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Is Bitcoin really ‘rat poison squared’?

Credit: Getty

Credit: Getty

May 21, 2018   5 mins

My first good look at the cryptocurrency and blockchain world came when I attended a conference in early 2014. It was a landmark event, one of the largest to have taken place at that point, with about 1,200 attendees at which a teenage programmer named Vitalik Buterin announced his upgrade of Bitcoin called Ethereum (today it is the second most valuable virtual coin in existence). I left, enthralled by the potential of blockchain technology, which effectively creates open-access, secure, and globe-spanning payment and database networks without any central administrator.

How quaint all that seems now. Last week, I attended three back-to-back blockchain conferences in New York, all part of the city’s first official Blockchain Week. The largest of which, Consensus, had over 8,500 attendees; the whole 2014 conference could have fitted comfortably into a corner of the hall where Consensus attendees ate lunch.

The other two – Ethereal and Token Summit – were each big in their own right. And were surrounded by a constellation of at least 25 official and dozens of unofficial events, spread from Queens to the Lower East Side to Columbia University’s campus up north. Blockchain Week seems poised, in other words, to become the South By Southwest of blockchain technology.

The frenetic activity during the week was remarkable for two reasons. First, because it followed the massive slide in the value of essentially every blockchain asset: Bitcoin is currently down more than 50% from its December 2017 peak. Yet there was no sense of anxiety or uncertainty in those packed hallways, or any discussion of the crash, suggesting it was seen as a mere speedbump on a much longer road. (In fact, the currency has since bounced back, gaining $500 over the weekend.)

More profoundly, the size of Blockchain Week is striking because so many prominent investors and technologists still believe blockchain’s rise to be little more than a high-tech tulip mania. Only a few days before it kicked off, Warren Buffet said Bitcoin is “probably rat poison squared”. There’s a grain of truth to those warnings, in the sense that the nascent blockchain industry is full of wild overoptimism, shady projects, and outright scams.

While there remains plenty of hand-wavy theorising, the first real-life applications for blockchain are becoming apparent

But it’s hard to imagine even the most hardened Bitcoin sceptic walking away convinced that there’s nothing of real value there. Ignore the headline-grabbing big names who showed up (though for the record, they included Snoop Dogg, Deepak Chopra, and Twitter CEO Jack Dorsey). Leave aside, for that matter, the size of the events or the passion of the attendees. The event demonstrated that real blockchain tools are being built and put into action, both by blockchain-first upstarts, and, increasingly, by legacy giants.

Of course, there was plenty of absurdity to be found if you were looking for it. A fleet of rented Lamborghinis and a staged “Bankers Against Bitcoin” protest outside of Consensus both gave form to some of the industry’s more childish impulses. And Chopra’s appearance at Ethereal didn’t exactly convey seriousness, particularly when one attendee asked him whether the various layers of the Ethereum protocol could be compared to the chakras of Eastern metaphysics. The question fit into the broader silliness of Ethereal, an event long on sweeping generalities and cyberpunk installation art but short on substance. Appropriately enough, Chopra – who might or might not actually understand anything about blockchain – nimbly dodged the question about Ethereum’s chakras.

But elsewhere plenty of deadly serious work was on display. Lawyers wrangled with rising regulatory scrutiny, and how it could impact future digital economies. At Token Summit a panel of lawyers from powerhouses such as Cooley LLP and Perkins Coie concluded, in essence, that existing securities regulation frameworks couldn’t be squared with the way blockchain tokens will be used in the future – an entirely new, blockchain-focused regulatory body would be needed to square the circle.

On the technology front, while there remains plenty of hand-wavy theorising, the first real-life applications for blockchain are becoming apparent. Digital payments are the main focus – and there is real potential here for the disruption of credit card systems. Dorsey, who in addition to Twitter founded and runs the payments upstart Square, declared at Consensus that the internet “will have a native currency. I don’t know if it will be Bitcoin or not. I hope it will be.”

The creation of a blockchain using coded private keys to prove your digital identity could protect your privacy – and reclaim power from Facebook and Google

But the technology isn’t just about digital money. Several well-funded projects at Consensus showcased their efforts to use blockchains to rent unused computing power for tasks like rendering CGI images. Other startups see the blockchain as a new way to maintain permanent provenance records of real-world objects including fine art.

But perhaps the most intriguing development on display last week was the blockchain-based secure personal identity system. Because a public blockchain isn’t owned or controlled by a single entity, the creation of a blockchain using coded private keys to prove your digital identity could protect your privacy – and reclaim power from Facebook and Google.

Also among the novel applications being dreamed up is one that at first might sound silly. Last December, a digital collecting game called Cryptokitties created a big enough furore to temporarily choke the Ethereum blockchain it runs on. This isn’t merely some strange digital version of Beanie Babies, though – at a Token Summit panel, CryptoKitties creator Dieter Shirley explained that because the code behind the Kitties is public, they can be remixed and reused in other applications. Cryptokitty owners can now race their cats and dress them up, using tools built by third-party teams.

Bear with me. Blockchain games are still very primitive, and it’s tempting to dismiss games in general as trivial. But this has the feel of something radically new. Imagine a gamer being able to take their Wolfenstein character on a detour through a level of Call of Duty, whether or not either game’s creator thought that was a good idea. More broadly, Cryptokitties highlights the most mind-bending aspect of blockchain tech: unlike pieces of code sitting on traditional servers, digital objects on the blockchain are genuinely unique and quite hard to destroy, giving them some of the ontological substance of physical stuff.

I would estimate that attendees were as much as 90% male, compared to around 75% even at Amazon, one of Silicon Valley’s least diverse companies

That sort of conceptual noodling was probably of interest to only a small fraction of the crowd at Blockchain Week. They included day traders looking for their next hot tip, company staff partying hard on their expense accounts, and an array of strivers hoping to get a foothold in the emerging industry. It also included a markedly international cast, from across Europe, India, the Caribbean, and particularly East Asia, with a huge Chinese presence and representatives from no less than two Japanese news outfits.

One grim reality, though, was the scarcity of women. That’s a persistent issue across technology companies, of course. And blockchain does have some notable female leaders, including Lightning Labs CEO Elizabeth Stark, and former JP Morgan crypto analyst Amber Baldet, who made several high-profile appearances across the week. But seeing the crypto community all in one place suggested that the overall imbalance is even worse than in tech more broadly: I would estimate that attendees were as much as 90% male, compared to around 75% even at Amazon, one of Silicon Valley’s least diverse companies.

Of course, that won’t matter much if blockchain turns out to be simply a mass delusion – the wealth it has generated will melt away, leaving unlucky bagholders crying in their soup. That might still happen next year, or the year after that, especially if a broader economic downturn sucks capital out of the ecosystem. But even if Blockchain Week 2018 was partly fueled by a still-overinflated bubble, it did showed that the technology has more potential than its critics seem to grasp – and it’s becoming reality with mind-boggling speed.

David Z. Morris is a writer and researcher who regularly covers business and technology for Fortune. His work has also appeared in The Atlantic, Pacific Standard, Slate, and other outlets. He is a former social scientist with a focus on media, and has served as a research fellow with the Japan Society for the Promotion of Science and the University of South Florida.


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