The Good, the Bad and the Ugly of Consensus 2017

CoinDesk’s Consensus 2017, the blockchain and decentralized app conference of the year, is officially in the books.

It’s by far the biggest conference in the fledgling blockchain industry but it’s still tiny by tech industry standards. Mega-conferences like the Salesforce Dreamforce Summit, which pulled in 171,000 attendees and another 15 million online, dwarf it by comparison.

But the intimate nature of Consensus brings lots of advantages.

It means you’re likely to run into the CEO or lead programmer of any given company instead of the low-man-on-the-totem-pole flunky they send to hand out t-shirts at bigger industry events. It’s super easy to walk right up to a major investor or blockchain thought-leader and strike up a conversation.

As with any tech conference there’s lots of noise.

Flashy projects dominate, as do ones that copy already well understood ideas.

It’s much simpler to sell an idea to people looking to cash in on the crypto gold rush if they already have a mental framework for the concept. New ideas are harder to pitch because you’ve got a lot of explaining to do just to level set.

It’s easy for projects delivering real technological innovation to slip through the cracks.

The good news is there’s lots of innovation to be found if you know where to look.

The Good and The Bad

Let’s face it, Blockchain is still at the infrastructure development stage.

Consensus was jam packed with people hawking infrastructure. It’s as if they’re selling the Internet before Netscape. “Hey, buy some TCP/IP and some HTTPS. Get your DNS right here!” In the real world nobody gives a crap about infrastructure. It’s plumbing to them. What the world needs is a killer app, but we’re not there yet.

We haven’t hit our Netscape moment. Some folks will tell you Bitcoin is that moment, but it’s not. The Block.One CFO really nailed the reason why:

“We want to enable…decentralized applications that are indistinguishable…from the centralized alternatives.”

In other words, until apps look like any other app in the App store, nobody in the real world cares.

Few people seem to get that yet. The Block.One people, with founders who came from the BitShares and Steemit platforms, get it. It’s also a key focus for us at the Cicada project and Fermat’s Internet of People. Think of it like hybrid cars before the Prius. Up until then hybrid cars looked ugly as hell. They had weird looking frames and covers over the back wheels. Nobody wanted them. But as soon as they started making vehicles that looked like regular cars sales took off. The average person doesn’t care about the cause. They don’t care about privacy or security as John Oliver’s infamous “dick pics” interview with Snowden proved. It’s sad, but true. But if we deliver killer apps, they’ll adopt them in droves and the industry will take off.

The Block.One EOS team also hit on another point that’s killing early projects:

Nobody in the real world will pay microtransactions for everything. It’s insane. They said it best in their talk: “Imagine if you went to Amazon and it costs three cents to load the page. Nobody would do it.”

Exactly.

We need a free tier of transactions in the DecNets of the future. Microtransactions are awesome for things that have actual value. I’ve written and talked about this concept extensively, so it’s awesome to hear others who finally get it!

Speaking of the “decentralized Internet”, which is officially a mainstream term now that it’s the subject of this season’s Silicon Valley, and BlockStack came out of stealth mode with a super-secret decentralized Internet project they’ve been working on for three years. This term is poised to become so overused that it makes eyes roll in the coming years, which is a real shame, because it’s probably the right term.

I read the BlockStack paper with relish. It’s essential to read widely in this field if you want to make an impact in the early days.

The fact is no project will come up with all the ideas to build the internet of tomorrow so I eat up everything that comes out.

There’s zero doubt in my mind that the DecNet will end up as a mashup of multiple projects’ ideas, each of who end up delivering unique pieces of this complicated puzzle. Nobody can think of everything.

The best part of the BlockStack system is storage. It uses any cloud or distributed storage as a dumb backend. It simply encrypts a bunch of files and dumps it into EC2 or Google Compute as a giant blob that the cloud companies can’t decrypt. That’s a brilliant and much needed idea. It returns control of data to users and companies, hides it from the prying eyes of spies and hackers and utilizes robust infrastructure that’s already in place.

Other projects that caught my eye on the infrastructure front were Tezos, QTUM and EOS. EOS sports super high performance, on the level of Visa scale transactions, a la Ripple, free transactions and it has industry heavy hitters behind it.

QTUM sports fantastic branding, a sleek corporate website, and they managed to rack up 11,000 bitcoins in their ICO. That’s a lot of money, 15 million USD at the time, and upwards of 30 million with the continual rocketing rise of Bitcoin (hovering at $2300+ at the time of writing after a huge consortium of Bitcoin power players promised to support SegWit and a 2MB hard fork within six months).

It didn’t hurt that QTUM focused on building bridges between the two largest blockchain communities, Ethereum and Bitcoin. Their pitch is “we support the Ethereum Virtual Machine on the Bitcoin blockchain.” That tag line brought the bitcoins pouring into their hot wallets, shattering previous ICO records. In fact, if you’re looking to raise an eye-popping amount of cash for your project, it doesn’t hurt to fork any of the major projects and bridge them together with a bunch of glue code.

But their project is not all hype.

At the conference they announced a new whitepaper (that I got a sneak peak at ahead of time and that should release soon) as well as code for a governance system to fix the problems that led to the need for a Bitcoin scaling agreement in the first place. The system uses Proof of Stake and allows people to vote on changes which it enforces in the code with smart contracts and a kind of decentralized business rules system. It even has the ability to auto-generate votes so that when the 2MB block they started out with gets saturated it will call a vote to go to 3 or 4MB. That’s awesome.

Tezos is one of those projects that everyone knows about because it has big money behind it. I actually had one conference goer tell me “everyone hates Tezos because it was started by a snooty French mathematician.” Personally, I can’t stand that kind of thinking. I judge each project atomically on its merits. It lives or dies by its ideas for me.

On the down side, they failed to ICO on May 22nd because of a legal snafu. That worked for me though because I was stuck at Consensus and would have missed it anyway. It’s pushed back to June.

This write up of the current state of their code and ideas is a terrific must-read. They’re thinking about things that people are missing right now, like serious security for Proof of Stake. When I was working with the team to design the Cicada Decentralized App Platform concept in the early days of 2015, I hit upon many of the ideas that have come to pass with the modern Proof of Stake 3.0 systems powering coins like PIVX and a myriad of other alt-coins. I didn’t have the proper words for them like signer and witness, but the ideas were very close to what we are seeing in live code today. I ended up disregarding PoS because of the high probability of collusion and because it’s overly complex. I now feel the threats are mitigate-able but I’m worried that too many people have rushed to PoS with understanding the threats.

Tezos gets it.

That’s why they build an “attacker node” that acts like Netflix’s “Chaos Monkey” to constantly try to trick the network, making it stronger. This is an idea that’s taken off in AI as well, called Generative Adversarial Networks. Other projects will rapidly adopt these concepts and that’s a good thing.

Identity Without Authority

The conference also featured some big news on identity. Identity is foundational to the nets of tomorrow.

We need an ID that uniquely identifies everyone and yet paradoxically provides absolute privacy when necessary.

I’ve written a lot on this topic, so it’s one that’s near and dear to my heart. It’s the foundation of the Cicada project. It allows for a novel proof of work that limits everyone to a single miner and drafts them into random pools to secure the network.

Lots of other folks are now working this idea and they’ve united under the Decentralized Identity Foundation. I’m ecstatic to see this come to pass. It brings some serious players to the table and we’re exploring joining the foundation.

Of course, one man’s “decentralized” is another man’s “centralized.” I’ve looked at some of the ideas behind the members of the DIF and a few of them have me very concerned that they don’t really deliver a robust decentralized ecosystem, just a centralized system in sheep’s clothing.

More on that later.

But this is still very early days, so at this point they get the benefit of the doubt and we’ll see what develops.

I think this foundation can do a lot of good in the world because at least 1.5 billion people can’t get an ID. It’s a catch-22. You need an ID to get an ID. In other words you need a piece of paper that says you exist to get another piece of paper that says you exist. That’s literally insane.

The DIF has the opportunity to change all that but they need to be very, very careful that they don’t build a digital tracking system that gives totalitarian regimes the ability to hunt down and discover every single thing their many “enemies of the people” are doing. It’s a tempting for people in power to want to add centralized backdoors and choke points to everything, but when it comes to ID that’s a humanitarian disaster waiting to happen.

Do this wrong and we just built a system to enslave mankind.

Coins, Coins, Everywhere

On to the bit everyone cares about:

What coin will make me the most mulah!?!?

I have no idea. Good luck picking the winners. I have no special insight there.

What I do know is that it seems every single project needs to have a coin these days. This is absurd and needs to stop.

Even projects building a niche part of the Internet of the future are launching their own coins. These coins are useless and won’t generate a cent of value down the line. The industry needs a better way to fund these smaller projects like a decentralized Kickstarter.

For now though, coins are king. ICO fever gripped the conference, as Bitcoin continued to blow gold out of the water. A few other coins generated tremendous bursts, in particular ZCash which doubled from $100 to $200 overnight after JP Morgan announced they’re incorporating the ZCash privacy features into their enterprise blockchain.

I love Zcash but looking under the hood of this announcement tells me that this is not all it’s cracked up to be. I’m highly suspicious of JP Morgan’s motivations here. It seems to me that they and the other banks are already secretly building their own coins.

That is the exact opposite of what we need.

The cryptocoin industry represents an opportunity to break away from banks, or create decentralized banks, but if the banks develop this technology and beat other decentralized coins to building a sound economy around them, then we’re right back where we started, with banks as centralized choke points controlling everything.

Even worse, the Zcash protocol can dial security up or down. It’s like a slider. That means Zcash itself is fine but anything developed by banks will likely include backdoors for spies and regulators. Some will argue this is good because we need regulators but I think it’s a trojan horse to allow the equivalent of web hooks for the spy agencies of the world to track all transactions.

We don’t need a software version of the clipper chip for cash.

Overall, while I expect to see coins continue to proliferate, I’m not sure we need that many more unless they deliver real value.

I see coins as a baked technology.

We have coins to simulate every type of real currency in the world, from gold simulators like Bitcoin, to fast moving anonymous cash simulator currencies like PIVX, ZCash and DASH to everything in between.

What we need now is the digital economy to spend them in.

The Ugly

One thing at the conference had me burning with rage:

Patents.

Companies are trying to snap up patents on ideas that will underpin the basic functionality of the next-gen Internet. Imagine if the founders of the Internet patented TCP/IP and DNS before the net ever got off the ground?

That’s what’s happening right now.

In particular, one of the companies in the Decentralized Identity Foundation seems to have taken the patent everything approach. That company is Civic. Initially I was super excited to meet them when I picked up their flier. I spent about fifteen minutes talking to their team and I came away slightly horrified.

They’re looking to patent an utterly obvious idea that I wrote about and GPLed in Nov of 2016, which is flagging a compromised ID on the blockchain as dead. I wrote that the system could re-enroll a person who’s ID was stolen or compromised or lost and “flag any bit that labels previous biometric data as obsolete/defunct.”

Also, there’s this:

“We must prevent against Identity theft. The simplest way is with a legal system that allows a person to show up at a court and scan their iris and to verify their ownership of a HUID (human unique identifier) in the case of a dispute. If not, the ownership is transferred back to the correct owner through a flag...”

To me, patenting that is the equivalent of patenting SSL.

It’s so clearly necessary as a basic concept to decentralized identity that nobody should try to get exclusive rights to it or they risk destroying the ability to create any system that actually works without paying them a royalty which means the DecNet is screwed.

To be clear, I don’t know their intentions. They could be absolutely altruistic. They could simply be trying to get defensive patents that they would donate to a GPL licensed trust in the DIF but I don’t think that’s their goal. I will follow up to clarify with them.

But make no mistake, patents are the enemy of the next-gen of the net. The infrastructure has to be open source, patent free and agnostic. It’s as simple as that. Sadly I’m not sure we live in that world anymore. The Internet was created in a simpler time.

I’m not against patents in general. They’re absolutely necessary for people who create ideas that matter but in this case I see them as a highly destructive whirlwind gathering out to sea that can obliterate any number of projects in the works.

Worst of all, I talked to a number of folks out there piling up patents.

That breaks my heart because it could wind up absolutely killing this industry before it ever gets off the ground.

Imagine if every open source project starts getting a knock on their door asking for money every time someone conducts a transaction on the blockchain or connects a phone peer to peer?

Again that’s not a world any of us should want to see come to pass.

Conclusion

Consensus 2017 delivered a lot of innovation and a lot of noise. Sifting the two requires patience and an open mind. I have no doubt that I missed countless gold nugget technologies at the conference. There’s just too much to see and do for any one person.

If you spotted a killer technology in the crowd, post about it in the comments. Please try to keep it civil though. You never know which project is going to break out and deliver the system that we so desperately need even if it’s in an imperfect state now.

These are still early days. Coins are baked but the economy to spend them in is still developing and it will take years to come to fruition.

A lawyer from Australia who specializes in blockchain law said it best:

“I want to see something that’s done and working, not a prototype.”

I get it.

We’re just not there yet.

That’s because nobody has fully developed a working, production ready version of the decentralized Internet. There are lots of contenders but nobody ready to take the title and get their names enshrined forever in the hallowed pages of Wikipedia as the founders of Internet 2.0.

But that day is coming soon.

And maybe, just maybe, someone at that conference is already working on it.

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A bit about me: I’m an author, engineer and serial entrepreneur. During the last two decades, I’ve covered a broad range of tech from Linux to virtualization and containers.

You can check out my latest novel, an epic Chinese sci-fi civil war saga where China throws off the chains of communism and becomes the world’s first direct democracy, running a highly advanced, artificially intelligent decentralized app platform with no leaders.

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