CES panel: bitcoin’s crash was needed, blockchain forages forward
Duncan Davidson of Bullpen Capital, Steven Becker of MakerDAO, Ryan Singer of Chia Network and Brock Pierce of the Blockchain Foundation discuss blockchain's future.
Everyone following blockchain and cryptocurrencies knows that bitcoin suffered a major price correction last year, but that hasn't halted the growth of these technologies. That much was evident during the daylong Digital Money Forum at the recent CES show in Las Vegas.
In addition to bitcoin's dramatic price fallout, many initial-coin-offerings have failed. A CES panel consisting of blockchain experts tackled the current state of bitcoin and crypto in a session titled, "The Great Crypto Debate."
Moderator Martine Paris, a technology reporter for The FinTech Times, dove into the current challenges by asking the panelists what caused last year's bitcoin crash. The panelists agreed that bitcoin's price crash was necessary, and that blockchain technology continues to hold significant promise. Not all agreed, however, that the worst is over, or how soon blockchain's promise will materialize.
Why the crash was needed
Brock Pierce, chairman of the Bitcoin Foundation and a founder of several blockchain enterprises, said bitcoin's price crashed because the market was in an irrational state, "and it was a very necessary correction." He said the market has been volatile several times.
"Price is primarily the barometer of sentiment, and sentiment can get out of hand," he said, and the market had rallied to irrational levels.
"Eventually the market corrected, which is a good thing," Pierce said, calling it a cleansing. When the market rallies, it brings out the market's worst attributes. "The cockroaches come out from everywhere, talent doesn't stick around, projects become a joke," he said.
Pierce said the best blockchain projects get built in down markets.
The blockchain market will become stronger when functional products that scale are delivered, he said. This means applications with a million users, and he believes significant progress is being made towards this goal, as he expects to see signs of blockchain technology fulfilling its promise this year.
"These use cases that we talk about are starting to become a reality," he said, pointing out that in the Philippines, more than 5 percent of the population has a blockchain wallet.
Functional blockchain products needed
Steven Becker, president and COO of MakerDAO, which provides a "stablecoin" designed to minimize volatility, was also optimistic, and he agreed on the importance of having functional products.
"It's becoming very clear that getting functional products out there… is tantamount to actually putting goods and services on the blockchain," he said. He added that it is necessary for cryptocurrencies to operate within a regulated space.
Ryan Singer, CEO and co-founder of Chia Network, a blockchain that uses proofs of space and proofs of time protocols instead of traditional proofs of work, said the crypto markets are becoming "deeper" and more liquid. More people are using their own capital to acquire inventory, he said, which enables both consumer and industrial uses.
Duncan Davidson, founding partner of Bullpen Capital, a venture fund that invests in technology companies that have been funded by angels and institutional seed funds, put the crash into historical perspective. He said he has participated in three tech booms: the PC bubble, the dotcom bubble, and the iPhone bubble.
"All great technologies in human history came in on a bubble or a boom," Davidson said. "You need to have this manic mentality of a boom to overcome the normal resistance to adopting a new technology." The recent fallout, he said, has gotten the technology into the public consciousness in a much bigger way than the 2014 price crash.
What's ahead now?
The downside, Davidson said, is that all manias return the market to the start of the bubble. "So I am not sure that the bitcoin price is yet at the bottom," he said. The price mania started below the $3,500 price. He also said it will take time to reach the bottom.
Davidson agreed with Pierce that the crash serves to clear out the "crazy stuff," but he does not think blockchain has had its "Netscape moment." When Netscape emerged, the Internet was complex. "Nobody could touch the Internet because it (was) too arcane," he said.
"We don't yet have a Web browser, Web server model," Davidson said in comparing blockchain technology to Internet servers. "Whenever that happens, I think that'll signal this thing's about to take off again."
Pierce disagreed, claiming that the "Netscape moment" arrived at least a year ago in the form of EOS, a blockchain designed to support commercial-scale decentralized applications. He said EOS is a public blockchain that is highly scalable, has low latency and is frictionless, meaning it requires no access fees. "I believe EOS was the Netscape moment," he said.
"We can now build just about anything on the blockchain," Pierce said. He said it will take a few years for a lot of people to realize this. Netscape similarly was not recognized as the "Netscape moment" for a few years.
What are the hot coins?
Turning the discussion to the 500 or so crypto coins created during last year's ICO craze, Paris asked the panelists for their picks.
Singer said the coin he tracks the most is bitcoin, specifically Bitcoin Core.
Becker said the main feature he looks for in a coin is its community.
"It's within the community that you can actually bootstrap your good or service," he said. MakerDAO has such a community he said.
Pierce agreed with Becker on the importance of a coin's community. "What will make it successful long term is that group's ability to build a community… and steward that community over time," he said. It's important to learn the number of developers and the quality of their applications.
Davidson said bitcoin is the equivalent of HTML — the foundation that everything is built on. Besides bitcoin, he said, Ethereum is "quite interesting" but it is hard to program. While he believes Ethereum is complicated, he still thinks it has a future.
Besides bitcoin and Ethereum, Davidson is high on Ripple since it has a real use case.
As an investor, Davidson doesn't look at how much he'll make on the token sale, but if there is real world use. "Very few of these (coins) have real use," he said.
Davidson said organizations can become too decentralized, a position to which Becker took issue.
"Maybe the DAO (decentralized autonomous organization) idea when you take it to the extreme doesn't work," said Davidson, who said a Chinese tech company became very "chaotic" after becoming a distributed organization. Becker responded that a distributed organization is different from a DAO on a blockchain.
"Don't invest anything you can't afford to lose," was Pierce's advice to investors. He also recommended sticking with the best capitalized tokens, and called the middle of the market and under "absolute rubbish."
"Remember the technology itself is open source," he said, meaning it has no barrier to entry.
Apps built on blockchain that can deliver at scale will be messengers, gaming and others to be determined, Pierce said.
When asked if blockchain adoption will come from consumers or enterprises, the panelists agreed that the two work in tandem.
"Enterprise follows consumer, not the other way around," Singer said. Consumers get frustrated when their personal lives are more convenient than their work lives, then push for their work lives to adopt innovations developed for the consumer. Enterprise adopted PCs, the Internet and checks later than consumers, he said.
Photo credit: CES