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Skeptical of ICOs? Investor Vinny Lingham Can Change Your Mind With a Marker

Up against a white board, Vinny Lingham makes a convincing case for initial coin offerings (ICOs).
Darting and drawing various charts and lines, Lingham positions the nascent concept – through which entrepreneurs sell blockchain-linked data that will form an underlying part of an in-development distributed service – as one that will change the world.
Lingham argues that ICOs, while today criticized for their relative newness and lack of legal framework, have given entrepreneurs the ability to solve a key problem. Namely, how to fund an idea before the point at which outside capital could acquire new users that enable the company to develop toward a successful exit.
"This is the problem we're solving. There's a gap between network value and user value," he explained. "VCs don't want to fund the gap between the incremental cost of the user and the break-even point."
It's perhaps this enthusiasm that is leading Lingham to offer a token that will enable users to buy into the network effect he wants to create with his blockchain identity startup Civic, founded in 2016 as a way to tackle problems relating to identity theft, but that has since expanded into online verification.
Lingham explained that in order to grow, Civic will need to turn its service – which enables users to prove personal information to websites – into a kind of marketplace where consumers and businesses are able to exchange and monetize this kind of data.
Lingham is now working with partners to launch the crowdsale, scheduled for the first week of June. Currently, he's engaging in pre-sales with minimum limits for big buyers. Though the mechanisms of the token sale are still being finalized, users will buy an ethereum token that will serve as a "pre-token" to be exchanged for another token, based on the bitcoin blockchain, later on.
Why go through this process? Lingham is articulate on the value proposition, arguing Civic is using the cryptographic tokens to empower early adopters to evangelize for the network.
"We're solving a distribution problem," he said. "We're extracting the creation of a powerful network from the company's equity structure."

The marketplace

There's also the unique nature of blockchain networks.
In interview, Lingham argued that he'd have to raise far more should he want to capitalize his network via traditional VC funding. (The platform raised $2.75m last year at launch, but he estimates the new plan would cost $60m to implement given customer acquisition costs.)
Over time, he projects that the increase in value derived from launching a successful token could become a "war chest" that powers user acquisition. Distributed ledger startup Ripple, for example, holds billions in its native cryptocurrency, XRP, and plans to sell these tokens selectively over time to promote its growth.
For Lingham, capital is crucial as he wants to enroll banks and consumers into a new kind of identity marketplace, one where users could demand value for their data from companies, and companies in turn could gain an additional revenue stream by selling the verification of the data that they've acquired in such exchanges.
Potentially, he envisions how such a system could enable banks to make KYC systems a monetizable asset, while keeping the ownership of data in the hands of users.
"Let's say Bank of America, Wells Fargo and Chase, they all know you. And you go to open up an account at Robin Hood, and Robin Hood says, based on your ID, it looks like there's four providers you trust. It could become a bidding system," he said.

International reach

As for why such a system would need a token, Lingham credited traditional problems with value exchange over the internet as yet another supporting factor.
Given that the online marketplace involves an array of countries, many with their own national currencies, he foresees needing tokens to facilitate the types of quick exchanges and verifications users and websites would want.
"If you give us your profile, we'll give you tokens," he said. "Users can sell their data anywhere. We're taking a market that exists, and we're saying here's a marketplace, we drop the costs for everyone."
Rather than a "fly-by-night" operation, Lingham painted Civic's ICO as one of the first that open up a network created by an entrepreneur with a successful exit – Lingham sold his mobile gift card startup Gyft to First Data in 2014 – to the wider market.
Still, Lingham said he's not without doubts about the process. "I still challenge people on why they are doing an ICO. For us, we're solving a distribution problem," he said.
As users benefit from low-cost participation in the data exchange market should they buy in early, Lingham hopes tokens could help the network scale to bitcoin-type levels.

Bitcoin Price Rebounds to Near $2,640 Following Yesterday's Losses

The price of bitcoin has rebounded after a notable fall yesterday that saw the digital currency lose over $400 to a low of around $2,352.
Today's resurgence sees the price back up at $2,626 at the time of reporting, having hit a high of almost $2,640 at 8:57 UTC, CoinDesk Bitcoin Price Index data shows.
Most major cryptocurrencies have been on an upwards trajectory in recent months, with bitcoin hitting new all-time highs in quick succession. On 25th May, bitcoin reached a record value of almost $2,790 prior to the drop yesterday, when some other cryptocurrencies also saw notable losses.
Notably, the total market cap of all cryptocurrencies reached an all-time high just over a week ago, with some experts polled by CoinDesk raising fears of a bubble that could ultimately see sharp corrections. Others though pointed to a growing awareness of cryptocurrencies among traditional investors for the ongoing rises.

Blockchain Entrepreneurs Target Apple and Google at Token Summit

An inaugural conference focused on new use cases for cryptographic assets showcased today how blockchain-based applications that serve actual needs may be on the horizon.
But not everyone at Token Summit agreed on the market's direction. As panel after panel of entrepreneurs took the stage in New York, some in the audience remained skeptical – while even the panelists themselves expressed a note of caution.
To kick off the event, hosted at the NYU Stern School of Business, one of the earliest innovators in the crypto-space, Erik Voorhees – who sold his first bitcoin company, Satoshi Dice, in 2013 – revealed more details about digital currency exchange ShapeShift's new product, Prism.
Addressing the critics who say the cryptocurrency boom is little more than speculation, Voorhees positioned the work as part of the foundation for the next Facebook and Google.
Voorhees said:
"The real use cases will come in the future, but if this technology is going to make an impact, there should be speculation today."
Following Voorhees' address a number of panels continued with the theme of building real-world applications based on blockchain technology.

To build a real blockchain app

Speaking at the event, Brian Armstrong, co-founder of Coinbase, doubled-down on a years-old theory: that the developing economy would be the first to adopt these distributed applications.
His comments came after Coinbase demoed an ethereum-based messaging app, dubbed Token, at CoinDesk’s Consensus 2017 event earlier this week. It's a messaging app built with cryptocurrency tech under the hood – but perhaps more importantly, it also includes an interface that Armstrong described as the "equivalent of HTML", but for ethereum rather than the Web.
According to Armstrong, the developing world – and its estimated 2.5 billion underbanked individuals – is the primary target market for the app.
"The main value of cryptocurrencies is bringing financial services to the developing world," said Armstrong. “That’s what we’re going to do with Token."
Muneeb Ali, co-founder of Blockstack, which launched its decentralized browser this week, said his startup was seeking a similar goal: facilitating the development of new kinds of apps. To help get there, Ali announced that his company had offered a bounty to anyone who could find a bug between his application and decentralized storage providers IPFS, Sia and Storj.
Storj founder Shawn Wilkinson downplayed the potential competition between the projects, instead positioning their work from an enemy-of-my-enemy perspective.
"We're all ideologically aligned to crush Amazon and other centralized services," said Wilkinson.

Slow progress

If the event showcased one thing, it's that there's little doubt that the road ahead with be characterized by slow and likely difficult progress.
Bitcoin-powered browser Brave has had it's service live for months, and in six days will launch its initial coin offering for the Basic Attention Token (BAT).
Brave advisor Ankur Nandwani took the stage to explain how the browser startup, which has already raised $4.5m in venture capital, will leverage the token in an attempt to change user behavior.
Out of 1.5bn tokens that will be minted, 300m will be set aside in a "development pool" to incentivize content publishers and users alike to download the app, which blocks third-party advertisements.
"Once you have users on the platform, advertisers will come," said Nandwani.
Another possible explanation, though, for the slow growth of the technology and adoption came from audience member and blockchain consultant Tone Vays, an outspoken critic of many decentralized applications.
Speaking to CoinDesk during a pause in activity on the stage, Vays said:
"It's not about the application. None of these applications need decentralization. They are just using the hype of bitcoin’s technology to blow their valuations out of proportion."

Blockchain honeymoon

Indeed, Maker software engineer Andy Milenius cautioned the crowd of investors, entrepreneurs and students about the potentially painful process that young crypto-investors will likely go through on their way to learning how to properly conduct due diligence on their investments.
"They're going to learn, probably the hard way, what makes a good idea worth investing in," said Milenius.
Citing the vast separation between what companies like Apple and Dropbox can provide and what their decentralized counterparts can offer, Blockstack founder Muneeb Ali went even a step further, predicting a period of large-scale failures by ICO-backed companies before any kind of decentralized Web becomes a reality.

Bitcoin's Price Tumbles More Than $400 From New High

Bitcoin prices fell sharply today after setting a new all-time high above $2,700 on the CoinDesk Bitcoin Price Index (BPI).
The BPI hit a high of $2,791.70 today, data shows. Yet after beginning to dip around 15:00 UTC, that move became more pronounced after 16:00 UTC, including a more than $100 drop between 16:36 UTC and 16:54 UTC, BPI data shows, sliding from roughly $2,630 to $2,515, with a further drop below $2,400 over the next hour.
Markets hit a low of about $2,352, BPI data shows. At press time, the price of bitcoin is at an average of $2,397.
The volatility comes amid a boom in cryptocurrency markets, which have seen bitcoin and others hit new all-time highs in recent days.

Bitcoin's New Scaling 'Agreement': The Reaction

A meeting of bitcoin startup executives and miners held this weekend has resulted in the publication of a new proposal for how the open-source project should be upgraded to support additional transaction capacity.
Detailed in Medium post published by investment firm Digital Currency Group today, the proposal was billed as an agreement that would make two changes toward this stated goal. The proposal was signed by more than 50 companies, and claims to have support from 83% of the network's miners – businesses that operate computers that secure the blockchain and add new transactions to it.
First, it lowered the barrier for the activation of Segregated Witness, the long-stalled proposal put forward by Bitcoin Core developers in December 2015, to 80% of the network's mining power. Second, it stated that the undersigned businesses would agree to activate software that would upgrade bitcoin's block size to 2MB via a process known as a hard fork.
DCG further called on companies, miners, users and developers to join the proposal via a dedicated web form that was provided in the post.
The company wrote:
"We are also committed to the research and development of technical mechanisms to improve signaling in the bitcoin community, as well as to put in place communication tools, in order to more closely coordinate with ecosystem participants in the design, integration, and deployment of safe solutions that increase bitcoin capacity."
Abra, Bitclub Network, Bitcoin.com, BitFury, Bitmain, BitPay, Blockchain, Bloq, Circle, RSK Labs and Xapo are said to be providing technical and engineering support to prepare for the upgrades, though their commitment was not further detailed.
Notable, however, is the absence of developers making up the open-source development community Bitcoin Core. Blockstream, a company that funds two such developers, opted not to attend the meeting when it was announced in March, with Blockstream CEO Adam Back formally declining to participate on behalf of the startup.
According to those involved, the proposal will use an idea put forth by RSK Labs developer Sergio Demian Lerner in early April, though it's notable that several developers rejected the proposal in following emails. (The idea has been floated many times before as well.)
Speaking to CoinDesk, Lerner affirmed that the startup would play a role in the process, though he said he "probably won't write" the code that is eventually used.
"Our agreement is to audit that code," he said.
No code was released in the announcement, and others were less clear about what technology would underlie the move.
According to those involved, the process by which the measure would be approved involves miners augmenting coinbase transactions in new bitcoin blocks to signal their support, as soft forks are usually deployed. By signaling on "bit", miners would be voicing their approval for a process by which SegWit would be activated at the time of a network fork.
"SegWit can activate immediately and the same bit will say in the future, at X date, a 2 MB hardfork happens, signaling two events with one bit," said Jeff Garzik, founder of bitcoin startup and proposal signatory Bloq.

What's different this time?

One of the more complex questions that resulted from the publication centers around just what it means exactly – and if it will really impact bitcoin's technical direction.
Garzik put forth the strongest argument that it marks a significant departure from past proposals, namely because it finds new businesses funding technical efforts that will benefit the non-proprietary code.
"I think a mistake that every business has made is that they free-rode on Core," Garzik said.
Others remarked similarly that the commitment might be real this time. Marshall Long, one of the leaders behind Bitcoin Classic, an early 2016 effort to increase bitcoin's block size, argued that the "field of communication" is improved over previous efforts.
In particular, he referenced a 2016 agreement between a subset of miners and developers, colloquially termed "The Hong Kong Agreement", which originally committed to a timetable that would see both the activation of the SegWit code upgrade and the development of a 2MB hard fork. Ultimately, both timelines were missed.
"We've seen this before, so it has a less likely chance of turning out the same way. The recent history, the Hong Kong agreement is so fresh, something will happen good or bad," Long told CoinDesk.
Still, Blockstream CSO Samson Mow, whose firm did not sign the proposal, noted that, like with other fork proposals, there is disagreement that it represents a significant enough majority to impact the network's direction.
"The technical community and a big swath of users have already said that a hard fork is not needed now," Mow said, adding:
"This proposal is just going back and rehashing things that have already been discussed at length."
Chaincode developer Matt Corallo had a similar view.
"I’m somewhat disappointed that all of the feedback given by folks who’ve worked on the bitcoin protocol was completely ignored," he said in the DCG chat group. "[I] suggest much more technically realistic ways to accomplish the same goal."

Who gets what?

Others commented on the somewhat messy sociology behind the positioning, given that bitcoin users have been so firmly entrenched along partisan lines – with those supporting so-called "off-chain scaling" solutions on one, and those backing "on-chain scaling" solutions that would increase the hard-coded block size on the other.
For example, Bloq economist Paul Storzc, whose startup is supporting the proposal, noted that he wasn't sure exactly what the compromise was.
"People wanted SegWit on the small block side, but the small block side thought the big block side would also like it because it's getting larger blocks, so it was unclear there would be any sentiment against it," he explained.
Still, he noted that the activation of SegWit as part of the deal would be unlikely to win over Bitcoin Core developers. "It isn't a huge concession to the small blockers to activate SegWit. It was only being withheld to annoy them anyway in the first place," he remarked.
Bitcoin miner Chandler Guo noted his belief that, if anything, the compromise is perhaps more out of necessity given frustration over the stagnation of the technology's development, and that in the end, there are perhaps no winners.
In a roundabout analogy, he compared the deal to a "beautiful girl" who would finally need to marry an "ugly man" due to indecision.
"The beautiful girl was waiting and waiting, and they have to marry someone, it doesn't matter who. The beautiful girl has to finally marry someone," he said.

Will the network fork?

Perhaps the most contentious part of the agreement is the commitment to a bitcoin hard fork within a certain timeframe.
Yifu Guo, the founder of bitcoin mining firm Avalon (now Canaan), professed to skepticism that the timeline would be held. "I'll believe it when I see it," he said. "It's too fast, they don't have enough adoption."
Even with the agreement, Guo said, there are technical limitations to how fast such a solution could be tested. Asked if he thought it would be a success, he said: "I don't believe that."
Others were also concerned about the six-month timeline as those backing the proposal would have to develop code, ensure that it has widespread agreement, and deploy it all before the deadline.
"I don’t think it’s very realistic. Six months is not long enough. Let’s put it like that," said bitcoin enthusiast Stefan Jespers, who goes by the moniker 'WhalePanda'. He mentioned that it took developers six months to develop SegWit, and that it takes a long time for nodes to upgrade, offering recent bitcoin client versions as examples.
"You know the expression 'honey badger doesn't care' in bitcoin?" said Jespers. "People are going to oppose it, because it seems like they're being forced into it. Even if 80% of the miners support it, then what do the other 20% want to do?"
He added that he feels many developers and users don't support a block size parameter increase, and that their voices were excluded from the agreement.

Action at any cost?

The fact that a range of scaling proposals have been put forth over the last year, with none ultimately reaching full agreement from the bitcoin community, meant there was also a notable skepticism of the proposal.
Still, some argue that it's at least a path forward.
ShapeShift CEO and co-founder Erik Voorhees, one of the companies that signed the agreement, told CoinDesk:
"I'm almost of the opinion that I don’t care what path is chosen for bitcoin. I just want something to happen. Bitcoin's been in this deadlock for two years. I'm a supporter of SegWit. I’m a supporter of a hard fork to a larger block size."
There were also strong enthusiasts of the measure due to the perception that fees on the network are escalating with the bitcoin blockchain's increasing use. Here, a variety of perspectives diverged, most of them stemming from disagreements on how economic costs of the network should function and who should pay those costs.
Garzik, for example, stressed the pain that he believes users are feeling, stating the proposal "actually addresses a problem facing the user community".
He told CoinDesk:
"[Bitcoin] Core is refusing to do anything in the short term that will actually increase capacity. If you want to talk about price, talk about transaction fee price."

Are network and startup needs the same?

Elsewhere, comments underscored a key divide in the argument, whether the bitcoin network should even adapt to the needs of startups.
Paul Puey, CEO and co-founder of wallet provider Airbitz, said he is in "full support” of the proposal due to the pain his firm has experienced of late, despite the fact that his startup had not signed the pledge at press time. As a wallet operator, its customers and the company itself have been feeling the strain of the higher transaction fees, and it's due to an upgrade that they have no control over.
"All of those people who think this is okay, that bitcoin doesn't support many transactions in volume. I think they’re horribly wrong," Puey said. "I’m all for pushing forward something at this point."
Others disagreed, with Blockstream's Ben Gorlick stating that SegWit offers a clear benefit for transaction capacity.
"What is being used right now is an attempt at a compromise. They're saying it as an excuse to fork. They're saying, let's take this thing that seems certain to everyone and they're creating a false majority," he stated.

Will the network fork?

Gorlick's statements also hinted at another side effect of the proposal – the fact that action without broad agreement could risk splitting the bitcoin network in two.
The 'contentious hard fork' aspect, which could result in two chains if not everyone agrees, is partly what's held back previous proposals so far. Some, such as Mow, think that this outcome could hold up this proposal as well.
Others say that it's a risk worth taking.
"That is a risk. But the risk of bitcoin stagnating because everyone's getting fed up with it is also a risk. The latter is becoming a much bigger problem in my opinion," Voorhees said.
Lightning Network creator Joseph Poon said he isn't supporting either side, but that from his past participation in negotiations, he believes the proposal puts the network on a path to a split that could result in two bitcoin blockchains.
Poon told CoinDesk:
"It looks like the way both sides are communicating, a fork is going to be inevitable. The real fight is going to be who gets to be called 'bitcoin'."
And, what will happen if it does? In a Consensus 2017 panel yesterday, BitPay CEO Stephen Pair said that as he thinks that the market should decide which blockchain is the one that would be called 'bitcoin'. He suggested that BitPay will ultimately choose to support both bitcoins for a time, even if he thinks one will ultimately win out.
In remarks, Digital Currency Group CEO Barry Silbert acknowledged that different users of the bitcoin network could go separate ways as a result of the deal, though he stated his belief that this outcome was increasingly likely before the meeting and proposal.

Can two chains survive?

Others said that the economics of the network won't support such an outcome.
"There will be two bitcoins with two market prices, they will sum up to what they have before," Storzc said. "One will be worth more than the other, and the one that is smaller won't be enough for miners to run profitably."
While the ethereum blockchain underwent a split, commentators remarked that the unique design of bitcoin – it takes longer for the difficulty to reset, for example – means that this might not happen the same way.
Even if miners with spare hardware were to support a fork, Peter Rizun, developer for the alternative bitcoin implementation Bitcoin Unlimited, expressed his doubts that two chains could continue.
"The technical problem of keeping the chain alive. Old miners will mine that, but they'll never find the block," he said. "I don't think people realize how long the minority chain will struggle."
Others continued the familiar refrain that this outcome is unlikely. Economics aside, there may be technical hold-ups to efforts to change bitcoin.
"I think the people [behind the agreement] pushing for the fork are not really the majority so they won't do it," said Ferdinando Ametrano, a professor at Politecnico di Milano.

Consensus 2017: Blockchain Tech Leaders Predict Interoperable Future

Leaders of four different blockchain and distributed ledger projects believe they are collectively working on what could end up being an interoperable network of services.
Speaking onstage at CoinDesk's Consensus 2017 conference in New York, ethereum co-founder Joe Lubin, bitcoin scientist Adam Back, Hyperledger executive director Brian Behlendorf and Richard Gendal Brown of distributed ledger consortium R3 took turns talking about the future of their industry.
While philosophies differed regarding public and private blockchains, and methods of development, a consensus was largely formed that, eventually, their technologies will probably directly interact in the future.
Lubin, who is also the co-founder of ethereum development firm ConsenSys, told the audience:
"All of these individuals on stage with us are all building technologies with which we would someday like to interoperate."
Still, Lubin described ethereum as the only "powerful blockchain system that can operate in a private permissioned context or a public context".
However, Back – the inventor of early cryptocurrency, hashcash – is working with Blockstream to introduce features to the public bitcoin blockchain that would give it certain privacy traits that might make it more attractive to regulated enterprise.
One of the most significant obstacles to be overcome in the creation of this interoperable mesh of blockchains, he argued, would be the preservation of what makes each chain unique, even as value moves from one to the other.
"I think interoperability is going to be important," said Back. "And its important for the trust properties of the chain to transfer."
While the Lubin indicated that ConsenSys is working on an "interledger" capable of facilitating such interoperability, Hyperledger's Behlendorf proposed a different possibility: that what might end up connecting these blockchains would be an identity solution that lets users own their own profiles.
That statement is notable as, earlier this month, Hyperledger revealed plans for an effort called Project Indy to do exactly that, though Behlendorf didn't make explicit the possibility that the solution might play a role in blockchain interoperability.
"These things will be richly woven together," he said.
As evidence of the interconnected nature of the global exchange of value, R3's Gendal Brown described the early days of his consortium's work with global banks.
What began as an effort to solve the problem of how global financial institutions can transact with each other with greater trust has ended up moving towards a tool for establishing trust in other industries, including insurance.

IC3 Debuts Upgraded Off-Chain Transaction Protocol 'Teechain'

The Initiative For CryptoCurrencies & Contracts (IC3) has unveiled a new version of its Teechan off-chain transaction protocol.
First put forward last year, Teechan relies on the utilization of specialized hardware, the Intel SGX, which provides a kind of masking layer for the data it contains. Conceptually, the protocol is similar to the Lightning Network, a proposed transaction layer to bitcoin aimed at creating payment channels – and with them, the potential to enable millions of transactions per second.
It's the promise of huge throughput that has led to projects like Teechan, and the Cornell University-based team behind it is releasing several new changes to the original design, now dubbed "Teechain".
Among those upgrades: the ability to direct payments to parties that aren't directly linked via an existing channel.