After three consecutive days at Consensus, it was time to get ready for the next conference of the week: Tokensummit 2017. The timing couldn’t have been better as both events were held in the same week. Many attendees of Consensus could just stay longer in New York and attend both. On the evening before the start of Tokensummit 2017, a pre-event was organised where Max Kordek and myself attended. This event facilitated meetings with the speakers and organizers. Although the location of the pre-event was quite fancy, the audience of Tokensummit was clearly more informal and less corporate than what we had seen during Consensus.
Next morning, the sunny weather had been replaced by rain while we were heading towards the auditorium of the New York University. The first edition of Tokensummit was clearly sold-out. Rumour was that tickets were sold way above normal price and that people without ticket gathered at the Starbucks around the corner, organizing their own mini-conference. Tokensummit was mostly about panel discussions featuring over 40 experts and 15 sessions interrupted by short breaks and lunch. The Blockchain experts elaborated on topics such as business models, legal and governance, Initial Coin Offerings (ICO), token funds, and future predictions.
Emphasis on Blockchain use cases
Organizer and venture capitalist William Mougayar kicked off by saying that the focus of Tokensummit would be on the businesses behind cryptocurrencies. Co-organizer Nick Tomaino (Runa Capital, The Control) added that token valuation is the main interest of traders outside the Blockchain space but that most people attending Tokensummit are aiming to benefit from long-term success of the industry. However, a small question round revealed that nearly everybody in the audience held cryptocurrencies, but only a few held them for their utility or use cases.
Talks on ICOs
According to panellist Brian Lio (Smith + Crown), the amount raised during ICOs in 2017 has already outperformed 2016, including seed and Series A venture funding. Alex Sunnarborg (CoinDesk) added that currently every single crypto project in the top 100 has a valuation of over $10M, which is remarkable. In contrast to ICOs, receiving traditional seed and Series A funding is quite difficult as it requires start-ups to display traction and revenue streams. With ICOs as new funding mechanism, more projects have access to money while the public has more opportunities to participate in projects with great potential. However, the comparison with traditional VC funding is not completely valid. Sid Kalla (Smith + Crown) pointed out that the differentiating factor of using Blockchain technology also asks for a different way of funding. He said that those projects generally need an ICO just for distribution. For most projects, the broad distribution of their tokens is a necessity for the network to succeed. Those projects wouldn’t even consider giving VCs a substantial number of tokens in return for funding. Although I agree with his reasoning, fair distribution is unfortunately not always the case. Driven by massive ROI, we see a trend where more and more venture capitalists want a piece of that pie. Most (private) ICO participants simply don’t have the financial power to pay for high transaction fees to compete with huge investors. The result is that many (smaller) investors are excluded and a broad distribution fails. One solution could be a capped amount one person can invest, which raises other challenges to tackle such as people using multiple wallets at a time and conflicts with private investor deals.
Spread over two sessions, several well-known projects such as Aragon pitched their concepts. Others took the opportunity to campaign for their upcoming ICO, including Civic, Tezos, and 0x project. Interesting fact is that Tezos, like Lisk, is running a delegated proof-of-stake consensus. The big announcement of the day came from outside the Blockchain space. Chat application Kik with over 300 million users revealed their plans to launch a custom token. This is a great example of how tech companies can utilize Blockchain technology and accelerate the adoption of this technology by the public.
Towards the end, fireside chats were held to recap and reflect. Nick Tomaino and William Mougayar went into debate with respectively Brian Armstrong (Coinbase) and Fred Wilson (Union Square Ventures). Wilson made clear that ICOs are not just a way of initially funding a company, but that the token is also the native monetization model of the business. He added that if a project is doing well, the utility value of the network goes up and as a result, the token value would rise. In other words, start-ups might give away a lot of their tokens in return for initial funding, but the small number of tokens they keep should increase substantially in value over time, incentivising the founders to make the project a success. For Lisk, this is definitely the case. The future potential of the Lisk project makes us sell Bitcoins to finance operations rather than LSK tokens. Wilson concluded:
“It doesn’t feel right to spend something that is going up in value.”
Although the day was long and intense, most were still filled with energy and inspiration to continue exchanging thoughts after the event in a bar close by. Our stay abroad gave us great new insights and inspiration to continue building on the Lisk project. For me personally, both conferences contributed to my steep learning curve since I entered the Blockchain space. Once more, it became clear to me that Blockchain technology has great potential. Together with the rest of Lisk, it is my task to accelerate the adoption of Blockchain technology by providing the right tools and support to enable developers to create stunning Blockchain applications that soon will provide value for millions of people across the globe.