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Peep the future of distributed ledgers with the leaders of Hyperledger, Parity Technologies and Tradeshift
As cryptocurrencies emerge from the speculative bloodletting of the past months, believers in the promise of distributed ledger technologies for business and consumer applications are casting about for what comes next.
On our stage at Disrupt San Francisco we’ll be welcoming some of the leading thinkers in how distributed ledgers can create an entirely new architecture for computing and new processes for almost every conceivable transaction framework.
For Brian Behlendorf, the executive director of Hyperledger, distributed ledger technologies represent a powerful path for the future of networked computing — no matter the underlying technology. That’s why Behlendorf –through the Linux Foundation — is investing resources in ensuring that viable open source distributed ledger projects are supported and coming to market for any number of applications for businesses and consumers.
One of the leading lights of the internet revolution, Behlendorf’s career shaping the future of the networked world began in 1993 when he co-founded Organic Inc. — the first business dedicated to building commercial websites. Going on to become one of the foundational architects of the Apache http protocol, Behlendorf has served as the chief technology officer of the World Economic Forum and as an executive director for the technology investment fund, Mithril Capital.
Meanwhile, Parity Technologies is attempting to ensure that businesses don’t need to worry about the underlying technologies at all. Selling a suite of services that are all enabled by distributed ledger technologies and cryptographic computing, Jutta Steiner is giving businesses a way through the maze of competing protocols with a service that can enable the creation and adoption of distributed apps for businesses.
“We see it as a way for people to build blockchains that fulfill their particular needs,” Steiner told our own Samantha Stein at our Blockchain event earlier this year in Zug. “One of the challenges we’re addressing in this is to come up with a scalable framework.”
Before Parity, Steiner was responsible for security and partner integration within the Ethereum Foundation when the public blockchain first launched in 2015. Steiner also co-founded Project Provenance — a London based start-up that employs blockchain technology to make supply chains more transparent.
Supply chains are at the heart of Tradeshift’s offerings — and the company is hoping that distributed ledgers will be too. That’s why the company created Tradeshift Frontiers, an innovation lab and incubator that will focus on transforming supply chains through emerging technologies, such as distributed ledgers, artificial intelligence and the Internet of Things.
“The use cases we’re working through Frontiers cover a very wide variety of themes, including supply chain financing, asset liquidity, and supply chain transparency,” said Gert Sylvest, co-founder and GM of Tradeshift Frontiers, at the time. “There is so much more potential than just cryptocurrencies.”
That potential will be one of the things that Sylvest, Steiner, and Behlendorf discuss. We’ll hope you’ll be in the audience to listen.
Disrupt SF will take place in San Francisco’s Moscone Center West from September 5 to 7. The full agenda is here, and you can still buy tickets right here.
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Sagewise pitches a service to verify claims and arbitrate disputes over blockchain transactions
Sometimes smart contracts can be pretty dumb.
All of the benefits of a cryptographically secured, publicly verified, anonymized transaction system can be erased by errant code, malicious actors or poorly defined parameters of an executable agreement.
Hoping to beat back the tide of bad contracts, bad code and bad actors, Sagewise, a new Los Angeles-based startup, has raised $1.25 million to bring to market a service that basically hits pause on the execution of a contract so it can be arbitrated in the event that something goes wrong.
Co-founded by a longtime lawyer, Amy Wan, whose experience runs the gamut from the U.S. Department of Commerce to serving as counsel for a peer-to-peer real estate investment platform in Los Angeles, and Dan Rice, a longtime entrepreneur working with blockchain, Sagewise works with both Ethereum and the Hedera Hashgraph (a newer distributed ledger technology, which purports to solve some of the issues around transaction processing speed and security which have bedeviled platforms like Ethereum and Bitcoin).
The company’s technology works as a middleware, including an SDK and a contract notification and monitoring service. “The SDK is analogous to an arbitration clause in code form — when the smart contract executes a function, that execution is delayed for a pre-set amount of time (i.e. 24 hours) and users receive a text/email notification regarding the execution,” Wan wrote to me in an email. “If the execution is not the intent of the parties, they can freeze execution of the smart contract, giving them the luxury of time to fix whatever is wrong.”
Sagewise approaches the contract resolution process as a marketplace where priority is given to larger deals. “Once frozen, parties can fix coding bugs, patch up security vulnerabilities, or amend/terminate the smart contract, or self-resolve a dispute. If a dispute cannot be self-resolved, parties then graduate to a dispute resolution marketplace of third party vendors,” Wan writes. “After all, a $5 bar bet would be resolved differently from a $5M enterprise dispute. Thus, we are dispute process agnostic.”
Wavemaker Genesis led the round, which also included strategic investments from affiliates of Ari Paul (Blocktower Capital), Miko Matsumura (Gumi Cryptos), Youbi Capital, Maja Vujinovic (Cipher Principles), Jordan Clifford (Scalar Capital), Terrence Yang (Yang Ventures) and James Sowers.
“Smart contracts are coded by developers and audited by security auditing firms, but the quality of smart contract coding and auditing varies drastically among service providers,” said Wan, the chief executive of Sagewise, in a statement. “Inevitably, this discrepancy becomes the basis for smart contract disputes, which is where Sagewise steps in to provide the infrastructure that allows the blockchain and smart contract industry to achieve transactional confidence.”
In an email, Wan elaborated on the thesis to me, writing that, “smart contracts may have coding errors, security vulnerabilities, or parties may need to amend or terminate their smart contracts due to changing situations.”
Contracts could also be disputed if their execution was triggered accidentally or due to the actions of attackers trying to hack a platform.
“Sagewise seeks to bring transactional confidence into the blockchain industry by building a smart contract safety net where smart contracts do not fulfill the original transactional intent,” Wan wrote.
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Andreessen-funded dYdX plans ‘short Ethereum’ token for haters
Crypto skeptics rejoice! A new way to short the cryptocurrency market is coming from dYdX, a decentralized financial derivatives startup. In two months it will launch its protocol for creating short and leverage positions for Ethereum and other ERC20 tokens that allow investors to amp up their bets for or against these currencies.
To get the startup there, dYdX recently closed a $2 million seed round led by Andreessen Horowitz and Polychain, and joined by Kindred and Abstract plus angels, including Coinbase CEO Brian Armstrong and co-founder Fred Ehrsam, and serial investor Elad Gil.
“The main use for cryptocurrency so far has been trading and speculation — buying and holding. That’s not how sophisticated financial institutions trade,” says dYdX founder Antonio Juliano. “The derivatives market is usually an order of magnitude bigger than the spot trading or buy/sell market. The cryptocurrency market is probably on the order of $5 billion to $10 billion in volume, so you’d expect the derivatives market would be 10X bigger. I think there’s a really big opportunity there.”
How dYdX works
The idea is that you buy the short Ethereum token with ETH or a stable coin from an exchange or dYdX. The short Ethereum’s token price is inversely pegged to ETH, so it goes up in value when ETH goes down and vice versa. You can then sell the short Ethereum token for a profit if you correctly predicted an ETH price drop.
On the backend, lenders earn an interest rate by providing ETH as collateral locked into smart contracts that back up the short Ethereum tokens. Only a small number of actors have to work with the smart contract to mint or close the short Tokens. Meanwhile, dYdX also offers leveraged Ethereum tokens that let investors borrow to boost their profits if ETH’s price goes up.
The plan is to offer short and leveraged tokens for any ERC20 currency in the future. dYdX is building its own user-facing application for buying the tokens, but is also partnering with exchanges to offer the margin tokens “where people are already trading,” says Juliano.
“We think of it as more than just shorting your favorite shitcoin. We think of them as mature financial products.”
Infrastructure to lure big funds into crypto
Coinbase has proven to be an incredible incubator for blockchain startup founders. Juliano was employed there as a software engineer after briefly working at Uber and graduating in computer science from Princeton in 2015. “The first thing I started was a search engine for decentralized apps. I worked for months on it full-time, but nobody was building decentralized apps so no one was searching for them. It was too early,” Juliano explains.
But along the way he noticed the lack of financial instruments for decentralized derivatives despite exploding consumer interest in buying and selling cryptocurrencies. He figured the big hedge funds would eventually come knocking if someone built them a bridge into the blockchain world.
Juliano built dYdX to create a protocol to first begin offering margin tokens. It’s open source, so technically anyone can fork it to issue tokens themselves. But dYdX plans to be the standard-bearer, with its version offering the maximum liquidity to investors trying to buy or sell the margin tokens. His five-person team in San Francisco with experience from Google, Bloomberg, Goldman Sachs, NerdWallet and ConsenSys is working to find as many investors as possible to collateralize the tokens and exchanges to trade them. “It’s a race to build liquidity faster than anyone else,” says Juliano.
So how will dYdX make money? As is common in crypto, Juliano isn’t exactly sure, and just wants to build up usage first. “We plan to capture value at the protocol level in the future likely through a value adding token,” the founder says. “It would’ve been easy for us to rush into adding a questionable token as we’ve seen many other protocols do; however, we believe it’s worth thinking deeply about the best way to integrate a token in our ecosystem in a way that creates rather than destroys value for end users.”
“Antonio and his team are among the top engineers in the crypto ecosystem building a novel software system for peer-to-peer financial contracts. We believe this will be immensely valuable and used by millions of people,” says Polychain partner Olaf Carlson-Wee. “I am not concerned with short-term revenue models but rather the opportunity to permanently improve global financial markets.”
Timing the decentralized revolution
With the launch less than two months away, Juliano is also racing to safeguard the protocol from attacks. “You have to take smart contract security extremely seriously. We’re almost done with the second independent security audit,” he tells me.
The security provided by decentralization is one of dYdX’s selling points versus centralized competitors like Poloniex that offer margin trading opportunities. There, investors have to lock up ETH as collateral for extended periods of time, putting it at risk if the exchange gets hacked, and they don’t benefit from shared liquidity like dYdX will.
It also could compete for crypto haters with the CBOE that now offers Bitcoin futures and margin trading, though it doesn’t handle Ethereum yet. Juliano hopes that since dYdX’s protocol can mint short tokens for other ERC20 tokens, you could bet for or against a certain cryptocurrency relative to the whole crypto market by mixing and matching. dYdX will have to nail the user experience and proper partnerships if it’s going to beat the convenience of centralized exchanges and the institutional futures market.
If all goes well, dYdX wants to move into offering options or swaps. “Those derivatives are more often traded by sophisticated traders. We don’t think there are too many traders like that in the market right now,” Juliano explains. “The other types of derivatives that we’ll move to in the future will be really big once the market matures.” That “once the market matures” refrain is one sung by plenty of blockchain projects. The question is who’ll survive long enough to see that future, if it ever arrives.
[Featured Image via Nuzu and Bryce Durbin]
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Knotel acquires 42Floors in order to build the blockchain of property
Another day, another blockchain project. This time sources are reporting that Knotel – an office space rental service in Manhattan – has acquired 42Floors, a commercial real estate search engine in order to, according to founder Amol Sarva, get “access to data and technology on over 10 billion square feet of office space, driving further liquidity to Knotel’s marketplace while also accelerating its plans for a blockchain platform.”
The deal is not yet complete.
Knotel is building the Agile HQ platform, a way to rent office space for a few hours or a few months without getting stuck in a lease. The company has 1 million square feet of space in New York, San Francisco, London, and Berlin and it raised $100 million in funding. The company claims it has more has more buildings in New York than WeWork.
“42Floors built a powerful tool to organize a dark market that hasn’t changed in a hundred years,” said Amol Sarva, CEO of Knotel. “It’s still backroom and bilateral while the rest of the world is becoming digital and standardized. This is what leads to transactions that take months to close with a dozen middlemen – no reliable information. You can buy a house faster than you can rent a floor. Partnering together will help give owners and customers what they both want: truth.”
The reported 42Floors acquisition enables the company to bring new properties onto its platform and could let non-blockchain-based contracts move to the blockchain.
UPDATE – Text changed to reflect the type of business and ICO plans.
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Kik launches beta product after $100 million ICO
Kik made waves last year after a successful $100 million ICO. Now the company has released its first beta product related to its Kin token. Called Kinit, it’s a simple wallet that enables users to earn, store, and spend its tokens.
“Kinit is a fun, easy way to earn Kin, a new cryptocurrency made for your digital life. Earning Kin is just like playing a game, only better, because you get rewarded for completing fun daily activities like surveys, quizzes, interactive videos and more,” reads the Google Play Store description. You can download the app for Android here.
The Kin token is unique for a few reasons. First it is not a traditional ERC-20 token and is instead uses Ethereum for liquidity and the on the Stellar network to improve transaction speed. Further, the company is spending a great deal – about $3 million – to get developers to develop on the token through its KinEcosystem site. The Kinit app is the first effort to get normal users to adopt the tool.
The app makes it possible for users to generate a few dollars in value per day and then exchange those dollars for gift cards and perks. According to CCN, Kik has created a product without a business model and instead it wants to drive the adoption of the token through giveaways.
“Kinit is the first publicly available app dedicated to Kin. Our goal with Kinit is to get Kin into more consumers’ hands. It’s a major step towards making crypto truly consumer-friendly through fun and engaging experiences, and we plan to learn and iterate based on real-world user behavior. We’re excited to get even more people earning and spending Kin — all on the Kin Blockchain,” wrote Rod McLeod, Kik’s VP of communications. The app currently asks you to complete surveys in order to get discounts and gift card codes for products.
With the rise of the product-less ICO it’s clear that Kik has the right idea. By encouraging usage they drive up the token price and token velocity and by launching a general beta full of cutesy imagery and text they are able to avoid the hard questions about developer adoption until far into the future. While the KinIt app is probably not what most Kin holders wanted to see, it’s at least an interim solution while the team builds out sturdier systems.
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0x lets any app be the Craigslist of cryptocurrency
Centralized crypto exchanges like Coinbase are easy but expensive because they introduce a middleman. Not-for-profit project 0x allows any developer to quickly build their own decentralized cryptocurrency exchange and decide their own fees. It acts like Craigslist, connecting traders without ever holding the tokens itself. And instead of having to bootstrap their way to enough users trading tokens on their app alone so that there’s liquidity, 0x offers cross-platform liquidity between users on the different projects it powers.
The problem is the user experience of decentralized apps is often crappy compared to the consumer apps we’re used to across the rest of tech. From sign-in to recovering accounts to conducting transactions, it’s a lot more complicated than Facebook Login, PayPal, or Shopify. Bitcoin and Ethereum prices remain well below half their peaks because it’s difficult to do much with cryptocurrency right now. Until the decentralized infrastructure improves, the dreams of how blockchains can improve the world remain distant.
0x is trying to fix that by ensuring developers all don’t have to reinvent the exchange wheel.
It began as a for-profit exchange before the team recognized the massive usability gap. So instead it became a decentralized exchange protocol, and raised $24 million in an ICO for its ZRX token. That’s how relayers — the apps who use it to build exchanges for ERC20 tokens atop the Ethereum blockchain — can charge fees. It also gives those who collect the most a say in the governance of the protocol.
Some of the top projects on 0x like Augur and Dydx are going strong. Last week Coinbase announced it was exploring whether it might list ZRX and several other currencies for trade on its exchange, helping perk up the price after declines since the new year.
0x’s ZRX token price, via CoinMarketCap
Now 0x is putting some of its $24 million to work. It just hired former Facebook designer Chris Kalani to help it improve the usability of its APIs and the products built on top of them. His skills helped Facebook embrace mobile around its 2012 IPO. He then built Wake, raising $3.8 million for the design prototype sharing tool that let teams get instant feedback on their works-in-progress. Kalani sold Wake to design platform InVision in April, and after a few months assisting the transition, he’s joined 0x.
“There are very few designers involved in the [blockchain] space” Kalani tells me. “There’s not a lot of people who had worked on anything at a large-scale or from the consumer perspective. We’re focused on making crypto more approachable.”
Sustaining a crypto not-for-profit
After talking to four leaders in different parts of the blockchain industry, the consensus was that 0x was an elegant protocol for spawning decentralized exchanges. But the question kept coming up about whether the project will be sustainable. The company doesn’t have to earn enormous amounts of revenue, but concerns about its longevity could scare away developers. One, who asked to remain anonymous, described 0x saying, “the best analogy is trying to monetize Linux.”
0x is open source, so it could be forked so developers can sidestep ZRX. 0x hopes that the shared liquidity feature will keep developers in line. It only works with the unforked version, and is now being used by 0x-powered projects, including Radar Relay, ERC dEX, Shark Relay, Bamboo Relay and LedgerDex.
While some centralized exchanges have suffered security troubles and hacks, those with stronger records like Coinbase continue to thrive while banking off high fees. That in turn lets them offer better liquidity and invest more in the user experience, widening the gap versus decentralized apps. “People trust Coinbase with large amounts of capital but they wouldn’t trust themselves,” Kalani admits. But he thinks it’s early in the game, and as users become more knowledgeable and comfortable with holding their own tokens for use on decentralized exchanges, 0x and ZRX will thrive.
There’s also competition within the decentralized exchange space from Kyber’s liquidity network, and AirSwap’s peer-to-peer exchange marketplace. But for any of these to thrive, the mainstream crypto owner will have to get better educated. That could fall to 0x.
One alternative path for the not-for-profit would be selling developer services and consulting to those building on top of it. Or it could always do another ICO. But for now, there are a lot of projects out there that don’t want to foot the upfront cost to build their own secure and compliant exchange from scratch. Kalani concludes, “The way Stripe allowed developers and businesses to build on top of it, and not have to worry about regulatory issues and all the infrastructure necessary to take payments, I think 0x is going to do something similar with exchanges for crypto.”
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The future of Ethereum looks bright
In what amounted to one of the most far-reaching and interesting conversations at TC Sessions in Zug, Ethereum masterminds Vitalik Buterin, Justin Drake, and Karl Floersch spoke openly – and often candidly – about a bright future for Ethereum scaling and, more interestingly, their way to build teams that work.
“There’s definitely changes that we could have made into the protocol,” said Buterin when asked whether or not he would have changed anything if he could start Ethereum again. But, he said, “there are ways in which that the problem is fundamentally hard.” In other words, growth was the only option.
“The demand for using public blockchains is high and we need to up the stability in order the meet that demand,” he said.
Floersch discussed the problems associated with Ethereum in the context of “adversarial networks.”
The network, he said, should “penalize people who don’t provide guarantees” and he felt that the tools available to simulate economic actors – including bad actors – are still weak.
“We come up with ideas, try to formalize them, and implement them,” he said. But, he said, the simulations still aren’t available.
The team expects aspects of Ethereum 2.0 – namely the Casper upgrade and the addition of sharding – to begin rolling out in 2019. After that, said Floersch, Ethereum 3.0 would enable quantum secure systems i.e. systems that can withstand the power of quantum computers.
“We’ll push quantum secure updates before there are commercial quantum computers,” he said.
Ultimately, said Buterin, Ethereum runs because the team is so tightly knit thanks to a clear roadmap. He said Bitcoin has many heads and the gridlock created was dangerous.
“Can they agree? No. You have gridlock,” he said.
“Part of the reason is that the Ethereum community early on [continued] to promote the idea of the Ethereum roadmap,” he said. “I feel that the roadmap is part of the social contract.”
“People who buy into ethereum buy in knowing that these are the things that people are going to want to push it forward. There may be deadlock on what specific path the community should take,” he said. But, he noted the roadmap keeps everyone on the same path. Given the expansive popularity and reach of the technology, it’s a fascinating bit of team-building that should inform other open source and blockchain projects over time.
You can watch the entire panel below:
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Ethereum falls after rumors of a powerful mining chip surface
Rumors of a new ASIC mining rig from Bitmain have driven Ethereum prices well below their one-week high of $585. An ASIC – or Application-specific integrated circuit – in the cryptocurrency world is a chip that designers create for the specific purpose of mining a single currency. Early Bitcoin ASICs, for example, drove adoption up and then, in some eyes, centralized Bitcoin mining in a few hands, thereby thwarting the decentralized ethos of die-hard cryptocurrency fans.
According to a CNBC report, analyst Christopher Rolland visited China where he unearthed rumors of a new ASIC chip dedicated to Ethereum mining.
“During our travels through Asia last week, we confirmed that Bitmain has already developed an ASIC [application-specific integrated circuit] for mining Ethereum, and is readying the supply chain for shipments in 2Q18,” analyst Christopher Rolland wrote in a note to clients Monday. “While Bitmain is likely to be the largest ASIC vendor (currently 70-80% of Bitcoin mining ASICs) and the first to market with this product, we have learned of at least three other companies working on Ethereum ASICs, all at various stages of development.”
Historically users have mined Ethereum using GPUs which, in turn, led to the unavailability of GPUs for gaming and graphics. However, an ASIC would change the mining equation entirely, resulting in a certain amount of centralization as big players – including Bitmain – created higher barrier to entry for casual miners.
“Ethereum is of the most profitable coins available for GPU mining,” said Mikhail Avady, founder of TryMining.com. “It’s going to affect a lot of the market. Without understanding the hash power of these Bitmain machines we can’t tell if it will make GPUs obsolete or not.”
“It can be seen as an attack on the network. It’s a centralization problem,” he said.
Avady points out that there is a constant debate among cryptocurrency aficionados regarding ASICs and their effect on the market. Some are expecting a move to more mineable coins including Monero and ZCash.
“What would be bad is if there was only one Ethereum ASIC manufacturer,” he said. “But with Samsung and a couple other players getting into the game it won’t be bad for long.”
There is also concern over ICO launches and actual utility of Ethereum-based smart contract tokens. “The price of ETH is becoming consolidated as people become more realistic about blockchain technology,” said Sky Guo, CEO of Cypherium. “People are looking for higher quality blockchain projects. I believe a rebound in ETH’s price will come soon as panic surrounding regulations begins to fade.”
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Robinhood rolls out zero-fee crypto trading as it hits 4M users
Coinbase has some serious competition. Today, Robinhood starts rolling out its no-commission cryptocurrency trading feature in California, Massachusetts, Missouri, Montana and New Hampshire. Users there can buy and sell Bitcoin and Ethereum with no extra fees, and everyone can track those and 14 other coins in its sleek app. Read More
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Robinhood adds zero-fee cryptocurrency trading and tracking
No-commission stock trading app Robinhood will let you buy and sell Bitcoin and Ethereum without any added transaction fees starting in February, compared to Coinbase’s 1.5 to 4 percent fees in the US. And as of today Robinhood will let all users track the price, news, and set up alerts on those and 14 other top crypto coins, including Litecoin and Ripple. “We’re planning… Read More
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