) noted that this was merely a lecture, and not binding guidance, and far that the apparent transparency of factors of focus in the speech has proven cryptic in drill. For exercise, jurisprudence firms are leery of providing a legal opinion that a proposed visualize is sufficiently decentralized for its nominal sale to fall outside of U.S. securities law requirements. As another example, Hinman ’ randomness focus on whether token buyers plan to use the tokens apparently rules out the habit of sales discounts, even though discounts ( such as for volume ) are commonplace in product markets. The SEC distillery has an exposed door policy to informally discuss how the jurisprudence might apply to a contemplated nominal sale. however, what would be more helpful, according to a ConsenSys white house, would be just one SEC no-action letter ( non-binding guidance on a fact situation where the SEC would not recommend a securities law enforcement natural process ) on a keepsake sale. The inconsistencies in the current, conventional view of tokens under U.S. securities law persist. As emphasized by the COO of Phunware, blockchain and crypto are basically innovations for the transmission of value. therefore, the offspring is which rate transfers are covered under the securities laws. get down of harangue. Software-defined crypto networks with native currencies offer the likely to harness speculation to drive greater consumption of those networks. Despite this, the sale of utility tokens to users of networks obviously implicates the U.S. securities laws. The house horizon of U.S. securities regulators is that the sale of this narrow, technologically bounded device ( utility program tokens ALL relate to software, whereas the distinctive security relates to any diligence ) must be accompanied by securities law disclosure, as opposed to product/service disclosure. It ’ south as if the buyer of an iPhone needs to read Apple ’ s annual report, as opposed to product reviews and e-commerce monetary value lists. end of rant .

The security token mirage

Let’s look at security tokens through two different lenses. The first is vitamin a necessary evil to carry on crypto financing, with the security token the successor to the utility token, which was an concern experiment in start-up finance that must give means to the realities of ( U.S. ) rule. The second is as a room to use the crypto daybook to engage in untold levels of securitization, unlock liquid premiums on assets ranging from a newly discovered Picasso to boxes of discard socks that don ’ t make the cut on eBay. For crypto nomads with dry throats, security tokens offer the haven ( or yoke ? ) of U.S. regulative complaisance, and increased liquidity for atomize assets and prize streams of sorts both old ( for example, real estate of the realm, artwork ) and new ( for example, fees from transfers of digital holder instruments ). These two lenses reveal two quite different markets. Consider first the grocery store for utility nominal ICOs turned security token offerings ( STOs ), in particular in the U.S .In the desert of U.S. utility tokens appears a soothing sanctuary of security token offerings From downtown L.A., look not to the Pacific, towards Asia, a redoubt of utility token projects, but turn rather to the desert of the Mojave, and the oasis of securities tokens. The league featured a separate and well-attended track on security system tokens, and discussion of these tokens occasionally spilled into other tracks as well .Token legality and liquidity are just over the horizon For token projects frustrated by the crypto market slowdown, STOs would appear to offer the prospect of tapping non-crypto investors, and tapping them now. Recognize, however, that investors in STOs are normally quite different from investors in utility program crypto. First, utility token investors look for “ asymmetrical ” returns, per one panelist — security tokens are structured to well eliminate the prospect of such returns. Second, utility nominal buyers ask different questions about projects, focusing on the want for use of blockchain and its decentralization and the necessitate for tokens and their economics. By line, at CIS security token sessions, there was little discussion of these issues, or evening of possibly the more apposite question of how to sync up the states of off-chain assets and their security token doppelgängers .Wait, why are we looking for water in the desert? As we draw nearer the oasis, the large cool pool of liquidity starts to look more like the dry well of micro-cap stocks. For security token projects touching the U.S. market, a panelist advised having a legal co-founder, who could save hundreds of thousands of dollars in legal fees, deoxyadenosine monophosphate well as a number of insomniac nights. But securities lawyers, whether in-house or outside guidance, are not magicians, and must deal with the same consequences of U.S. securities laws that make the U.S. so unsympathetic to utility token projects. The U.S. securities laws hinder the ability of crypto projects to leverage the power of tokenization. The primary path to regulated fund raise is Regulation D, whether under section 506 ( barn ) or department 506 ( cytosine ). Reg D ’ s transfer restrictions and holding periods are contribution of the box, making clear to anyone who is placid confused on the detail that security tokens are not for use. In any consequence, Reg D in drill diverts stick out tokens away from most electric potential users to accredit investors, such as angels and early-stage VCs. Regulation CF, for the smaller fry looking for $ 1 million or so, is short more attractive to security keepsake sellers than it has been to security sellers. Regulation A+, touted to crypto projects for over a class now, has yet to produce a sale of a latter day utility program token ( please correct me if I ’ megabyte wrong ), and was merely mentioned in passing at the CIS sessions I attended. At the end of the day, evening if project STOs begin to surface at scale, they face challenging comparisons to the securities of much larger and more fluent, if more conventional, public companies .At the bottom of the wishing well … pennies, or penny stocks?

STOs: drunk on liquidity preference?

Let’s come in from the desert. MBA students at the University of Chicago partake beverages at regular events called Liquidity Preference Functions. These have nothing on the potty fascination with fluidity among securitization, emergency room, security, nominal fans. STOs in service of securitization are certainly going after a huge market. Consider, per Elevated Returns, the estimated $ 240 billion size of the ball-shaped real estate market, overabundant with illiquidity and miss of foil. real estate of the realm is just the peak of the securitization iceberg — huge asset classes from debt to art are besides nominated as candidates for tokenized securitization. Alas, attacking big markets can make it difficult for insurgents to establish the competitive moats that drive superior returns, but that ’ s a review for another day.

On the other hand, for those with assets to monetize, STOs are a story more for traditional investors than crypto disruptors. You can see this from where the investor demand is coming from for successful STOs. For case, Elevated Returns said that its recently closed $ 18 million rear came chiefly from traditional gamey net worth and institutional real estate investors. Spice, a fully tokenized VC, in the first place looked to raise roughly half of its fund from crypto investors. In the consequence, crypto investors have thus far only contributed approximately 10 % of Spice ’ s raise, with the huge majority coming from traditional class offices, funds of funds, angels, and high web worth individuals .Sure, he’s been drinking, but that’s not why he’s drunk The STO bar’s specialty cocktail is liquidity, but improvements in liquidity will likely take a lot more than tokenization. Don ’ deoxythymidine monophosphate just take my son for it. Listen rather to Barry Silbert, founder and CEO of Digital Currency Group and previously the laminitis of SecondMarket, which was a pioneer in providing fluidity for private shares of public companies. Silbert ( at approximately minute 35 of the linked podcast ) turns a doubting eye to the liquid promises of tokenization. True, as listen at CIS, tokens could reduce the administrative frictions — and therefore delays — of asset transfers. But from the CIS stage, even security token offer bulls said that promised improvements in liquidity are not a near-term view. ultimately, the security token commercialize seems to focus on legal conformity and conventional valuation metrics, catering to traditional investors. This will probable attract a different community than crypto. deoxyadenosine monophosphate doubting as Bitcoiners may be of smart contracts, it is more difficult to see them adopting en masse the cause of using crypto technology to make the physical world safe for securitization .

Community — crypto without money?

Let’s close with a nod to community, a defining feature of many successful crypto projects. Some at CIS urged a healthy incredulity about quantitative metrics of community engagement, like the number of followers on Telegram or Twitter, which can be gamed. possibly, more accurately, crypto projects depend on communities, plural, in that what captures the “ hearts and minds ” of developers may differ from what captures those of users. Despite the current bear market and an consort slowdown in money flows from token sales, which can invite broader agnosticism about the future, the vibration at CIS reflected a crypto residential district focused on improving the technology, deoxyadenosine monophosphate well as the technology ’ s invoke to the non-enthusiasts .

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