The highlights seen at the ETHDenver Hackathon held in Denver, CO from 2/15–2/17.

TL;DR

The second ETHDenver hackathon showcased the strength and progress of the Ethereum developer community despite being in a year long bear market. With each event and hackathon, the possibilities of blockchain technology become noticeably real. Experimentation is still a large focus within the Ethereum developer community; however, the increased attention placed on user experience and product/market fit is a necessary step towards achieving greater adoption. Important conversations from the weekend include the rise of Decentralized Finance (or Open Finance) services, an increased attention placed on Ethereum application design for the end user, the evolution of digital securities, and the overwhelming success of the Burner Wallet.

Introduction

The second annual ETHDenver hackathon ran its course a week ago. Over 2,000 Ethereum enthusiasts came to the Mile High City to enjoy an amazing three days filled with ingenuity, learning, late nights, and dancing bufficorns (the natural amalgamation of a buffalo and a unicorn). The excitement from the Ethereum community was palpable and was further stoked by the endless stream of new product announcements and the latest insights from industry influencers. Here are some of the overarching themes that sparked many conversations throughout the event.

DeFi (Decentralized Finance) Movement Remains Strong

DeFi represents a collaborative effort amongst decentralized financial applications built on Ethereum. The mission is to provide users with an ecosystem of new tools to manage and use their Ethereum-based assets outside of third party control.

The recent success of two such projects, MakerDAO and Uniswap, continued to be the hot topic within the Ethereum community. Both projects have seen immense growth in the number of transactions as well as the amount of ETH locked in their respective smart contracts: Maker uses ether to collateralize its stablecoin product, Dai, in order to maintain a 1:1 peg with USD, and Uniswap pools ether to provide liquidity on its decentralized exchange (DEX). Unsurprisingly, a number of hackathon teams sought to leverage some of the existing Maker primitives for their contest entries, including finalists Delphi and SafeCDP.

The other DeFi member to make a splash was Dharma, an open-source series of smart contracts that enables end-to-end management for lending crypto assets on Ethereum. Leading up to the conference, Dharma Labs — the Y Combinator and Polychain Capital backed venture — announced the arrival of its new high-volume, margin lending service, Dharma Lever. Lever will help pool credit liquidity from the original protocol and act as the underwriting service for each loan. Additional features include a portfolio manager to evaluate performance and manage compliance responsibilities, as well as compatibility with any crypto wallet, which streamlines the sign-up process and increases the total serviceable market.

Dapp UX and Design Sees Increased Attention

It is well-known daily active users (DAUs) on dapps pale in comparison to those exhibited by traditional web and mobile applications. Low user numbers can be attributed to a lack of product/market fit and the dizzying collapse of cryptocurrency prices. But the biggest hurdle to adoption, according to the UX & Usability panel featuring Taylor Monahan of MyCrypto and other product design experts, is the cumbersome process of onboarding users.

In order to even think of using an Ethereum dapp, users must run through the steps of purchasing ether through an exchange such as Poloniex or Coinbase, creating a Metamask wallet, and successfully sending the acquired ether to the newly established Metamask wallet. This task alone represents a high technical learning curve filled with tedious transfer fees, delayed transaction times, and unfamiliar practices, such as managing private keys. Moreover, the lack of a recovery mechanism when transferring tokens outside of a custodial service like Poloniex or Coinbase is often unsettling.

A potential solution, as proposed by the panel, would be to offer gradual onboarding solutions, giving users the opportunity to choose their level of blockchain exposure based on experience or confidence. For instance, lower exposure levels could only run on testnets, so mishandled tokens would not result in the loss of actual money. Ultimately, onboarding new users is still an education intensive process that is going to require a better balance between more relatable (less jargon-filled) messaging and hands-on learning experience.

Two projects at ETHDenver looking to reduce friction and bring familiarity to creating a crypto wallet include POA’s Burner Wallet (mentioned in detail below) and Fortmatic, whose CEO was also on the aforementioned panel.

The STO Narrative Gets Refined

Security Token Offerings (STOs) were the theme of nearly every conference last Spring. The regulatory concerns surrounding Initial Coin Offerings (ICOs) and the free fall in utility token prices led most blockchain projects to believe security tokens were the next evolution in fundraising vehicles. Despite the overwhelming enthusiasm from entrepreneurs, the market lacked the infrastructure and sufficient liquidity for investors to feel safe with their money and realize gains.

The narrative surrounding STOs at ETHDenver last weekend was not only more subdued, but also attempted to uncover the true value behind tokenizing securities. Ryan Selkis of Messari moderated a panel on digital securities featuring some of the top investment companies in the space, including SPiCE VC managing partner Tal Elyashiv. The group talked about how real estate and public equity are ripe for tokenization, and how STOs, a non-dilutive form of fundraising, may be a great option for growth stage companies, but not a Series A, or earlier, funding round. Tal also shared that the infrastructure (both technical and regulatory) is about 1–1.5 years away from being ready for institutional entrants. To top it off, Tal mentioned the SEC will likely change its regulatory stance on retail investors purchasing STOs since smart contracts can be programmed to contain and enforce compliance standards.

Onboarding and Transacting Made Easy with the Burner Wallet

Sifting through the wide array of product launches and demos, the one experience that stood above the rest was the Burner Wallet and buffiDai, the digital currency that drove the conference economy.

Austin Griffith, Director of Research at Gitcoin, unveiled the Burner Wallet earlier this year in direct response to the need for simpler Ethereum onboarding services. Austin’s creation enables users to send or receive cryptocurrency without having to work through the tedious process of downloading a wallet app and managing the associated seed phrase. Burner wallets are automatically generated by either heading to xdai.io or scanning an Ethereum private key in the form of a QR code. The private key itself is stored in a cookie so users can easily access their web-based wallet at any time. It is a compromise on security in favor of ease of use, but can be an effective means of storing and moving around small amounts of money.

This new wallet runs on the xDai Chain, an Ethereum compatible sidechain built by the POA Network in collaboration with MakerDAO. This sidechain features Dai (called xDai) as its native currency to pay for transaction fees and access to the POA Bridge tool, which facilitates the exchange between xDai and mainnet DAI or ETH. Thanks to POA’s technology, the xDai Chain supports faster block generation times, more transactions per second, and lower transaction fees compared to the Ethereum mainnet.

Austin and his Burner Wallet associates teamed up with ETHDevner organizers to create a custom wallet and digital currency just for the hackathon. Upon arrival, attendees were given a SolidCoin with a QR code on the back. Scanning the QR generated a web-based wallet filled with buffiDai, which is pegged 1:1 to Dai and, as a result, USD. Users were then free to spend their buffiDai with various vendors throughout the event, including all 11 food trucks present. On the other side, vendors were able to securely cash out earned buffiDai into their bank accounts by initiating a transfer through Wyre, a crypto-to-fiat exchange service, at the end of each day.

To call the buffidai experiment a success is an understatement. From the food trucks alone, 4,405 meals were sold for a total of $38,432.56, and the cost to process all of these transactions was only $0.20. Moreover, the conversation surrounding improved onboarding experience is not only gaining traction, but is also becoming more focused thanks to the unanimous appeal of the ETHDenver Burner Wallet.

Final Thoughts

With each event and hackathon, the possibilities of blockchain technology become noticeably real. Experimentation is still a large focus within the Ethereum developer community; however, the increased attention placed on user experience and product/market fit is a necessary step towards achieving greater adoption.

As a final note, ETHGlobal, the Ethereum Foundation organization that helps coordinate the ETH sponsored hackathons, announced four more hackathons for 2019: ETHNewYork, ETHBoston, ETHIndia II, and ETHWaterloo.