Facebook is in Crypto?

By Eleanor Haas, blockchain/crypto columnist for Iconic Holding, advisor to ventures and Astia Angels and Director, Keiretsu Forum Mid-Atlantic.

The first I heard of Libra was in Fred Wilson’s newsletter:
“A new blockchain & cryptocurrency project, Libra, was announced today. Libra has been incubated by Facebook . USV (Union Square Ventures) will be one of the founding members of the governing body, the Libra Association. Libra is a stable, fiat-backed cryptocurrency that will launch inside some of the world’s largest consumer-facing applications.”

I had mixed emotions. Incubated by Facebook? Questionable credibility. USV a founding member of the governing body? Top credibility. A new cryptocurrency? Really? I read the rest of Fred’s newsletter. Then the Libra white paper. Wait — this is about plans for a complex new financial infrastructure as well as “a simple global currency”- an oxymoron if ever there was one — a currency that will one day trade on a global scale much like the U.S. dollar. Further, it’s more of a payment system than a cryptocurrency, a system designed to provide an easy way for Facebook users to send and receive money through its messaging services.

Libra vs. Cryptocurrency

Bitcoin, the first cryptocurrency, was intended to be digital cash, a decentralized means of exchange issued by a private source, not a government, which could solve the problem of hyperinflation. The inventor described it as “A peer-to-peer electronic cash system that is based on cryptographic proof instead of trust.”

Like Bitcoin, Libra uses cryptography and is intended to be digital cash issued by a private source. But its network is permissioned, not decentralized, and it replaces government control through banking & regulatory mechanisms with corporate control through technology.

Corporate control is by a not-for-profit organization — the Libra Association — but that, in turn is full of giant profit-making entities, as well as some not-for-profits and GMOs, all of whom make money from Libra users invisibly in the background! Doesn’t this sound a bit like the way Facebook makes money from Facebook information users?

Libra as a Stable Coin


By metamorworks

To trade on a global scale like the US dollar, Libra can’t have Bitcoin’s volatility and will peg its value to a basket “of low-volatility assets, including bank deposits and government securities” in different fiat currencies. “As the value of Libra will be effectively linked to a basket of fiat currencies, from the point of view of any specific currency, there will be fluctuations in the value of Libra.” Might Libra displace sovereign fiat as more and more people use it to shop online and find their own sovereign fiat inconvenient?

Hmmm. Sounds like governments may have something to say about this. As a start, the upcoming G7 group will explore how to regulate cryptocurrencies to protect both consumers and the economy. According to Reuters, “France, which holds the rotating presidency of the Group of Seven nations, has said it does not oppose Facebook’s creating an instrument for financial transactions. But it adamantly opposes that instrument becoming a sovereign currency.”

In addition, Maxine Waters, the chairwoman of the House Financial Services Committee, has scheduled hearings to examine Libra and told Facebook to stop development of the project until big questions are answered.

The Libra Reserve

The assets backing Libra will be held by the Libra Reserve, created by deposits from Libra Association members — 27 so far, with 100 the goal — deposits of $10 million each. The reserve will be invested in low-risk assets that yield interest over time. Revenue from this interest will go first to support the Association’s operating expenses and then pay dividends to Association investors. However, according to The New York Times, no deposits have been made so far. Association members are waiting for more clarity on how Libra will work.

Chicago University Law School professor Eric Posner compares the Libra Reserve to a money market mutual fund with a floating net asset value . He writes: “When you buy a Libra, you’re buying a share of this mutual fund, which you can transfer to others over the internet, using Facebook’s social network among other platforms. If enough people buy in, Libra could work as a currency — where the currency value is simply the relevant fraction of the assets in the mutual fund (the ‘Reserve’).” Users receive no return from the reserve.

So everything about the Association and the Reserve is at odds with the concept of the token economy, where behavior is incentivized for the mutual benefit of all concerned in a decentralized ecosystem. Clearly, Facebook’s Libra ecosystem is structured for the benefit of the owners, i.e., the Association, including Facebook, not token users.

Libra and Digital Identity

When we first heard Facebook was working on blockchain technology, many of us hoped the company would accept the need to clean up its corrupt use of user identity and create a sovereign identity that could redeem Facebook’s reputation and transform the online world

Lo and behold, at the top of page 9 of the Libra white paper PDF are these two sentences: “An additional goal of the association is to develop and promote an open identity standard. We believe that decentralized and portable digital identity is a prerequisite to financial inclusion and competition.” That’s all there is. Not another word on the subject anywhere in the white paper. What does it mean? No way to tell at this point.

With more than 2 billion users worldwide, Facebook could do something hugely valuable here.

Most people commenting on Libra have not even mentioned this! Coindesk, is an exception, with an excellent discussion of the topic and a takeaway that “Some identity experts say this is even more important than the cryptocurrency, but others question how much control Libra would give users and find its approach overbearing.”

Conclusion

The Internet abounds with opinions of Libra. Nailing any reality is another story. The white paper is all sweetness and light generalities and good intentions about plans that will take a good five years to evolve. I share the idealism of many in the front lines of today’s blockchain and crypto about the potential for a new, more just and inclusive social, economic and cultural infrastructure. I admire USV’s commitment to supporting the development of blockchain and cryptocurrency. But I just can’t trust Mark Zuckerberg or Facebook.

I have to agree with what Eric Posner says in The Atlantic. Facebook, one of the world’s most distrusted companies, wants us to trust its new Libra cryptocurrency, which, it hopes, will be used by billions of people around the world. We shouldn’t. Libra will almost exactly replicate all the problems generated by Facebook’s social network. Those problems can, in turn, be traced to the central paradox of Big Tech: The technological innovation that is supposed to liberate us from government ends up subjugating us to a handful of corporations.”

Bringing Institutional Investors to Cryptoassets

By Eleanor Haas, blockchain/crypto columnist for Iconic Holding, advisor to ventures and Astia Angels and Director, Keiretsu Forum Mid-Atlantic.
Unlike other asset classes, crypto investment began with retail trading, not adoption by institutions. Early adopter crypto funds soon followed. Now it’s the turn of institutional investors.

Importance of Institutionalization

80% of equity market cap is held by institutions. So it is not surprising that institutionalization is essential if digital assets are to scale, as stated by KPMG, the Big Four auditing firm, in a report published last November entitled “Institutionalization of Cryptoassets.”

“Institutionalization is the at-scale participation in the crypto market of banks, broker dealers, exchanges, payment providers, fintechs, and other entities in the global financial services ecosystem,” the report says.

“Institutionalization . . . is required to build trust, facilitate scale, increase accessibility, and drive growth,” the report continues.

“Interestingly, even though there are large price fluctuations with Bitcoin, it is not inherently volatile. The supply is in fact fixed and algorithmically secured. It is the demand that is fluctuating, and this could eventually stabilize as the market matures,” the report adds.

The value, writes Jeff Horowitz, Coinbase chief compliance officer, in the same report, is the opportunity cryptoassets represent to transform the financial industry into a truly open global financial system.

What will give cryptoassets staying power, the report asserts, is their ability to reduce friction and inefficiencies within the global economy.

Challenges for Institutionalization

In addition to the need to comply with laws and regulations, KPMG cites the gap between use cases and development execution as a major challenge for institutionalization: more than 2,000 significant cryptoassets already exist but most have no functional product. Four important use cases listed are: Bitcoin as a digital store of value, Ethereum as a means to raise funds, Litecoin as a cheap and fast peer-to-peer medium of exchange, and the tokenization of traditional assets.

The KPMG Solution

As one would expect, KPMG has developed a solution to propose to crypto businesses that want to scale while addressing the challenges — a comprehensive framework of nearly 20 components.

Promising Outlook

Prospects for attracting institutional investors to cryptoassets are favorable.

Last month Fidelity Investments, the fifth largest asset manager in the world, released findings that showed why institutional investment in cryptoassets is likely to grow significantly over the next five years. Fidelity surveyed 441 institutional investors — such as endowments, financial advisors, hedge funds and pensions — from November to February on their outlook on crypto investing.

  • 22% of respondents have already purchased cryptocurrency — a remarkable increase from near-zero in 2016.
  • 40% of respondents said that they are open to future investments in digital assets in the next five years
  • Nearly half of respondents — 47% — said that they see a place for digital assets in their investment portfolios.

In terms of how they invest, Fidelity found that 72% prefer purchasing investment products that hold or represent digital assets, such as futures, while 57% choose to purchase cryptocurrency directly or to buy equity in digital asset-related companies.

Institutional Engagement is Here

Actions speak louder than words, and major institutions are stepping up to the plate. Three examples:

  • Fidelity Investments. Fidelity has already taken a lead. It formed a new company last year, called Fidelity Digital Assets, through which it is building “the technical and operational capabilities needed for securing, trading and supporting digital assets with the exacting oversight required by institutional investors.” Earlier this year, it announced it was beta testing its trading and custody solutions with a “select set of eligible clients.”
  • Bakkt. Bakkt, a digital asset exchange from Intercontinental Exchange (ICE), owner of the NY Stock Exchange was expected to launch late last year and is now scheduled for late this year, with beta testing this summer. It will be one of the first institutionally backed cryptocurrency trading platforms as well as the first to launch physically settled Bitcoin futures. The platform is expected to bring in a large number of institutional investors by providing them with a regulated ecosystem for investing in and securely storing cryptoassets. It could be a critical factor in triggering the next crypto market bull run. A major cause for the launch delay has been ongoing work with the U.S. Commodity Futures Trading Commission (CFTC), the regulatory agency in charge of overseeing derivatives products in the country. Initially, Bakkt sought explicit CFTC approval for each new product. Now, Bakkt will self-certify its bitcoin futures products through ICE. This means that the CFTC will assess each proposed product for compliance, with ten days to identify issues before the product can go forward.
  • The First Pension Fund Investments. Conservative institutions, led by two pension funds, funded a new Morgan Creek crypto-focused venture fund to the tune of $40 million in February. Morgan Creek is an asset manager focused on institutional clients and family offices. The two public pensions anchoring the fund are Fairfax County, Virginia’s Police Officer’s Retirement System and Employees’ Retirement System. Other fund investors include a university endowment, a hospital system, an insurance company and a private foundation.

The size of the two pension funds illustrates the potential of pension funds for crypto investing. The police pension fund has $1.45 billion in assets; the employees fund has $4.25 billion.

Morgan Creek’s investment opportunities will be primarily sought in equity, though the fund will be open to a limited number of security token opportunities that provide cash flow provided they comply with Reg D. The investment portfolio will be thoughtfully structured to meet the needs of established investors with a long view, according to Anthony Pompliano, partner at Morgan Creek Capital.

Crypto Funds

Investment funds already play a critical role in institutional investing, with an estimated 60% of institutions’ assets under management in hedge funds. The funds add value by enabling investors to diversify efficiently into non-correlated asset classes and by introducing asset managers with the experience to manage risk and the skills to optimize returns.

Crypto funds can be expected to be even more important for institutionalizing cryptoasset investments because the crypto asset space is all new and even more difficult to navigate than traditional investing. In addition, it still has more than its share of scams.

It’s early days for crypto funds, but they’re growing rapidly. The first annual crypto hedge fund report by PWC Elwood estimates the number of crypto hedge funds at 150, most of them small. Over 60% have less than $10 million in AUM, with fewer than 10% managing over $50 million though a number have over $100 million, according to the report.

(By comparison, Hedge Fund Research estimates the number of hedge funds at nearly 10,000 as of the end of 2017, the largest of which, Bridgewater, had $124.7 billion in AUM. )

Emergence of the Crypto Asset Management Industry

Iconic Holding is playing a leadership role in helping to give birth to the new crypto asset management industry with the Iconic AMaaS solution — Asset Management as a Service. — which will launch in Q3 2019. Iconic experienced the challenges crypto asset managers face at first hand in the course of issuing its first crypto index funds last year. The company found enterprise-grade service providers few and far between in crypto, leaving managers to cobble together the least of the evils for the major capabilities a crypto fund requires and then to figure out how to get them to work together as a harmonious whole.

The complexity of the need was far greater than could be met by a software platform. It encompasses:

  • Market data
  • Custody
  • Trade execution
  • Liquidity
  • Audit
  • Compliance
  • Banking
  • Fund administration

So to develop its own index fund infrastructure, Iconic built a network of licensed crypto service provider partners and connected them via API to create an interoperable ecosystem that functions seamlessly through a single digital portal. Asset managers showed interest in this framework, and Iconic decided to make it a market offering for any would-be crypto asset manager. The hope is that AMaaS will dramatically speed the set-up and optimize the operation of compliant crypto funds, lowering pricing — and, in the doing, accelerate institutionalization of cryptoasset investing.

Conclusion

Will a substantial number of institutional investors be able to find a reliable and trustworthy environment in the crypto space within, say, the next five years?

Will a large percentage of financial assets become digital within, say, the next ten years?

Will the use of digital assets via the blockchain actually produce increased transparency, openness and auditability pivotal to a fairer and more open economy?

It could happen!

Signs of Crypto Spring

By Eleanor Haas, blockchain/crypto columnist for Iconic Holding, advisor innovators and Astia Angels and Director, Keiretsu Forum Mid-Atlantic.

Cheng Wei / Shutterstock.com
“Turn! Turn! Turn! (To Everything There is a Season)” Pete Seeger’s ageless plea for peace — based on the Old Testament — perfectly expresses what seems to be happening with the blockchain/crypto space: continuous change. Each new stage seems to be a valid destination. Then the cycle turns again. Oh, yes, and with each turn, space expands to new kinds of opportunities. Are we there yet? Hardly! But multiple financing options have sprouted for starting and growing new blockchain/crypto ventures. There’s a definite feeling of crypto spring in the air.

Crowdfunding

The ICO, the first public funding for blockchain/crypto projects, was enabled by a form of crowdfunding, itself legislated into business use through the JOBS Act just a year before the first ICO. Both turn traditional fundraising upside down. Instead of asking a few hard-to-reach sources for large sums of money to finance a business, both use the Internet to reach thousands of people and ask for smaller amounts.

Crowdfunding helped some early ICO candidates raise the funds needed for the ICO itself. Alas, like the ICO, lack of transparency and accountability plus frequent failures caused crowdfunding to lose trust, though there have been some successes and there are industry leaders aggressively advocating for reform. One of these is Ryan Feit, founder and CEO of SeedInvest, one of the first crowdfunding platforms. SeedInvest vets applicants with a comprehensive due diligence process that requires compliance with the SEC and has accepted only about 1% of startups that applied.

Now Pledgecamp, which just completed an STO and is scheduled to launch in Q3, has used blockchain technology to develop a new crowdfunding platform, to restore trust in the practice. Smart contracts will be key to this, through the transparency they enable, along with Backer Insurance, which requires project creators to proposed milestones before contributions are made and then unlocks funds only as supporters vote fulfillment of each milestone.

So, startups have a handful of reliable crowdfunding websites and the promise of reconstituted crowdfunding to get to their ICO.

Initial Token Offerings (ITO)

“I published a white paper and an address, and strangers were sending me money.” That’s how a Seattle-based software engineer named J.R. Willett created the first ITO, a crowdfunding event to generate a new token in 2013, called an Initial Coin Offering (ICO). Ethereum, the blockchain platform that was to become the ICO gateway, was born the following year.

Then came exuberance, followed by reality and, in late 2018, crypto winter — along with serious regulatory attention. For good reason: A Satis Group– commissioned study found that 81% of ICO’s were scams. So the ICO fell into disrepute, with Q1 2019 stats even below those of Q4 2018 in number of ICOs and dollars raised; yet, they did raise $902 million, according to ICOBench, and the average ICO raised $2 million more in Q1 2019 than in Q4 2018. So the original ITO is down but not out. Several websites publish calendars of upcoming and ongoing ICOs, including Coindesk.com.

At the same time, the ICO morphed into a new form of ITO, the STO. In April 2017, as the ICO moved towards exuberance, the STO, or security token offering emerged — a crypto token that qualifies as a tradable asset — such as a stock, bond, option, etc. — in SEC terms, which is to say meets the Howey Test, and is required by law to comply with SEC regulations. Compliance brings safeguards for investors but also limits the amount of sales beyond accredited investors.

Regulatory uncertainty has complicated STO use. On April 3rd, the SEC released fresh regulatory guidance for token issuers The framework offers further clarity but clearly states it is a guideline, not a rule or regulation. Security attorneys and the SEC continue working on open questions. Forbes recently published a helpful article on “How to Run a Successful Security Token Offering in Compliance with New SEC Guidance.”

The number of STOs grew strongly in 2018 and surged to an increase of 130% in Q1 2019 over Q4 2018, according to a report by InWara.

The market’s enthusiasm for the security token stems in part from the unlimited use cases it affords despite this still being uncharted territory. It combines programmable equity with crypto fundraising, 24/7 global access to markets, lower fees (no middleman) and access to 2 billion unbanked potential customers.

Further, the security token, itself an expansion of the blockchain/crypto space initiated by cryptocurrencies, followed by utility tokens, and smart contracts, will require development of new infrastructure: marketplaces/exchanges, STOs, custodians, wallets, etc. It’s like building an onion from the inside out!

Tokenization

Creating a new token represents a share of ownership in a new tradable asset. That’s one side of the coin — no pun intended. The other is tokenizing an existing asset, such as real estate, gold, an art collection, intellectual property, etc.

Tokenizing enables liquidity, among other things. This frees up capital provided there is demand for the token, a trustworthy exchange for trading it, and an acceptable exchange rate. This makes tokenization a cash flow bet! What is the probability of demand? What is the availability of an acceptable exchange? What is that token selling for today? When the stars align and you can liquidate favorably, you can generate new capital from tokens in the same way as you would in selling stocks or bonds

Traditional Funding Sources

An especially encouraging sign of crypto spring is the growing number of traditional funding sources who’ve begun investing in blockchain/crypto.

Top accelerators have begun accepting blockchain/crypto companies — including the Entrepreneurs Roundtable Accelerator, 500 Startups and TechStars.

Cryptocurrencies have already attracted 68% of global millionaires to invest or plan to invest by 2022 according to a survey released May 3rd by deVere Group, a Dubai-based financial planning and advisory firm that has more than 80,000 clients in more than 100 countries and more than $1 billion in assets under advice.

Members of angel investor networks, such as Keiretsu Forum, the largest in the world, have begun accepting blockchain/crypto companies as presenters. Keiretsu Forum’s affiliate, Keiretsu Capital, has even formed a blockchain fund of funds and attracted individual investors for it.

Venture capital funds nearly tripled their investment in blockchain/crypto firms during the first three quarters of 2018, according to a report published September 30, 2018 by Diar, a digital currency news and information service. Citing Pitchbook data, Diar reported a total of $3.9 billion in VC capital had been invested in blockchain/crypto firms during this period. In addition the median value of each deal grew by over $1 million.

Andreessen Horowitz, one of the largest VC firms and an industry thought leader, has been driven by the opportunity they see in blockchain/crypto startups to move out of the VC structure altogether by registering as an RIA, Registered Investment Advisor. As VCs, they were constrained by their limited partner agreements to devote no more than 20% of their capital to nontraditional investment “experiments.” This on top of having formed a special crypto fund last year in order to be able to move more aggressively on blockchain/crypto opportunities.

For specific funders, you’ll want to see the list recently published by The Bitcoin Pub, a community of cryptocurrency enthusiasts — 170 VCs and Hedge Funds Investing in Crypto and Blockchain Companies.

Conclusion

To paraphrase an early song by Alan J. Lerner (“Paint Your Wagon”): where are we goin’? I don’t know. Where are we headin’? I ain’t certain. All I know is we are on our way!

Pointing Blockchain Towards Tomorrow

By Eleanor Haas, an Iconic Holding partner, crypto/blockchain commentator, advisor to innovators and Astia Angels, and Director, Keiretsu Forum Mid-Atlantic

When cryptocurrency crashed, ICOs largely disappeared and the early stage crypto/blockchain market appeared penniless, a lot of people assumed the blockchain story was over. But, guess what, the main story had been burgeoning under the radar all along! Part of that story is the crypto asset flight to quality — discussed in Can Crypto-Spring Be Far Behind. But a big part is the transformational enterprise blockchain pilots and collaboration by enterprises and blockchain startups alike. Adults to the rescue? Nope. It’s a two-way street with challenges and progress on both sides.

Challenges and Progress

Adoption of blockchain technology by established entities — specifically, enterprise businesses and sovereign states — has been slow. Why? Fear of failure for lots of reasons, including:

  • Immature technologies and protocols.
  • Lack of a rock-solid business case for adoption.
  • No effective use case execution because of the lack of ecosystem. player collaboration.
  • Regulatory uncertainty.

Now, some enterprises are beginning to move beyond a focus on how the technology could work with existing processes to how to implement real use cases at scale. Even more important, increasing numbers see the technology as a valuable and trusted tool, and sovereign states are giving serious consideration to how they might benefit from their own digital currencies.

Acceptance in Theory. Disappointment in Practice.

Deloitte’s 2018 global blockchain survey — published last August — found that of the 1,053 blockchain-savvy executives who responded, “74 percent reported that their organizations see a ‘compelling business case’ for using blockchain technology.”

Given these findings, it’s not surprising that 2018 became the year of enterprise blockchain pilots and proof-of-concept projects. Alas, many of them aborted. According to Avivah Litan, a Gartner VP and Distinguished Analyst, this too is not surprising:

“Back in early 2018, we’d already said… 99% of enterprise projects are a dead end; 99% don’t need the technology; they don’t get out of the lab. They’re a result of CEOs fear of missing out — the FOMO phenomenon.” she said. In other words, blockchain is a dud.

Reason for Hope

Ah, but with blockchain, there are always two sides to every point of view! Despite failed pilots, blockchain appears to still be alive and well and living both at the startup and at the enterprise and state levels — and headed towards normalcy!

Mike Orcutt, Associate Editor, MIT Technology Review, gives us three reasons why 2019 will be “the year that blockchain technology finally becomes normal.”

1. Big plans from Walmart — and Wall Street.

From Walmart, deployment of a pilot that’s been in the works for several years — a food supply tracker designed to reduce the spread and impact of food-borne infections and to trace and contain contaminations cases as discovered.

Called the Food Trust, the tracker involves Walmart and nine companies — Nestlé SA, Dole Food Co., Driscoll’s Inc., Golden State Foods, Kroger Co., McCormick and Co., McLane Co., Tyson Foods Inc. and Unilever NV — in partnership with IBM.

From Wall Street, two major brands will launch cryptocurrency services: Bakkt, a digital asset exchange from Intercontinental Exchange (ICE), owner of the NY Stock Exchange, and a much-needed custody services for crypto assets from Fidelity Investments through a new company, Fidelity Digital Assets.

2. Smart contracts will finally be good for something in the real world. A three-way partnership will enable flight insurance policies that automatically pay out in cryptocurrency if your flight gets canceled. This is made possible by reliable, easy-to-use smart contracts.

Like the Walmart tracker, the flight insurance application involves collaboration, this time, among a startup, a project and a late-stage venture company: Chainlink, a startup, will create the first reliable system for securely feeding data to smart contracts; OpenLaw, a Harvard Law School project that models simple legal agreements based on smart contracts, and Rocket Lawyer, a 10-year-old cost-effective online legal service for individuals and small businesses.

3. At least 15 countries’ central banks are giving thoughtful consideration to state-backed digital currencies. Such currencies are likely to provide a halo effect of respectability for other cryptocurrencies and related technologies.

Continuing declines in cash use around the world create the banks’ need to avoid a loss of confidence in national monetary systems. Steady improvement in new payment technologies and cryptocurrencies are making state-backed digital currencies more technically feasible. And such currencies would benefit the banks. According to Christine Lagarde, head of the International Monetary Fund, they could help central banks reach hundreds of millions of the unbanked and offer improved security, privacy, and consumer protection.

Three Enterprise Strategies Show Promise

As enterprise buy-in grows legs, participating businesses are coming up with interesting strategies. Here are examples from three major brands:

1. Ernst & Young, the accounting and consulting firm, has launched a technology prototype that will for the first time enable companies to privately and securely create and sell product and service tokens on a public blockchain with private access to their transaction records. The prototype is scheduled for live production in 2019.

This is a huge step towards lowering barriers to more widespread blockchain adoption enterprise blockchain adoption. At present, enterprises can use only private, or permissioned, blockchains when privacy is needed. This is time-consuming and expensive. In addition, public blockchains typically offer better security and liquidity, thanks to their decentralization. The EY Ops Chain Public Edition (PE) offers the best of both.

2. Kodak has licensed its name for use as KODAKOne, a blockchain-powered platform for photographers to control their own image management and to have a marketplace, and KODAKCoin, an enterprise coin designed to benefit customers by rewarding loyalty and to benefit the enterprise by reducing cost and increasing customer appeal. KODAKOne is in beta.

The strategy comes from ICOx, a publicly held company (trades on the OTCQB) that partners with established brands to solve problems through joint ventures that launch and develop blockchain economies. This itself is an innovative strategy. Their tagline is “Creating Economies,” and they describe what they do as designing and creating “blockchain economies for established companies to benefit and grow their businesses through blockchain technologies and branded cryptocurrencies.”

3. IBM is probably the №1 enterprise business in completing blockchain projects and launching active blockchain business networks — more than 500!

Blockchain projects at the enterprise level require collaboration, and IBM learned the value of collaborating with qualified startups to launch and scale blockchain networks. To capitalize on this, IBM is partnering with Columbia University to create two blockchain accelerators as key components of the Columbia-IBM Center for Blockchain and Data Transparency.

The IBM Blockchain Accelerator is designed for later-stage growth companies globally that are focused on building an enterprise business network and client base for their application.

The Columbia Blockchain Launch Accelerator is designed for pre-seed, idea-stage companies affiliated with Columbia or another New York City-based university. Founders receive tools and training on how to build a blockchain startup.

Both programs give companies access to technology and services valued at about $400K per company. Neither IBM nor Columbia take equity or charge a fee.
Towards Tomorrow

Everything about blockchain is always on the move, so who knows what this will add up to when we look back. But, at the moment, it looks like a tomorrow of blockchain/crypto development with less hype, more realistic expectations, and a semblance of normality.

In Orcutt’s opinion:
“In 2017, blockchain technology was a revolution that was supposed to disrupt the global financial system.”
“In 2018, it was a disappointment.”
“In 2019, it will start to become mundane.”
“After the Great Crypto Bull Run of 2017 and the monumental crash of 2018, blockchain technology won’t make as much noise in 2019.”
“But it will become more useful.”

Can Crypto Spring be Far Behind?

By Eleanor Haas, an Iconiq Lab partner, crypto/blockchain commentator, advisor to innovators and Astia Angels, and Director, Keiretsu Forum Mid-Atlantic

It’s crypto winter. Cryptocurrencies have crashed by as much as 90%. Startups have shuttered. But in the background beyond the headlines are positive indicators. Three examples: Tokenized fundraising continued to evolve, the largest digital currency asset manager in the world found investors cautious but patient and the largest US bank announced its very own blockchain-based token — the most recent evidence of long-standing enterprise involvement and the maturing of a nascent technology.

Tokenized Fundraising Evolved

ICOs offering money for nothing — albeit as cryptocurrency — couldn’t last forever, and they didn’t. ICO’s hit reality in 2018 — including investor resistance and SEC scrutiny. Both cryptocurrencies and ICOs plummeted — cryptocurrencies in value, ICO’s in number and funding raised. Increasingly few exchange listings exacerbated the declining appeal of the ICO by killing investor liquidity.

From January to December 2018, the amount ICOs raised collapsed from $1.5 billion to $74.5 million (ICO Data), the number of ICOs from 807 at the end of Q1 — the all-time monthly high — to 182 in Q4, and exchange listings from 180 in Q1 in 27 (Inwara).

But tokenized fundraising may well be in transition and likely to survive. ICO problems stemmed from the nature of the cryptocurrency tokens investors received. Their lack of intrinsic value and dependence on user perceptions resulted in massive speculation and fraud; their lack of compatibility with US securities laws from the 1930s led to major legal and regulatory uncertainties.

During 2018, the STO (Security Token Offering) emerged as an alternative. For these, investors receive tokens backed by a tangible asset, such as equity in a company or real estate. STOs also have protections in place for investors. Most currently being initiated are private placement securities offerings to accredited investors. This, sadly, eliminates sales to the general public, though the SEC has a backlog of exempt public security offerings, or Regulation A+ STOs, currently awaiting approval. Securities attorneys are working on a number of additional problems and the SEC is expected to issue “plain English” guidance on the security token analysis as soon as early this year.

In addition, bipartisan legislation, the Token Taxonomy Act, was introduced to Congress in December. Its major goal is to clarify “that securities laws do not apply to companies that use blockchain once they reach their goal of becoming a functional network.” Interesting!

It’s not a slam dunk, but there’s hope for positive change. A reason to want tokenized fundraising is its ability to create value for innovating entrepreneurs, innovative investors and the businesses their tokens support.

  • It can provide a significant new way for innovators to finance their projects — a new way that democratizes access to capital. (Whether this survives will depend on SEC rulings.)
  • It represents a new road to rapid liquidity for investors.
  • It can allow companies to engage with potential customers as token buyers.
  • And it can create a new kind of participation in building success for a business, with incentives increasingly mutual, thanks to a token-based network effect.

Cautious but Patient Currency Investors

Grayscale Investments, the world’s largest digital asset manager, creates investment products based on virtual currencies, targeted at both institutional and retail investors. Despite everything, the company had a bumper 2018, with $359.5 million in inflows, the strongest calendar year inflows in the company’s history.

The bear market caused the company’s weekly average for investment inflows to shrink in Q4 from $6.9 million to $2.3 million. But the company still had $825 million in assets under management (AUM) at year end, with 44% from 2018 investment inflows — this despite the highest drawdowns on AUM since the last bear cycle in 2015, spiking at 75% in December.

An encouraging trend was the increase in the volume of funds coming from retirement funds, which were up 40% in the final quarter. Institutional investors still represent the largest share of inflows.

“These datapoints reinforce two important trends that we’re observing. First, the average investor at this stage of the bear market is patient with a multiyear investment horizon (i.e., investing for retirement). Second, institutional investors are building core strategic positions in digital assets over time and have largely viewed the 2018 drawdown as an attractive entry point,” the company said.

The First US Bank-Backed Cryptocurrency

The bank is JPMorgan Chase, the token is called JPM Coin, and it isn’t money per se. It’s a digital coin that represents US dollars already held in JPMorgan Chase accounts. The purpose is to reduce cost, capital reserves and risk for institutional clients making payments to other clients. When one client sends money to another using blockchain, the settlement time is eliminated because their JPM Coins are transferred and redeemed for the equivalent US dollars instantaneously .

It’s a first step towards a future where core transactions such as corporate debt issuance or cross-border payments are conducted on a blockchain. For that to happen, the bank needs to be able to transfer money within milliseconds, not days, to be compatible with smart contracts

Initially, the JPM Coin will be issued on the bank’s Quorum blockchain and subsequently extended to any standard blockchain network.

The coin is currently a prototype that has tested successfully for payments and will be rolled out in a pilot program later this year. The bank plans to explore other use cases for the technology, such as custody and clearing & settlement.

An Emerging Industry Begins to Mature

There’s more here than meets the eye. Within the crypto/technology community, the JPM Coin is controversial because it will run on a private enterprise blockchain controlled by the bank itself, not a decentralized public platform. Bitcoin fans and other crypto purists believe cryptocurrency exists in order to wrest control away from central authorities, especially big banks and government. For them, decentralization is the essence of all things blockchain.

On the other hand, enterprises in diverse verticals have been working with blockchain technology for several years, looking to centralized permissioned private blockchains for the real business value they can deliver.

  • Multiple financial institutions in addition to JPMorgan Chase — including Citibank, BNY Mellon, Santander, RBC, and Goldman
  • Such payment processors as American Express, Visa and Mastercard
  • Automotive companies like Volkswagen and Renault
  • Retailers such as Walmart and Starbucks.
  • Amazon Web Services (AWS) offers blockchain as a service (BaaS), along with IBM, HP, Microsoft, Oracle and SAP.

Unlike some early blockchain startups, enterprises test blockchain technology for projects where it is uniquely qualified, not just nice to have. They are focused on real ROI. And they prioritize operations over finance.

The End of the Beginning

2018 was a year of transition for crypto/blockchain. The sun set on the Wild West days of the ICO and rose on new ways to approach tokenized fundraising. Cryptocurrency took big hits in value but survived as a valid crypto asset and gained increasing use as a medium of exchange. Key blockchain infrastructure continued to be built. Enterprise proofs of concepts began moving into pilots and early production deployment across a range of use cases.

Might we be moving towards crypto spring?

USING BLOCKCHAIN — Because They Care About Sustainable Energy

By Eleanor Haas, an Iconiq Lab partner, advises crypto and life science innovators and Astia Angels and is Director, Keiretsu Forum Mid- Atlantic

Adding Real Value for the Connected Home

“The connected home needs to move from ‘because we can’ to ‘because we care,’ says Peter Davies, founder and CEO of Verv, a smart electricity use and blockchain-powered energy trading platform. “Many connected home devices at the moment are just gadgets . . . That’s not enough.”


Peter Davies, Founder
and CEO of Verv

Technology needs to add real value, according to Davies, and for the connected home, initial value is created by managing energy and then multiplied by monetizing excess grid-edge power generation in a peer-to-peer exchange. The key to this is data, he says, specifically, energy data, extremely granular energy data, something he’s been working on since 2009 at Green Running (www.greenrunning.com), a London-based team of data scientists and machine learning experts he founded, and Verv (www. vlux.io), an intelligent energy technology company established in 2015, of which it is a part.

The Verv Home Hub

The Verv Home Hub, which is already generating revenue, enables consumers to own their personal energy management with powerful analysis tools and unique learning abilities that provide insight into home electricity consumption. As a result, they are able to reduce their energy use, minimize their carbon footprint and bring down their bills for electricity as well as to avoid accidents with safety alerts when an appliance has been left on for too long and to detect when an appliance is faulty or deteriorating and wasting power.

BENEFITS OF THE VERV HOME HUB

Verv’s new layer of intelligence uses IoT and AI to identify key appliances and monitor the amount of energy each uses. The Hub attaches directly to the electricity meter with a current clamp, so it can “listen” to electricity usage. Verv has developed technology for collecting high frequency electricity data that is far clearer and more detailed than what smart meters deliver because it samples up to 5 million times faster.

The potential social impact is significant. In Davies’s words, “We’re democratizing data; unscrambling vast amounts of data from electricity usage and handing it back to the user in a form that helps them actively create positive change.” Power to the people! Literally!

Why Verv’s Technology Matters

Energy production and use is the largest source of global greenhouse-gas emissions, and greenhouse gases from human activities are the most significant driver of observed climate change since the mid-20th century. Traditionally, electricity demand increase has been coupled with economic growth. This is still the case for China and India. But not the US. In the US, GDP and electricity demand have been decoupled for ten years and last year demand was actually stagnant. This is thanks in part to the outsourcing of heavy industry but also to greater energy efficiency, the kind of thing Verv enables with its Home Hub, and to customers generating their own power, something Verv encourages with its recently launched Verv Trading Platform.

Verv’s End-to-End Renewable Energy Trading Solution

“As the percentage of intermittent renewable energy increases to meet global carbon targets, supporting grid-edge trading by reducing transaction costs will be essential to balance demand against supply,” explains Davies. “Our goal is to empower everyone to become completely self-sufficient on renewable energy sources with particular focus on poor communities around the world.”

Verv has combined deep learning AI with blockchain technology in order to allow consumers who generate green energy locally to share their excess energy with their neighbors and community at affordable prices in exchange for a token.

VERV’S ABILITY TO FORECAST PRECISE DEMAND PROVIDES THE FOUNDATION FOR PEER-TO-PEER ENERGY TRADING

AI is used to forecast supply and demand, so energy can be traded at the cheapest time. AI enables both Verv Home Hub user profiles that show who needs energy and when, and anticipation of energy power generation from satellite data about cloud cover.

Blockchain technology provides a secure and transparent ledger on a peer-to-peer network through which energy can be traded. By using a utility token called the VLUX to enable use of the trading platform, Verv can fund a freemium model, where participants pay no platform cost.

VERV HOMES HAVE AN INHERENT INFORMATION-FIRST ADVANTAGE THAT ASSURES THE BEST PRICE

User Benefits

When energy demand is low and use of grad infrastructure is minimal, a user with a battery can store energy free of charge for later use or sell it when demand is high.
This, in turn, helps with load balancing to the grid and avoids the need for additional energy generating facilities.

The battery owner doesn’t even have to own a source of power.

Users also benefit from improved grid resilience made possible by the fact that a decentralized/distributed energy grid has fewer points of failure than the traditional centralized infrastructure.

The Growing Verv Community Energy Blockchain Trial

The Verv trading platform executed the UK’s first energy trade on the blockchain in April 2018 at a public housing community in Hackney London, where solar panels had been installed on 13 blocks — powering the community with sunshine.

That trial was expanded in November when Centrica, the parent company of the UK’s largest energy supplier, British Gas, joined the trial to explore how to bill customers if solar panel owners sold excess energy to their neighbors. The test will analyze the amounts of consumed energy coming from British Gas and the amounts from solar panels.

Centrica, which had previously invested $2.4 million into Verv through its social impact investment fund, sees the emergence of blockchain as “a game-changer for businesses and consumers, in this case giving customers the opportunity to benefit from cheap, renewable energy.”

WHY BLOCKCHAIN MATTERS-Part 3

By Eleanor Haas, an Iconiq Lab partner, advises crypto and life science innovators and Astia Angels and is Director, Keiretsu Forum Mid-Atlantic

Photo by Nikhita Singhal on Unsplash

No value created through the use of blockchain technology is greater than allowing a business to control its own business model by powering and incentivizing a community through the use of digital tokens — establishing a token-enabled economy.

Blockchain, or crypto, began for most of us as Bitcoin, which we think of primarily as a means of exchange or store of value. But that’s just the beginning of the crypto token story Bitcoin is a crypto coin, a token that is native to its own blockchain. Functional tokens, which are built on existing blockchains and called tokens, deliver utility. Both are programmable code built on a blockchain and part of a smart contract for use on a specific software application (a dApp) in fueling the dApp and the smart contract.

Overview of Token Design

The token is a market offering — something an organization does to create value for stakeholders, so token design needs to give the answers you want to the following business model questions:

  • By whom will the token be used?
  • How will they use it?
  • At what cost?
  • For what benefits?
  • Resulting in what valuable transactional activity?

But the context for the business model will be determined by governance design and how token distribution and value are managed.
In the end — and this may come as a shock to some — important as the blockchain technology is, it represents only a fraction of token-enabled ecosystem considerations. It exists for one reason only: to make execution of a business plan possible.

Governance

Governance is a fundamental condition of how the ecosystem operates, as is the case for any organization. To govern is to exercise authority over an organization, and governance consists of the mechanics for making decisions about policies. Owners are responsible and accountable for governance in businesses — typically, investors with board seats, who delegate much of it to the CEO. It’s needed because there’s no way to know in advance what to do in every possible situation simply because who knows what will happen!

Smart contracts govern blockchain organizations and their communities to the extent that challenges and opportunities can be anticipated. But organizations need to adapt over time to new circumstances as they arise, and who gets to propose policies or to vote on changes is very much a privilege some community participants will seek out, others will avoid. Governance design is one of the three essential components of token design.

Prysm Group, which specializes in blockchain economics and governance design, suggests the following as typical questions to consider in designing a governance system.

  • What kind of decision needs to be made?
  • What information is required to make these decisions?
  • What expertise is required to make these decisions?
  • Whose preferences should be taken into account for these decisions?
  • What individuals or groups should be directly involved in the decision-making process?
  • How can these individuals be selected?
  • What mistakes could be made in this selection process?
  • How can we minimize the probability of these mistakes?
  • How can we ensure decisions are implemented?
  • How can we determine whether a rule has been broken?
  • What are the consequences when rules are broken?

Token Distribution and Value Management

Token distribution and value management is the second essential condition for operating a token-enable ecosystem. A fixed supply or tokens introduces scarcity, which means token value will increase as demand rises with community growth — a desirable network effect for users. But how and when will this fixed supply be achieved? And how will new participants be attracted once the supply has been fully distributed?

If the token supply is variable, does it grow continuously? Expand algorithmically? Contract algorithmically? Under what conditions?
After determining the supply behavior comes the need to assess transaction fees, block fees, distribution variability/dynamics and the relationships of each of these factors to the others

Role of the Token

Owning a functional token bestows access to rights. Functional tokens native to their projects are like the enchanted seeds that grew into the bean stalk that took Jack to a kingdom of riches. With the right magic, digital code can produce a cooperative community at the heart of a new world, a high-value token-enabled ecosystem. How these tokens are designed to interact with the underlying business model as incentives — the roles they play in crafting user market fit — will be key to determining success or failure.

The goal is to deliver sufficient user value for the tokens to incentivize massive numbers of users to power use of the market offering and, in time, to addict them to this application.

  • Iconiq Lab’s ICNQ token gives investors access to high-quality deal flow from compliant token launches, actionable data about the companies, participation in designing their business models and tokens and discounts on investment prices.
  • The Binance exchange has a token that lets users trade at fees reduced by 50%
  • The Musicoin token allows users to watch a video or stream a song.

This is not a trivial endeavor.

  • How can you attract an audience to participate in the first place? What are the limits to the value of economic incentives, i.e., freebies and discounts?
  • How can you retain these users? What positive mechanisms might make holding the token for longer desirable? What potential loss might deter departure?
  • And what might the token do to make a difference? This is the heart of the matter — token design — the basis of what William Mougayar calls the token economy, or “tokenomics.”

In what ways might your target community participants like to benefit from token ownership?

Participation in:

  • Governance — voting, communication and proposing changes in community policies and the decision-making process itself.
  • Earnings — profits, benefits.
  • Joining a network, communicating with others in the community

Use of a currency that enables frictionless transactions
Right to rewards for:

  • Work.
  • Creating a product.
  • Buying.
  • Selling.
  • Spending.

William Mougayar sums this up neatly: token to market fit is the new product to market fit!

Conclusion
Blockchain can add value to existing organizations and can create new kinds of value by improving existing processes — as Web 1.0 did. But just as Web 2.0 saw the creation of the greatest value — the ability of users to interact and generate their own content — so the greatest value blockchain technology is likely to create will undoubtedly come when the technology is more mature. The token-enabled ecosystem is still more concept than reality and is both complex and complicated. It requires considering needs and wants of all player, weaving multiple token roles and features to help shape the experience of all participants and accepting a long-term time horizon. The value? Democratic self-determination.

The token-enabled ecosystem is a new way to live, a new way to operate a business and a new way to interact. Companies like Iconiq Lab are laying the groundwork. Early advocates — such as Crypto Monday members — are sharing a new take on how the world might operate.

To what extent will Iconiq Lab succeed in its commitment to democratize investment in early stage companies? How well will companies design and manage their communities? To what extent will they believe enough in the ecosystem vision to allocate the resources it needs even when token markets hit troughs? It’s not unlike the challenges Hamilton, Madison and Jefferson faced in establishing the US, when the Colonies forked from Great Britain!

WHY BLOCKCHAIN MATTERS-Part 2

By Eleanor Haas, an Iconiq Lab partner, advises crypto and life science innovators and Astia Angels and co-leads Keiretsu Forum New York

We live in a time of emerging transformation. Blockchain technology is enabling both a new kind of social infrastructure, as described in Part I of this blog — characterized by one-to-one economic trust, decentralized connections and incentivized collaboration — and an alternative financial system, the subject of Part 2, with a new economic model that establishes the rules and policies governing the behavior of this system, to be the subject of Part 3. Together, these innovations hold unprecedented potential to reshape society — we hope, for the better. It’s a time full of monumental unknowns but also great promise.

Cryptocurrencies. Cryptocurrencies, beginning with Bitcoin, are at the heart of the new financial system — digital assets with economic value that use blockchain technology to verify, record and track transactions. They are native to the technology, use cryptography for security and are intended for use as a means of exchange, store of value and/or fund-raising mechanism. They can also be used as a unit of accounting, a metric to price the value of other things. Anyone can create one, and as of today, CoinMarketCap lists 1,999, including XRP, Ethereum, EOS, Stellar, Litecoin, etc.

As a Means of Exchange. The financial value of cryptocurrencies, like that of government-backed money, is derived solely from supply and demand. Increasing numbers of companies are beginning to accept them as payment. Overstock, Expedia, Subway, PayPal, and Shopify were early adopters. One hundred companies were listed in this category as of September 4th by www.unblock.net.

Crypto money can do things fiat cannot, things that solve serious problems. It can add flexibility to sovereign money systems for special purposes, such as enabling seamless cross-border payments. It resolve cross-border payment issues such as card fees, fraud, slow bank wires and exchange rate losses. Above all, it represents a potentially safe haven for beleaguered citizens in times of hyperinflation, as in Venezuela today, one of the worst cases in history, where Venezuelans are beginning to use crypto currency as they learn about it from Bitcoin Venezuela, among others.

Cryptoassets as a Store of Value. As digital natives, cryptocurrencies have an advantage for investors over traditional assets in their liquidity and trading volume profile. They can move as quickly as the internet and therefore differ from other asset classes. In fact, they can be viewed as the silver bullet of diversification despite their volatility, which has begun to calm down, and the low correlation with traditional assets, something expected with acceptance by the broader capital markets.

Early evidence of broader acceptance appeared in July with the first-ever crypto investment report released by the digital asset management fund Grayscale Investments. The report showed that the majority of Grayscale’s capital inflow for the first half of 2018 was coming from institutional investors. The breakdown was 56% institutional investors,20% accredited individuals, 16% retirement accounts and 8% family offices.

Other kinds of assets, both tangible and intangible — art, real estate, intellectual property, stocks and bonds — can become cryptoassets by converting ownership rights into a digital token on a blockchain. This makes transfer, tracking and subdivision vastly simpler and more efficient than current paper systems. Converting ownership rights into fractional shares also democratizes the process through more widespread ownership for smaller investments.

As a Fund-Raising Mechanism. Privately issued currencies are acquired/invested in at exchanges, which trade 24/7, such as Coinbase or Cex.io, or when launched at an Internet Coin Offering (ICO). Yes, lots of early ICO scams — nearly 80% of them in 2017, according to the Satis Group. Interestingly, fewer than a third of ICOs were hosted in North America (https://elementus.io/blog/ico-market-august-2018/), and early ICO investors are believed to have been largely inexperienced investors, millennials who had profited from bitcoin speculation.

Fortunately, the market is maturing, Americans have governmental safeguards, increasing numbers of ICOs are SEC-compliant, and investors globally are showing greater restraint, as evidenced by new data just released by Elementus, a blockchain analytics company: the number of ICOs rose by 58% from 58 in August of 2017 to 101 in August of 2018, but the number of sales that were successful in raising $100K or more declined from 52% of the sales to 22%. In addition, regulators around the world have started to develop a framework to oversee cryptocurrencies. So it begins to look like the Wild West of cryptocurrencies and ICOs may soon be tamed!

As a fund-raising mechanism, the ICO has been able to do two things not previously possible that significantly facilitate financing for entrepreneurs and other innovators. It raised major capital without diluting equity, and it democratized participation beyond the fewer than 6 per cent of Americans who qualify as accredited investors and can buy shares of stock under US Securities laws. Both of these, however, are likely to change with the emergence of the security token, or tokenized security, which is expected to attract significant amounts of Wall Street money in 2019.

The security token is backed by a traditional asset, such as equity or real estate, and is subject to SEC regulation. Security tokens act like a bridge between legacy finance and crypto finance. They align issuer and investor interests by digitally representing ownership and can provide various rights to a company or fund. They provide access to expert networks, KYC/AML compliance and regulatory oversight. And they preserve both the investor liquidity and community development of the utility token, similar to loyalty rewards points given by credit cards, which have dominated ICOs.

Why Blockchain Matters — Part 1

By Eleanor Haas, an Iconiq Lab partner, advises crypto and life science innovators and Astia Angels and co-leads Keiretsu Forum New York

It’s early days for blockchain — or crypto as the broader trend is called — but we can already see it changing how the world works. No, it’s not because of Bitcoin. That’s merely one application. It’s because of how the underlying technology shifts power and control.

Blockchain is changing how we relate to one other. It’s enabling new ways to communicate, exchange value and interact, creating a new social infrastructure.
To define it, the blockchain means both a peer-to-peer computer network that runs parallel to the Internet and the database of transactions it contains. Blockchain software platforms — Ethereum, EOS, and Hyperledger, for example — are also called blockchains.

“Crypto” comes from private key cryptography, a core blockchain technology that allows data privacy to coexist with transparency, an essential feature of all blockchain applications.
This is Part 1 of a two-part blog post. It speaks to the first three of five ways blockchain is changing our world — establishing a basis for one-to-one economic trust, decentralizing connections and energizing collaboration.

  • A Basis for One-to-One Economic Trust. Society is founded on exchanges of value, and blockchain technology was invented to enable people to trust each other to make these transfers without the need for a trusted third party, such as a bank, broker or real estate agent, a practice going back more than 600 years.

Eliminating intermediaries vastly speeds processes and reduces costs for such purposes as financial and real estate record-keeping and transactions, asset management, energy and commodity trading, supply chain management and electronic health records, among others. It also eliminates a source of fraud — remember Bernie Madoff? Enron?

What we actually trust instead of intermediaries is the data embedded in the blockchain database. What makes it trustworthy is that it’s immutable, time-stamped and distributed — stored as multiple copies on multiple independent computers that no single entity can control — and verified by validators. The database becomes a single source of truth.

Decentralized means the peer-to-peer blockchain network has no central server. Decentralized connections help assure data integrity by eliminating third party control — and they also add further value for users.

  • Decentralized Connections. Because no single entity can control a decentralized network, decentralized electronic connections change the balance of power between the technology platform provider and its user, putting the user in control.

User-based data ownership and the ability to monetize your personal data? It’s happening at Vetri.global, a personal data management platform.

Social media based on the decentralized blockchain infrastructure? Yes, that’s happening as well. Steemit.com, Sapien.network, Sola.ai and Indorse.io are among the growing number of early-stage blockchain-based social media in development, and they reward content creators and curators as well as users as part of a digital sharing economy. What a thought: a digital sharing economy!

It’s controversial, though possible, to design a blockchain to be centralized/private or, partly centralized/hybrid as opposed to completely decentralized/public. In these cases, a deploying enterprise or government controls access and levels of participation with permissioning. But it’s the permissionless public model that was the original, and decentralization is viewed by many as the soul or guiding ideology of blockchain technology, exciting because of its potential to subvert and innovate.

The reason for the original model was to make Bitcoin possible. Bitcoin, described by its inventor as “a peer-to-peer electronic cash system,” is digital money issued by a private source. It was initially intended to solve the problem of hyperinflation, which wipes out purchasing power and the value of cash people are holding in their wallets or banks. Because this is typically caused by government budget deficits financed by money creation rather than loans or higher taxes, the primary object was to eliminate central control with a decentralized system.

Centralized systems and organizations are hierarchical. All the power flows from the top down, channeled through the flow of information. For decentralized systems and organizations, decision-making resides in the individual participant; information flows sideways and governance is collaborative. Collaboration becomes the third aspect of relationships shaped by blockchain.

  • Incentivized Collaboration. Driving the crypto space is a culture of “we’re all in this together,” a culture embraced by developers and users alike that values sharing and collaboration rather than competition. Collaboration is key to effective decentralized decision-making.

Supporting the cultural trend to share and collaborate are cryptoeconomic incentives designed to galvanize openness and cooperation among network participants, i.e., both the computers validating data (“crypto miners”) and currency or data users. The incentives take the form of digital rewards — digital money for crypto miners or utility tokens for users, which provide access to specific rights, products or services or other benefits.

The value of the digital currency or tokens, like that of government-issued currency, is determined by the ratio of supply to demand. But where the supply of government-issued currency can be varied by sovereign governments in ways that impoverish people, the supply of digital currency is fixed at inception and controlled by technology, free of human intervention. It is then to the mutual self-interest of the organizations and individuals who use a digital currency to use more and more of it in order to support its value by increasing demand.

A crypto company’s community members are also incentivized to engage with each other and the business to optimize revenue from sales of products or services and to multiply value of the network through the network effect, where the value of something increases as more people use it. Aligned self-interest makes communities truly the heart and soul of any viable crypto business model, and community member recruitment and relationship management becomes a top priority.

Humans at the core of the value chain? A human-centered Internet? Yes!
Part 2 will be about why blockchain matters because of the new business models, new ways to invest and new way to finance innovation.

Selling to the C-Suite

SELLING TO THE C-SUITE

C-Suite execs are besieged and time-pressured.  Survival depends on a ready no.   But if you go in on their terms, not yours, they’re fair game.  Six tips for getting in the door:

  1. Selling to the C-Suite is a 2-way conversation, where the prospect does 70 percent of the talking.  It’s NOT marketing – one-way communications designed to foster Interest in your service or product.
  2. It’s letting prospect talk themselves into buying your offering, while you direct the conversation with well-chosen questions. It’s NOT a capabilities presentation.
  3. You help people better understand their needs and the urgency to do something about them. It’s about THEIR point of pain, NOT the value of your company or your offering.
  4. You connect with your prospects by being relevant to their interests and concerns. You do NOT use corporate marketing messages about what you are, what you sell or what differentiates you from competitors.
  5. You always start by creating curiosity about a pain point and how to solve it – never by explaining anything.
  6. You come right to the point knowing that brevity matters to your prospect. What’s the problem?  What’s the solution?  You NEVER waste time with idle chitchat – weather, traffic, etc.