Continuing the theme of consumer education, Pat Berarducci and Aaron Wright (OpenLaw) introduced the Brooklyn Project and announced its draft Framework for Consumer Tokens. The Brooklyn Project is an exciting initiative that seeks to create a taxonomy of tokens (i.e. payment/currency tokens, consumer tokens, and investment tokens) that should each be regulated appropriately. Moreover, the Brooklyn Project’s Framework for Consumer Tokens attempts to set a standard in consumer protection and transparency and is planning on designing tools to enforce compliance with the framework. The best part about this space is that decentralized projects are inherently cooperative: the Brooklyn Project stated that it intends to use the Token Curated Registry cryptoeconomic primitive to whitelist projects that comply with its framework.

Tokenization of Historically Illiquid Assets

Lee Schneider of Genesis Blockchain moderated a panel of representatives from projects that are working on tokenizing traditional financial securities as registered Broker-Dealers with alternative trading systems (ATS): (Templum, Satis Group). Also on the panel was Samantha Radocchia from Chronicled rocking a killer tee (“Satoshi is Female”) who is working on leveraging the blockchain to power smart supply-chain solutions. This panel was bullish on the tokenization of historically illiquid assets like gold, fine art, and real estate: imagine if you could own a liquid share of a Picasso painting!

Will tokenization of the real world lead to a reemergence of the barter economy?

A core feature of decentralized ledgers is immutability, but this is also potentially problematic. Privacy becomes an issue when identity can be stored on-chain. Is there a liquidity to my identity? (note: Scary thoughts about implications for slavery). What if I don’t want my age to be public knowledge, but I need to prove that I am at least X-years old to order a drink? (Zero-knowledge proofs might be a potential solution here).

Sobering takeaway: if you break security law, then you go to jail. We must take regulation seriously.

The Birth of Fluidity

Finally, Don Mosites of AirSwap answered why we had all been gathered in one location: the introduction of Fluidity. Fluidity will be a full stack digital investment bank that will handle the sourcing/origination, structuring, launching/selling, and secondary market trading of digital assets. Each stage will be led by a specific team:

Sourcing: Dixon Advisory (a NY-based real estate investment trust)

Structuring: Genesis Block (a blockchain consultancy and advisory firm)

Launching: Token Foundry (a ConsenSys mesh team focused on issuance of legitimate consumer tokens)

Trading: AirSwap (the star of the show: a P2P decentralized exchange)

Since AirSwap is a P2P DEX, it needs developers to build relayer solutions on top of it. Accordingly, it announced a trading API and widget API for AirSwap developers (along with a telegram group: t.me/airswapdevs).

AirSwap: calling all developers!

A bet on AirSwap implicitly acknowledges that commerce is fundamental to the social scalability of communities, societies and economies. We are on the very front edge of a transformation where every asset can be represented digitally — just as information is that is organized by Google and people are represented digitally in a network by Facebook. When all assets are ‘digital and connected’ by a commerce layer there will be a lot of value creation and Airswap has the right team and approach to help define the category.

Debate Time: Lubin versus Roubini

The capstone event of the night was a riveting and intellectually stimulating debate between Joe Lubin (co-founder of Ethereum and CEO of ConsenSys) and Nouriel Roubini (macro economist who famously predicted the housing bubble crash of 2007–2008 and prominent critic of cryptocurrencies). The debate was energetic, relatively cordial, and Roubini raised many legitimate counter-points to an audience full of crypto-enthusiasts.

“ Great being here today where everyone, like me, is a crypto-skeptic” — Roubini

(3:09) Lubin versus Roubini

Roubini admitted that a significant disruption to the financial system is coming, but that machine learning, data science, and IOT will revolutionize payments, insurance and asset management. Therefore, his hypothesis was that cryptocurrencies and blockchain technologies are NOT necessary to this revolution.

The heart of the debate centered around whether decentralization is needed to revolutionize finance. Lubin argued that the Blockchain is a next generation database technology that can coordinate the actions of self-interested economic actors without relying on a centralized authority. Blockchain technologies will therefore enable self-sovereign identity and money, problems unaddressed by today’s “broken” internet, that Lubin argues must be features of a financial revolution.

Roubini questioned the core tenet of decentralization, pointing out that centralization of risk has organically arisen in mining, exchanges, developers, and cryptocurrency wealth. Lubin conceded that total decentralization is an exaggeration, but that a transition to a Proof of Stake consensus mechanism will remedy the hash power centralization we see today. Moreover, mining centralization is not necessarily a bug: a modest centralization of miners enhances network security by increasing the overall hashrate for the network, making external attacks more expensive. As a last resort, network developers can change the POW hash function to essentially nullify the most efficient ASIC miners.

Lubin observed that Proof of Stake lowers the barrier of entry for miners, and the ability to fork an open-source network is ultimately available. Regarding centralized exchanges, Lubin added that decentralized exchanges (the raison d’être for this conference!) will eventually dominate market share.

Next, Roubini argued that no cryptocurrency is a reliable unit of account, medium of exchange, or store of value. While these points are currently true, Bitcoin has the potential to develop into the greatest sound money technology in history because it is verifiable, durable, and fungible, more portable and divisible than gold, and more scarce and censorship-resistant than fiat. Bitcoin’s most important feature is that its value cannot be invisibly eroded by inflating its supply, a temptation for any store of value. By design, if you own 1% of the BTC network today then you will own 1% of the network twenty years from now. Moreover, the longer that a Bitcoin is perceived to have value, the more likely that it will have value in the future. As Bitcoin engenders faith in its ability to store value, it will be more eagerly accepted as a medium of exchange. For this to happen, its opportunity cost to use as a medium of exchange will admittedly have to stabilize — and this might take some time as Bitcoin’s increasing purchasing power is key to its store of value quality. In the meantime, it is possible that another cryptocurrency designed for price stability will function as a medium of exchange. Further reading on the theory of cryptocurrency as an innovation in sound money here and here (Quote from The Bitcoin Standard by Saifedean Ammous in tweet)

Roubini asked when Proof of Stake is coming (answer: soon), critiqued scalability (layer 2 solutions are also coming and will enhance Medium of Exchange viability), and claimed that most ICO’s are thinly-veiled fundraising scams (fair point, and efforts like Token Foundry are attempting to whitelist proper consumer token ecosystems). Most importantly, he argued that the effort to “tokenize everything” will re-vitalize the inefficient “stone age of barter”. This is a legitimate concern that web 3.0 projects will inevitably have to confront. I appreciate Roubini for having the courage to call out some of the hypocrisies in our space, and I actually wish that Lubin had responded more transparently with what could go wrong with the blockchain-powered revolution.

Concluding Thoughts and Swag

Fluidity attendees were given free wallets, which raised humorous confusion because everyone got excited to receive free Ledgers, and AirSwap tees: