Looking back at Blockchain in 2017, and What’s Ahead for 2018

It’s hard to predict or understand how a new technology will be used, even when we’re given a lot of clues. It’s especially difficult to envision how a versatile technology, like the blockchain, will drive new products and services compared to a specific one, like a 3D printer. We take a look at how blockchain and cryptocurrency evolved this year in unexpected ways, and make our predictions for 2018, knowing full well the odds are against us.


Most surprising events of 2017

  1. Bitcoin crosses $1,000, $2,000, $5,000, $10,000, and neared $20,000: Yes bitcoiners were saying this was going to happen for years, but even they were caught by surprise by the suddenness and timing of bitcoin’s massive bull run. Bitcoin crossed $1,000 on the first day of 2017 and kept going, hitting new highs month after month, faster than expected. It surely caught the outside world by surprise and embarrassed naysayers who were calling bitcoin a dead-end for years. Bitcoiners were finally vindicated — their currency that has been ridiculed for years, is at last being taken seriously.
  2. ICOs: While ICOs (initial coin offerings) are nothing new — Ethereum itself launched with an ICO in 2014 — the form they took in 2017 was unexpected. They were no longer only used by new software projects trying to get off the ground, but by established companies, such as Kik or Omise raising funds for the launch of a new product. Also the quantity and size of ICOs, with some crossing $200 million, exceeded anyone’s expectations. 
  3. Bitcoin Cash and Bitcoin Gold: Let’s pause to reflect for a moment that Bitcoin Cash and Bitcoin Gold weren’t even a thought before 2017, and now they have a market cap of $41 billion and $4 billion, respectively. The idea that bitcoin would weather a fork (split) and weather it well caught many off guard. It has now led to the proliferation of other bitcoin forks, such as Bitcoin Silver, Bitcoin Platinum, Bitcoin Diamond, Bitcoin Uranium, Bitcoin Cash Plus, Super Bitcoin and more.
  4. The EEA: It’s amazing to realize that the Enterprise Ethereum Alliance did not exist one year ago, and it now has over 200 member companies including Microsoft, Cisco, Intel, JP Morgan, Santander, UBS and Mastercard. No one would have predicted that last one to be part of an Ethereum focused organization.
  5. Bitcoin Futures: Just this month CME and CBOE both launched bitcoin futures trading. This was undreamt of even 6 months ago. Earlier this year the SEC aggressively denied the application for a Bitcoin ETF, so for the CFTC to approve bitcoin futures shortly after came as a surprise. 

Predictions for 2018

  1. We will see a large social media platform or chat app integrate a blockchain token to reward and incentivize their content creators. We started seeing this in 2017 with the Kik messenger platform launching their own crypto token to create a micro economy within their app, and Steemit — a Reddit-copycat that utilizes its own blockchain and cryptocurrency. 
  2. Users will be able to pay for content on some media platforms using a crypto-token. The Brave web browser with its crypto-token, BAT, is already moving in this direction. The token will be used to reward users for their “attention” to content or ads, and may also be used in the other direction to compensate content producers in lieu of ads. 
  3. We’ll see some large established companies offering a pilot service or product on a public blockchain. We already saw some movement in this direction this year with insurance giant AXA offering flight delay insurance on the Ethereum blockchain. Established companies are very cognizant of how institutions that ignored the internet in the 90s were consumed by web startups, and they don’t want to be similarly blindsided with the arrival of blockchain technology. They recognize it’s either start experimenting with a blockchain, or go the way of blockbuster.
  4. A large financial institution or government will create a digital asset that moves on a publicly viewable ledger. There are already murmurings of central banks (e.g. Russia, Israel) looking at creating a digital currency using a blockchain. 
  5. The hottest job market will be for blockchain professionals, commanding salaries far higher than comparable positions non-blockchain related. It won’t just be for blockchain developers, but for all professionals literate in the technology.

Top 10 — Differences between Bitcoin and Ethereum


Solomon Lederer, Ph.D


1. Currency issuance: Bitcoin creates 12.5 new bitcoins every 10min (or 75/hr) while Ethereum creates 3 new ether every 15 seconds (or 720/hr).

2. Currency cap: Bitcoin is limited to 21 million bitcoins, of which 16.7m have been created so far. Ethereum has no hard cap currently, but there are plans to reduce or stop issuance in a year or two. There are currently 96.4m ethers.

3. Bitcoin creates a new block every 10 minutes (on average). Ethereum creates a new block every 15 seconds.

4. While bitcoin has a scripting language built in, it’s very limited in functionality with only a few dozen operations. Ethereum has a full general-purpose language integrated (known in computer-speak as a Turing-complete). Programs written in this built in language are known as “smart contracts”.

5. Ethereum assigns a cost, known as gas, to every operation or use of storage on the blockchain. Bitcoin transaction costs are based simply on their size.

6. Each block in bitcoin is limited to 1MB in size (or 8BM in the case of Bitcoin Cash). In Ethereum, blocks are capped by the gas-limit, the total overhead of all the operations in the block. In practice bitcoin can process 5 transactions per second, Ethereum roughly 15.

7. Ethereum smart contract code lives at its own address on the blockchain as opposed to being within a transaction as in the case of Bitcoin. Therefore Ethereum has two account types, one to hold user funds, the second to hold computer code.

8. Ethereum includes blocks that are valid but were outpaced by another newly accepted block. These almost-accepted blocks are known as “uncles” and their incorporation provides added security to the chain and allows Ethereum to have shorter block times.

9. Bitcoin’s hashing algorithm (SHA-256) can be performed efficiently with special purpose hardware, known as ASICs (application-specific integrated circuit). The Ethereum hashing algorithm (KECCAK-256) is memory intensive so it’s far more difficult to build an economical special-purpose chip for. This allows for Ethereum to have greater mining decentralization.

10. Ethereum has plans to move away from mining altogether by changing the consensus algorithm from Proof-of-Work (PoW) to Proof-of-Stake (PoS). PoS creates blocks based on the token holdings of the nodes rather than computational power. In addition, Ethereum plans to tackle scalability by implementing “sharding”. Sharding breaks up the blockchain into many many interconnected sub-blockchains. Bitcoin currently has no such plans.



VCs Are Chasing the ICO Gold Rush

gold rush.jpeg

Solomon Lederer, Ph.D


In late 2015, when billionaire Mike Novogratz visited Joe Lubin in Bushwick and offered him $10 million for a piece of his company, ConsenSys, Lubin turned him down. He told Novogratz his company isn’t one organization but a spaghetti plate of different entities working on applications for the Ethereum blockchain. Novogratz, undeterred and wanting a piece of the action, decided to buy ether instead, the native currency of Ethereum. The price was then $0.85. A couple months later it passed $5. Today it’s hovering around $300, and it’s rumored that Novogratz is putting together a $500 million fund to invest in the blockchain space.

Blockchains have created a new means for investing. The standard route of purchasing equity or shares in a company is making way to investing in the cryptographic tokens that are issued on a blockchain. As Novogratz learned, and as venture capital firms are now recognizing, these tokens are an easy way to get exposure to the success of a project or company, without the challenges of normal venture investing.

Just a few years ago, Bitcoin and related enterprises were dismissed, if not ridiculed, by VC firms. There were exceptions of course. In 2013, Andreessen Horowitz and Union Square Ventures invested in Coinbase; Boost VC invested in Bitcoin and payments startups exclusively. But they were few and far between. Today however, the massive gains in the crypto space — 1,000% to 10,000% — is making everyone pay attention. A myriad of venture capital and hedge funds are pouring in and looking for ways to quickly get a slice. Conveniently, blockchains and the crowdsales being launched upon them, called ICOs, or Initial Coin Offerings, are a ready apparatus to accept their money.

Startups create their own crypto tokens on a blockchain, usually Ethereum, and offer them for sale to the public. They make the claim that the tokens are needed in some way to power their application, and while that’s true, in most cases the application could have been designed without the need for such a token. However, their function is almost beside the point. It creates a vehicle for investors to gain access to the success of a company, and the demand is strong. This year ICOs raised over 2 billion dollars, with a large portion coming from VC firms.

Filecoin, a distributed file storage startup, has courted Andreessen Horowitz, Union Square Ventures, Sequoia Capital, and Winklevoss Capital to invest in its ICO, which topped $250 million. The messaging platform Kik recently completed its ICO with investments from Pantera, Blockchain Capital, and Polychain Capital. Again, all these firms were just buying a blockchain token with no equity or rights in the underlying company.

Why would venture capitalists give up equity for something that is created out of thin air? The short answer is because they’re making money, a lot of money. They’re happy to find companies that have a good product and will command a strong price for their token. VC firms can make a play without the long commitment and responsibility of a normal investment. Once they get their tokens, they can sell on exchanges as they please.

Billionaire investor Mark Cuban, who has called bitcoin a bubble just four months ago, has come around to crypto. He’s now backing venture capital fund 1confirmation, which plans to invest $20 million into blockchain startups and ICOs. It addition, Cuban is involved with two other ICOs, one for a chat app called Dust, and an eSports betting site Unikrn, whose ICO is ongoing right now. What he once said about stocks is proving true about crypto:


“Cash is earned by convincing someone to buy your shares from you”


At first it’s hard to understand why these tokens are worth anything, if they’re just “made up”. But value is nearly all perception. Just as going off the gold standard did not hurt the validity or value of paper money, a free flowing digital asset can be valuable, even if it’s not legally tied to the issuing company. If the company grows, the demand and value of the tokens go up.

In reality, crypto tokens have a number of advantages over common stock. While supply and issuance of a stock is murky and can be diluted, a crypto token cannot. Every token is clearly visible and accounted for with a locked issuance, so they cannot be inflated in any way. They also move freely, with zero friction. Finally, they can serve a vital function in their associated application on the blockchain.

For VC firms, the lure of ICOs is stronger than for the public. They get to buy them early, during a pre-ICO phase, at a 20–60% discount, so they’re gaining right out the gate. Startups are eager to offer VC firms such discounts, because they need the early cash to help in launching the ICO. They’re also better positioned to raise money from the public with backing from a brand name VC.

The VC firms get their profits quickly, and startups get cash flow without giving up equity. Everyone wins. And while that keeps up, the venture capitalists and their money will keep on coming.


How to Participate in an ICO in 3 Easy Steps


Sean McKeough


Have you too been hearing all about the latest blockchain company to raise 100+ million USD in an ICO or Initial Coin Offering? These novel fundraising mechanisms have been gaining a lot of attention over the past few months. If you are interested in how you can participate in the next one you deem worthy here’s how.

Step 1 — Obtain Ether

You’ll need some cryptocurrency in order to participate in an ICO or crowdsale because these crowdsales don’t typically accept USD or other fiat currencies. Most are designed to have a smart contract accept peoples contributions and then automatically return to them the new token.

In order to do this you’ll need one of the more popular cryptocurrencies. Most crowdsales these days have been running on top of the Ethereum network and so obtaining some ether is your best bet. Bitcoin and some other alt-coins may be accepted also depending on the ICO but you can’t go wrong with ether.

The safest way to obtain ether is to go through a company like Coinbase. Be sure to sign-up for an account at least a week before the crowdsale so you can be sure that your account will be set-up and you’ll have a chance to purchase the ether and have it ready to go.

Step 2 — Move Your Ether to a User Controlled Wallet

In order to receive the token that the ICO is selling you need to send the money from a wallet where you have control over the private key. If you send ether from your Coinbase account to an ICO address all that will happen is you’ll make Coinbase richer. Nobody wants that.

Instead once you’ve purchased ether or whatever cryptocurrency you’ve chosen from Coinbase move the money to a user controlled wallet like My Ether Wallet or Parity. The Parity wallet actually has a feature where you can set it to make a payment at an exact time which is useful if the ICO you’d like to participate in will be beginning while you are still asleep. With the speed in which these ICOs have been selling out this makes Parity a great option.

Step 3 — Contribute to the ICO

Okay, you’ve obtained your ether, you’ve moved the ether to a user controlled wallet like Parity and you are ready to be a first mover in the hot new token that is about to be launched. The next and final step is to send your cryptocurrency to the ICO address in order to receive the new token.

Now there are scams a plenty going around where people try to give you the wrong address to send your ether to, telling you that this is the ICO address when in reality it is their personal address. There are no chargebacks in cryptocurrency so you must be sure that you are sending your hard earned crypto to the right address. The best way to do this is to check the company website which should have the details posted. Going to the company Slack channel for instance is the wrong way. In many cases people will join a team’s Slack channel and start pretending to be a community manager and give out the incorrect address for the token sale. Although you can never be 100% sure that a companies site has not been hacked, it is your best source.

Once you have the right address to send your cryptocurrency to and the sale has started, go ahead and send that crypto over and you will receive the newly launched token back. Since most of these crowdsale tokens are designed on the ERC-20 standard the wallet you used to send the ether to the ICO should be able to support the new token the ICO sends you back. If for some reason this is not the case, the company issuing the new token should have directions on how to secure your new token on their website. For everyone else, I would suggest moving the new token off of the wallet service you used to participate in the ICO and secure your new token in a cold wallet storage device such as Trezor.