After about an hour of a one-day event on a block chain theme called "Initial Taco Offer," I received a family show for many at the South By Southwest Interactive Festival in Austin. There is a crowd of conference attendees, mostly men, and there are free tacos.
The event, a game of the initial offers of currencies that have turned digital currencies into some of the most vibrant and stressful investment opportunities on the planet, will take place at a restaurant specializing in meats on Lavaca Avenue in the downtown Austin. The organizers, a group called the Founders' Organization, attracted attendees to more traditional sessions at the city's convention center and nearby hotels with the promise of free food and lively discussions about the future of cryptocurrencies.
Because it's SXSW and not taken too seriously, the event is full of googly-eyed stuffed animals and chocolate coins with the Bitcoin logo. In the back, a man tries to sell viewers in an intimidating configuration of multiple monitors called Terminal Blockchain. It is a cryptocurrency tracker in the line of the distinctive financial product of Bloomberg that is not able to buy and sell cryptocurrencies, for several technical reasons. Although the air is cheerful and smells strongly of fried fish, the vast majority of speakers and attendees take their seats when the five-hour panel attack begins, all listening intently in the hope of understanding the future. And hopefully enrich yourself in the process.
Blockchain technology was the hottest topic at this year's SXSW festival
The cryptocurrency, as a general term, is derived from the cryptography used to sign and register transactions in the block chain: the technical basis of digital currencies such as Bitcoin and Ether. At SXSW this year, cryptocurrencies are by far the hottest issue, as they aspire billions of dollars in barely regulated and highly influential investments. Blockchain-focused panels got the best location in the larger stages of the convention center and sometimes attracted crowds comparable to those of Bernie Sanders and the Westworld cast. Even the smallest conversations held at some Austin hotels often reach capacity in a matter of minutes, with waiting lines snaking around the floor while people waited in the hope that a seat would be released.
The reason for the explosion in popularity is the astronomical jump in the value of Bitcoin last year, which peaked at $ 20,000 a few months ago and is now close to $ 8,000 after another tumultuous fall this week. But the increase in the value of Bitcoin and other cryptocurrencies, especially Ethereum, has attracted millions of dollars of investment and an influx of high-level talent, all in the belief that the next generation of multi-billion dollar companies will be born in the market. chain of blocks
And while SXSW has long lost the innovative brightness that once made it a debut destination for Twitter more than a decade ago, it remains a litmus test for where the technology culture is headed. In fact, SXSW, more than any other conference, feels ready to show the mentality without radical encouragement, too enthusiastic, get rich quickly that threatens to swallow the culture of cryptocurrencies. So here, sitting in the crowd at Bob and Chip's Steakhouse, between Lone Star taco plates and plastic cups, lavishly frothy, I'm beginning to think that maybe the blockchain is not crap complete
Maybe the blockchain is not really a complete shit
Almost everyone I spoke with at SXSW, from the extremely optimistic to the timidly skeptical, agrees that there is too much exaggeration, marketing nonsense, scams, fraud and misinformation around the industry. Too many people have adopted a gold-rush mentality, with power from federal regulators who have been slow to act and dot-com appeals that promise to turn buyers into millionaires overnight. The avalanche of money and bad actors has made a dent in the true believers, who now spend much of their time apologizing for the scammers among them.
Asked how the blockchain industry has changed in recent years, a lively Hartej Singh Sawhney, co-founder of the audit and security firm Hosho, says: "If he played a drinking game, and took a picture every time they mentioned Bitcoin, on CNBC, I would be really screwed. " The line laughs loudly from the crowd in the second panel of the Initial Taco Offering in the afternoon, which led Sawney to add: "Oh, and many fools started buying ICO and realized they could raise money to avoid VCs "
Photo of Nick Statt / The Verge
Photo of Nick Statt / The Verge
Photo of Nick Statt / The Verge
Sawhney refers to those offers of initial currencies, which basically allow anyone with Internet access to create a website, use open source code to develop a cryptocurrency and sell the chips to the public as if they were shares. These tokens are sold with the promise that they will be used to implement a product based on blockchain, but in reality, people buy them mainly because they believe that coins will increase their value and make them richer. By the end of last year, nearly $ 5 billion had been raised using ICO, according to a January report from Crunchbase.
Many of these ICOs, which individually have raised millions, come from companies that do not yet have a product and others are from companies that never intend to produce anything at all. Some employ schemes of pumps and boats of the old school of the world of stock trading, while others are transparent trolls like the one that ICO sells something called Ponzicoin. To combat scams, Google and Facebook have banned cryptocurrency and ICO ads, and the SEC has released probes to dozens of companies and individuals about possible fraudulent behavior related to the largely unregulated sale of cryptocurrency tokens. However, that has not prevented a flood of ICO from foreign companies taking money from people around the world with little or no oversight.
"Many of these projects will fail and people will lose their money."
It is this influx of wealth and negative attention that has marked many of the most sensible members of the community. "I think it's pretty clear in recent months that we're in the middle of a speculative bubble," says Vinny Lingham, CEO of the identity management company Civic, in a panel focused on blockchain-based businesses. "There are three or four thousand projects that are commercialized in all these exchanges and nobody is using any of these tokens, people are only speculating about the future value of what these tokens will be worth." When the moderator presses him on what could happen in the next 18 to 24 months, Lingham says it's going to be a bloodbath: "Many of these projects fail, and people will lose their money."
Julian Hosp, an Austrian businessman based in Singapore and a former medical surgeon who runs the TenX encryption company, believes that the inevitable accidents and bleedings will be good for the industry. "Cryptocurrency is Blockchain's most boring application, but it's the easiest to conceive," he says, speaking to a blockchain crowd gathered at the corner of the JW Marriott hotel in downtown Austin. It is only when the craze of cryptocurrencies burns that the true creators of the block chain will be forced to boost the industry, Hosp adds.
"The community has to stop this task of getting rich quickly," says Hosp. "Everybody wants to make money … but you can not bet on getting rich tomorrow, the market is bleeding and it's a good lesson that the market does not enrich you overnight." If there is a positive side, cryptocurrency enthusiasts at SXSW echo Hosp's prediction that only entrepreneurs and those genuinely interested in the possibilities of blockchain applications will be left behind once the speculation disappears.
Photo of Michele Doying / The Verge
"For all the millions of people who suddenly started buying tokens or Bitcoin, maybe 10 percent of them get it now, but 10 percent of them are absolutely impressed by the potential of blockchain and decentralized systems," says Michael Casey, a senior adviser to the Digital Currency Initiative at the MIT Media Lab, on a panel on the future of programmable money. "Now they are starting new companies and building platforms, this idea is happening, caused by something as crazy as ICO's madness."
Others, like Sawhney, say that while ICO is being abused, it is a liberating concept for entrepreneurs in developing countries, and could help revolutionize the way these engineers and entrepreneurs receive funding in the future. "The positive side is that if you're not American and you discover the concept of an ICO, you do not have to depend on Silicon Valley anymore – maybe you're in Ukraine or India and you're not going to get to Sand Hill Road," he says. "You have constant internet and electricity, this concept of an initial encryption offer is very exciting."
In a conference titled SXSW titled "Ethereum Will Change the World," which garnered a line across the fourth floor of the Austin Convention Center and down two flights of stairs, Ethereum co-founder Joseph Lubin balanced his lush predictions of the future calmly requires a more robust regulation. "The entry barrier is very low, so you can launch a symbolic project quite easily," Lubin told Forbes journalist Laura Shin. "You can copy and paste a whole token issue project without any interest in adding value to your token holders, it's basically a scam, and there are a lot of those projects in the world, it's absolutely logical that regulators take a look."
The advocates of Blockchain are inviting regulatory oversight of the SEC
An acronym that has been mentioned by almost all the panels last week is SEC. Federal regulators in the US UU They have recently taken steps to combat fraud by requiring ICO participants to be accredited investors and to initiate numerous investigations into potential scams. And while its standard critics of "regulation will kill innovation", many of the community's biggest names, including Lubin, invite scrutiny. "We understand that for hundreds and thousands of years, bad actors have been taking advantage of people," says Lubin. "I think it is prudent for the SEC to let people know that they are looking, which will allow for better behavior, which will make people perform deeper legal tasks around these events."
Addressing the crowd at Taco's initial offer, Sawney says it is everyone's personal responsibility to educate themselves better, and that the SEC can only do so much given how fast the blockchain industry is evolving. "Read the white papers, everyone and their mother are excited about the wrong," she says. "It's not my personal passion to educate the aunts of people who do not understand mathematics."
"It's not my personal passion to educate the aunts of people who do not understand mathematics."
Although regulation is the most important thing for everyone in the community, dreams of a decentralized future remain largely unshakeable and quite grandiose. "In general, I like the idea of decentralized freedom for people, it's not just about cryptocurrencies, but about all the social aspects of blockchain," says Fabian Wabbel, a German media professional who works for the Swiss newspaper NZZ. at a cryptocurrency meeting in Austin last week. Wabbel says he became interested in blockchain technology for the past two years, and although he is not an engineer or entrepreneur, he is convinced he could revolutionize the world. "It's going to change the world, or I really hope so," he says.
"We are at a point in time when he is still very young, he is almost a baby," says Benjamin Siegel, who works in policy management at the applications and services manufacturer Ethereum ConsenSys. "We have a two-and-a-half-year-old baby, and he's not ready to solve the world's problems, but one day, Siegel suggests, he will." Siegel aims at identity management, a popular topic among blockchain enthusiasts. Personal data in a decentralized block chain, rather than with a central authority such as Facebook or the government, could give people more direct control over how their data is used, in the same way that Bitcoin gives people control more direct of the contents of your wallet.
"Identity is a weapon that those who have power have over people, identity is a human right You get it because you were born," Siegel tells an enthusiastic crowd. Some in the blockchain world see a blockchain-based identity management system as a bad idea, potentially making confidential data more vulnerable to infractions and impostors, but those criticisms have not stopped the subject of question sessions and answers throughout the week.
Photo of Michele Doying / The Verge
Another blockchain hype at SXSW felt even less punished. Forbes & Laura Shin, moderating a panel in the taco that offered two days after interviewing Lubin at a keynote address, questioned the recent trend of putting any old business in the block chain and using the buzz of assistant marketing to raise large amounts of money. She was particularly concerned about companies that sell cryptocurrency tokens that do not really do anything, but that pretend they are not taxable values, even though the only reason why people buy them is to sell them later at a price higher.
It focused on Telegram, the encrypted messaging platform that raised a record $ 850 million in recent months in a pre-sale of the company's cryptocurrency, ahead of a formal ICO. Dave Hendricks, CEO of a company called Vertalo that is building blockchain-based human resources software, found no problem with the situation. "They are investing in the company." It's a great company, and it's a great service, "Hendricks said of Telegram.When Shin pressed him on how such a purchase is not considered equity, he replied that he does not consider it a formal investment.
"You invested?" Shin continued.
Hendricks said he personally put his own money.
Is it really worth $ 850 million? She asked.
"I do not know," he replied. "I did not do the due diligence."
Nervous laughter erupted through the crowd. But Hendricks did not flinch. "There's a lot of room for a lot of models, I think it's going to be fun," he said. Telegram is raising money to build an ecosystem of applications and services based on blockchain to face Facebook and other giants of Silicon Valley, all by selling people with the promise of a new cryptocurrency called Grams. The company is about to raise another $ 850 million in the coming months, before a potential public ICO that would raise even more money besides that.
We do not fully understand what Telegram is really selling, when it will materialize and if the company is only using the propaganda wave of cryptocurrencies. But it has not stopped it. Many smart people, including those within the largest venture capital firms, are lining up to buy. They want a portion of Grams, regardless of whether the SEC eventually considers it equity. More importantly, however, they do not want to be left behind. They are buying into the future, waiting to enter the ground floor.