Deconomy 2018 Retrospective
A non-exhaustive look at some highlights
Deconomy (Distributed Economy )2018 was a fantastic event. Here are some highlights:
In crypto land, David Chaum is a big deal. It was a treat for everyone there to see the creator of blind signatures and Digicash, e-cash precursor to Bitcoin, take us through some history.
It was awesome to see so much conviction for cryptography as a means to protect individual privacy as a foundation for democracy. He’s been in crypto for 35 years and only seems to be getting started. Up next: allowing individuals control over their cryptocurrency, distributed governance and direct democracy.
Ian Grigg’s discussion on perhaps one of the biggest current challenges in the crypto space — identity — was very interesting. In psychology, we often think of identity as individual attributes that have social meaning (i.e., social identity), but Grigg provided a unique perspective, suggesting that identity neither originates from the state (i.e., ID cards/passports), corporations (i.e., who you work for), nor self (i.e., I identify as [label x]).
Instead, he argued that identity is the sum interaction within a community (‘I am who my community says I am’); identity was the result of a web-of-trust (i.e., public-keys out there) and redundancy in social interaction (only after Bob, Alice, Carol and others say that I’m Paul, can we have reasonable confidence that I am Paul, etc.).
Identity is not in ourselves, but out there, in the willingness of our communities to vouch for us.
Therefore, small-groups are the key to identity (see alsoChamapesa).
Identity came up again in a subsequent panel (‘State of Blockchain’) where it was argued that, far from an academic research issue, identity will ultimately serve to make crypto more practical.
Entering the conference, I had thought of blockchain as a set of transactions to be settled, thus continually changing the state of any chain, but Joseph Poon suggested this is the wrong way to reason about blockchain.
Instead, blockchains make more sense as a court system. If you’re unsure of the implications, the Plasma[1] whitepaper provides some context:
One can view the root blockchain as the Supreme Court from which the power of all subordinate courts derive their power. It is the law of the root blockchain which allows for all lower courts to derive their judicial power. This allows for scalability in venues, it’s only when the state of the lower courts is disputed or halted that one needs to move on to higher courts for a more represented venue. Broadcasting attestations of state in higher courts are always possible, but can be more expensive (Poon & Buterin, 2017, working draft).
Because Plasma represents an off-chain (layer 2) solution to scaling, there are multiple blockchains (i.e., root chain being Ethereum; layer-2, which in itself has multiple layers, being Plasma chain and a court system to confer power from the root chain downward). One implication, Poon suggests, is that on Ethereum (with Plasma), enterprise blockchains can have their cake and eat it — private blockchains with public network enforceability and security.
The most striking point of his presentation came next. Referencing high transaction costs between internal and external agents (ref. Theory of the Firm) as the reasons organizations existed, Poon argued that blockchains, by drastically lowering these costs, ‘fundamentally shifts business processes at the deepest levels’ and could change the very fabric of organizations (i.e., the strategies they pursue and how they’re potentially structured). According to Poon, blockchains represent the largest threat to Chaebols. Frankly, I’m surprise this didn’t get more of a reaction from the Koreans in the room.
From an organizational perspective, this is massive. If blockchain fulfills its potential (and that’s still a big if at this point), then the very raison d’être of organizations could be altered. The ‘workplace’ as we know today, irrespective of which sector we belong to (profit, nonprofit, governmental, intergovernmental) could drastically change.
The main question Poon poses is:
How will we navigate this disruption of fundamental business processes?
Next, Vinay Gupta, of Mattereum, described how the confluence of four major technologies (i.e., Four Big Machines: GPS, High Frequency Trading, Google Spanner and Blockchains) that will allow the synchronization of global trade, fulfilling the vision of international organizations like the World Trade Organization (WTO), without laborious trade treaties.
However, Gupta also provided a more cautious message. Citing the years it took before foundational technologies in cryptography gain adoption (i.e., zksnarks (30+ years); public-key cryptography (40+ years)), Gupta challenges the certainty in the narrative that blockchain will shift power towards individuals and ultimately win. He cautions of blockchain enthusiasm:
There is no historical inevitability.
One notable thread throughout the conference were differences in views on how far blockchain has come versus those who think blockchain hasn’t gone nearly far enough. The massive amount of money ICO’s raised in 2017 certainly brought more scrutiny and expectations of the space. Some are wondering:
Are we actually making an impact? Or are we just raising money?
People are realizing that there is a definite downside to raising too much capital, too quickly; many projects simply don’t know how to spend the money or build a company. Here’s where traditional venture capital can make a contribution, to guide projects with their experience in shipping products and building company. Nevertheless, it was openly acknowledged by several investors that it is currently premature to invest in applications when there’s still so much to be done to build up the infrastructure layer (i.e., base layer public utilities that fundamentally have decentralization, security and data integrity).
There was definitely a sense that if 2017 was about raising funds, then 2018 should be about execution and implementation, with calls for projects to have clear metrics and key performance indicators.
The message for 2018 is clear: under promise, over deliver.
People openly acknowledged that decentralized systems (blockchains), in the short-term, cannot compete with centralized system (for now, tempering the ‘next Uber/Facebook/Airbnb’ talk), but in the long-run, decentralized systems could power a completely new wave of consumer applications.
Despite reasons to be cautious/skeptical, the general feeling was one of optimism. I find it more interesting to take stock of how far the space has come in a little under a decade (e.g., money -> ledger -> world computer -> ?). Whatever the next evolution is, it is clear we are moving towards a multi-chain world where multiple decentralized systems are interoperable and smart contracts run on different chains.
During the ‘Cryptocurrency Market Technologies’ panel Tom Ding suggested the things to look out for in upcoming blockchain technologies were: 1. Finality (How long it takes to reach consensus); 2. Privacy; and 3. Development Standards and Tools (Web Assembly; e.g., ewasm).
In addition to tech, other primary factors to accelerate crypto’s adoption into the mainstream include:
- Regulation
- Liquidity (institutional investments)
- Custody (secure holding, valuing and facilitating private transactions)
Deconomy was not without controversy, particularly when it came to the contentious relationship between Bitcoin Core and Bitcoin Cash. In the ‘Can Bitcoin Scale’ panel debate, Roger Ver, Bitcoin Cash (BCH) proponent, argued that Bitcoin Core (BTC) has strayed from Nakamoto’s vision by limiting the blockchain block size to 1MB; Samson Mow argued that Bitcoin scaling requires layer-2 solutions (ref Lightning Network). In doing so, he’s implying that the layer-1 chain block size should be limited, something which Roger Ver takes issue with. The full debate can be seen here. Vitalik Buterin’s live tweet of the whole thing is definitely worth reading.
The drama got ratcheted up a notch at the end with both Vitalik and Joseph Poon calling out Craig Wright (nChain scientist and Bitcoin Cash proponent).
As the discussion moved towards industry evolution and regulation on the second day, whether or not the Central Bank should be on a digital ledger was discussed. Antony Lewis, of R3, provided a slide that placed the tokenization of money, commercial banks and central banks side-by-side. Although he seemed to argue that Central Banks need to have a digital currency (and R3 would be pivotal in helping them do so), important nuances should be accounted for when considering Central Bank Digital Currency (CBDC), including:
- Does it compliment or replace existing systems?
- Who has access?
- Identity vs Privacy?
- Who is issuing the digital currency? (Central Bank or commercial bank?)
- Who hold the digital currency? (Custody)
- Where are payments recorded? Offline transactions? (should transactions be on blockchain or should it be account based)
- Is it token-based?
- What are systemic risks?
Stanley Yong (IBM) took a different view and argued that Central Banks don’t need CBDC as much as the overall token economy needed CBDC; that CBDCs would remove current volatility concerns and therefore enable the internet of value.
Personally, the most fascinating presentation came during the final portions of the conference as the discussion centered on Ethereum: World Computer.
Vlad Zamfir provided a walk-through of one of the fundamental challenges facing any blockchain project — governance — first tracing it’s evolution:
- Governance is about decisions and how they get made (i.e., should we incorporate the latest improvement protocol? should we hard-fork, soft-fork or spoon?)
- Governance is about coordination (i.e., what rules do we play by? how do we communicate those rules? what are norms that direct our interaction?)
- Governance is about managing legitimacy and ultimately, political process (i.e., how do we distribute the knowledge that we will or won’t take a certain course of action)
Moreover, blockchain governance applies the above concepts to nodes, repositories and trademark with both active participants shaping the direction of governance and stakeholders ultimately being affected.
It was instructive to see him discuss two important developments in Ethereum’s history within the context of governance (i.e., DAO and parity hacks).
Some important governance questions include:
- What should Ethereum governance be like?
- How should trademarks be governed?
- What should be the responsibility of EIPs (Ethereum Improvement Proposals)?
- Should blockchain governance be active?
- What is the ideal relationship with the law?
While we need legitimate norms and processes (because existing ones aren’t enough), decisions made today will set precedents for the future, so there’s a need to find a balance between going too fast and too slow. Zamfir closed on a sobering note to shape governance processes…
…otherwise, someone else will govern for us.
Speaking of setting precedents, I kept thinking back to Joseph Poon’s reference to Alexander Hamilton, James Madison and John Jay’s drafting of the Federalist Papers, the foresight needed and the monumental tasks that lies ahead.
The final presentations and panels really hit home for me why Ethereum is such a unique community. Aya Miyaguchi, current Ethereum Foundation director, detailing her personal motivations for joining the foundation exemplified blockchain for good as well as outlining the foundation’s role in growing the ecosystem, with specific focus on: Grants, Community Development and In-House R&D.
In the panel on ‘Scaling Ethereum’ moderator Joseph Poon, got the panelists which included Vlad Zamfir, Karl Floresch, Vitalik Buterin and Justin Drake to reflect on their personal path (personality and personal histories) to the space. It was great to see the lighter (human) side of the brains behind the World Computer.
With all the advanced technology that go into building decentralized systems, the Ethereum team managed to touch on the human-side in unexpected, pleasantly surprising ways. The thought that stuck with me as I left the conference came from OmiseGo Advisor, Thomas Greco:
Blockchains are not just a computer science problem, but they’re about social coordination.
Shout out to the organizers of Deconomy for a fantastic inaugural conference; I’m already looking forward to next year’s event!
[1] Plasma is a scaling solution for the Ethereum blockchain — one of the fundamental problems being worked on in 2018.
