Tectonic Shifts at Consensus ‘18 by@michael.margaritoff

Tectonic Shifts at Consensus ‘18

Michael Margaritoff HackerNoon profile picture

Michael Margaritoff


Consensus 2018 in New York was full of surprises.

The staggering volume of crypto funds in attendance — myself included — was not one of them.

There was a massive swell of security-token startups and ICOs, high on the opportunity to bring the benefits of “crypto-economics” to the world of traditional finance, and well positioned for the inevitable flood of institutional money now pouring into the crypto markets.

None of them were surprising.

What was surprising all had to do with the state of crypto itself, and our collective attitude, as investors, towards it.

In brief: Tech and community leaders have stopped presenting this space to investors as a get-rich-quick scheme. And it’s about time.

Investors will recall that, as recently as January, end-user DApps built on Ethereum by self- proclaimed “serial entrepreneurs” were everywhere. BTC Miami was practically a carnival, with reward tokens and art blockchains and decentralized YouTubes spending millions of dollars on marketing campaigns, and raising millions more.

Everyone wanted to be the next Jeff Bezos. And everything felt like a scam.

Thankfully, Consensus reflects how we’ve all calmed down a little since then, and realized that this technology’s greatest potential for growth is in the long-term, not the short-term.

The convention served to rein in our wild expectations, while still keeping the enthusiasm alive. It did so with a careful selection of ICO booths and a strategic assortment of tech-heavy lectures, reorienting attendees’ perspectives in a subtle but effective way.

Here are just a few of the indicators I noticed that gave me a sense of the profound change now taking place within the crypto community. (These are, of course, my own personal interpretations. Feel free to disagree with my reasoning):

1. There were far fewer ICOs marketed for the average consumer.

Most of the startups present at Consensus seemed geared towards providing some kind of a service for developers, or entrepreneurs, to help accelerate or incubate startup development.

These are the next tier of middleware platforms, and their success or failure will allow the next evolution of the crypto business model: “Gateway” businesses, which will aim bring the uninitiated user/investor seamlessly into the crypto universe.

Consider the massive booths setup by Microsoft, IBM, and Deloitte, all of which were offering services of the build-your-own-blockchain variety.

The general feeling is that a blockchain application should be something anyone can build — and, should they need help to make their network grow, a thriving, competitive market for consulting and strategy is out there. “Build it, and they will come” –the Modus Operandi of this industry since Bitcoin.

2. Despite the crash in January, no one is ready or willing to give up on Proof of Work. At least, not as much as I had expected, given the industry’s recent trajectory towards Proof of Stake (PoS).

Last month, EOS climbed from $3 to $20 in a week; Vitalik Buterin continues to publicly decry Ethereum as being unscalable without his proposed PoS hardfork, which he’s still working on; and Cardano remains one of the most highly anticipated projects among the industry’s leading academics. All of these are pretty obvious indications that people are looking for something they can trust over Proof of Work.

It’s not for nothing, either. One glance at BTC’s block confirmations on blockchain.info tells you all you need to know: 5 mining pools carry out almost every confirmation on the Bitcoin network. Ethereum hardly fares better. This is what Proof of Work does. What serious business would be comfortable putting the integrity of their entire enterprise in the hands of so few miners?

And yet, instead of trying to steer the industry towards newer, more sustainable consensus algorithms, such as Proof of Stake, industry leaders such as Blockstack and DCI all pushed a very unexpected position: Without a tenable layer 2 solution, they agree, no blockchain — PoW or PoS — should be expected to sustainably carry out all of a network’s functionalities.

In other words, a scalable, sustainable and low-cost blockchain network is inseparable from a sleek second-layer protocol (an oracle chain, second-layer transaction network, etc.) to coordinate the network’s most labor-intensive activities off-chain.

To that end, Bitcoin’s new proposed RSK smart-contract layer is expected to raise transaction rates from 6tps to over 100, and then — if what the man in the booth told me is to be believed — in excess of 20,000tps. If true, this would put Bitcoin transactions on the same order of magnitude as Visa transactions, and would allow multi-tool smart contract applications to run sustainably.

Questions we should ask ourselves at this point:

Could this finally make Bitcoin competitive as a payment method?

What does this mean for the power of the mining pools that currently support it?

With so many investors, are the mining pools even interested in attacking the network?

With so many potential use cases and proven reliability, will users even care who’s behind it?

One way or the other, it seems like Proof of Work in general, and Bitcoin in particular, still have a long evolution ahead of them.

And by the same token — no pun intended, of course — end-user applications are still a long way away, with plenty of business and investment opportunities still to be had in the meantime by helping them come about.

In the meantime, hopefully other conventions around the world can follow the example set by Coindesk’s Consensus, and recognize their role in helping the world reimagine this space as a serious long-term investment.

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