Blockchain technologies and digital currencies are arguably the most hyped and least understood areas of tech right now.
Unbridled optimism about these emerging sectors—as well as interesting questions about how they’ll play out—were on display Thursday night at an event in Boston’s financial district featuring three local companies pitching virtual token sales.
The main takeaway? It’s early days for blockchain platforms and cryptocurrencies, and things are moving fast. But despite concerns some have raised about bubbles, fraud, and regulations, advocates are confident that blockchain and virtual currencies are going to be transformative.
“All the criticisms people have of blockchains are true,” said Rob May, CEO and co-founder of Talla, one of the companies featured at the event. “They’re all irrelevant. The problems are going to be solved.”
That remains to be seen, of course. For now, advocates of blockchain technology are navigating uncharted territory. “There are no mental frameworks for what success looks like,” May said.
May’s company, which organized Thursday’s event at Granary Tavern, developed text-based messaging assistants that use machine learning and natural language processing to automate corporate service desks. Its business customers are using the conversational “chatbots” to answer repetitive questions about things like HR benefits, to build corporate knowledge databases, to onboard new employees, and so on.
Now, Talla is developing a chatbot platform that runs on blockchain technology. This “Botchain” would improve security and transparency because the bots’ actions would run on a decentralized network of computers and would be recorded in a distributed ledger, Talla says.
It’s an example of how new technologies can bring benefits but also create new problems. As bots start to take over mundane tasks for humans, they will also become security risks, May said. For example, if an employee is chatting with a bot, how does he or she know it’s not a hacker or malicious program posing as the bot?
“Bots are being spoofed” already, May said. “Identity is an issue.”
Bots will also need to be certified to carry out certain tasks, May said, such as ensuring they’re secure enough to meet standards set by HIPAA rules (in healthcare applications). As bots start talking to each other and making decisions without human oversight, “how do we trust them?” May said.
The event illustrated a wide variety of ideas people have for applying these emerging technologies. Caviar, the second company that presented, plans to sell digital tokens for an investment fund that gives investors exposure to both cryptocurrencies and real estate projects. Part of the goal is to enable cryptocurrency investors to reduce their risk and diversify their investments.
“Cryptocurrencies are not always backed by real assets,” said Alex Shvayetsky, a partner at Caviar. “This sector is highly volatile.”
Meanwhile, the third company to present, Nebulous, is trying to take on Amazon, Microsoft, and Google with a cloud storage service called Sia (pronounced sigh-uh) that runs on a blockchain system. Co-founder and CEO David Vorick argued that the tech giants are winning in the cloud storage wars not because of the lower costs gained through their economies of scale, but because customers trust them to take care of their data. Vorick said his company’s blockchain-based cloud storage offers a more secure option, along with better performance and lower prices.
Nebulous isn’t the only Boston-area company challenging the big tech firms in storage. There’s also Wasabi, led by Carbonite founders David Friend and Jeff Flowers. Both ventures are ambitious, and we’ll see how much demand they generate.
Here are three more highlights from Thursday’s discussion:
1. It’s I-C-O. Dave Balter, co-founder of Flipside Crypto, a new service that helps wealthy individuals invest in digital currencies, kicked off the event with a quick poll of the audience about initial coin offerings (ICOs). Companies have raised $2.3 billion via these digital token sales in 2017, Balter said. But in another sign of how early this sector is, people apparently pronounce the term “ICO” differently.
“Is it ‘Eye-see-oh’ or ‘eye-co’?” Balter asked the attendees.
“Eye-see-oh,” a chorus of voices responded.
2. There’s a talent crunch. May said Talla is getting creative with hiring. “People who have spent any time in blockchain are really rare,” he said. His company’s approach has been to hire people with related experience, like in cryptography.
3. Venture capitalists are already adapting to cryptocurrencies. Balter said some venture funds are already amending their agreements with their limited partners—the people and organizations who invest in the funds—to allow the VCs to invest in digital currencies.
ICOs are a way for companies to “create some form of value” for performing tasks on a blockchain system, but they’re also an alternative to raising venture capital, Balter said. “The question is if that’s the right way to think about it,” he added.
