Tag: bitcoin Page 1 of 8

Cryptocurrency Needs to Go Mainstream

On March 15, 2020

I wrote a blog post on CoinDesk a couple of days ago, Defining Cryptocurrency Is the Best Way to Kill it.

It’s a plea and a case for allowing cryptocurrency to become as pervasive as today’s money in all of its applications variety, plus much more. It’s also about the realization that the industry has tied itself in knots with various classifications and definitions trying to please regulators. Let’s stop playing that game, so we can let cryptocurrency become accepted as an alternative digital currency that is here to stay for the long term.

Cryptocurrency inherits all of money’s properties (as a unit and a store of value that is transferable, fungible, verifiable, divisible and scarce), in addition to adding unique functions that money doesn’t have:

its immutability is digital (the physical is gone)
it can be fungible or non-fungible (non-fungible is an innovation)
its policy governance doesn’t need to be centralized
it has very powerful programmable capabilities with imbedded logic (if-this-then-that)
its transferability is peer-to-peer (without central intermediaries)

If cryptocurrency is so much better than money, why are we erecting so many barriers for its adoption?

Please go and read this article, Defining Cryptocurrency Is the Best Way to Kill it.

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What I Said and Didn't Say: Setting the Record Straight After Media Distorts Your Messages

By William Mougayar

On May 21, 2018

In Featured

On the heels of last week’s NYC Blockchain Week and the Token Summit, I was invited to CNBC’s Squawk Box on Friday morning May 18th, to discuss the latest blockchain developments.

The conversation started with the role of the SEC, and I tried to move it towards the utility of tokens as a more dominant theme. I said a number of things, but it seems that my comments set off a chain reaction in other media sources where they were taken out of context. Suddenly, my comments metamorphosed into sensationalized headlines that I simply did not make.

Here’s the full interview which lasts about 5 minutes.

This investor thinks digital currencies could be a “utility,” but for now they are a “novelty.” https://t.co/gNk3ZNeyHL pic.twitter.com/KCCdzuPau3
— CNBC (@CNBC) May 19, 2018

First, let’s recap the points I made where my comments were taken out of context:

“The SEC is still trying to educate themselves, and not just educate the public.”

“They are still grappling with it, and for them, the box they play in, is they see all of these cryptocurrencies as a security.”

“In reality, not everything is a security.”

“There will be some updates to regulation. They have to change the current regulation.”

“The novelty is that these currencies could be a utility….the utility comes before being a security. That’s the novelty the SEC is trying to wrap their heads around.”

“They see everything as a security. That’s the box they play in. In a way, they are trying to fit a square peg into a round hole.”

“I think Bitcoin is one of them (native currencies). It is not going to be the only one. Ethereum is the 2nd most important one.”

“Ethereum today has the largest ecosystem of developers, startups, venture capital, and support around it.”

However, new headlines surfaced that attributed different statements to me (or implied that I said them):

“Ethereum Foundation Advisor: SEC Lacks Fundamental Understanding of Core Nature of Crypto” (Cointelegraph)
“Crypto Expert: SEC Fails to Grasp the Industry” (Crypto Globe)
“William Mougayar: The SEC Does Not Actually Know About Crypto” (Bitcoin Genie)
“William Mougayar Criticizes SEC Recognizing Its Crypto Familiarity” (Incrypts)
“William Mougayar disagrees with the SEC” (Trade Market News)
“William Mougayar says SEC know little about crypto.” (FX Street)
“Ethereum Foundation Advisor-SEC Don’t Possess Basic Understanding about Crypto’s Core Nature” (Currency Analytics)

The above headlines are highlighting comments I did not make or necessarily implied.

Although I understand this comes with the territory I play in, I just wanted to set the record straight.

ps – Another correction is that I’m a former Advisor to the Ethereum Foundation

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Watch Out, the ICOs Are Coming

By William Mougayar

On January 23, 2017

In Featured, Think Tank

First came Bitcoin, then blockchains arrived. Cryptocurrencies and decentralized protocols followed.

Now, the ICOs are coming. And the ICO funds are also arriving. And a crash will be forthcoming.

To paraphrase Clay Shirky’s famous book title, Here Comes Everybody, a moniker describing how crowds form online as quickly as wildfire.

New tokens are being listed every week. Dozens of startups are planning their ICO’s, and funds that specialize in these tokens are feeding the investment and speculation frenzy. Even websites offer out-the-box services to create, promote, run and list your ICO with, describing the process to being as easy as microwave cooking.

The regulators are watching, mostly without taking harmful actions (so far), which is interpreted positively by startups who would rather ask for forgiveness than permission. Let’s do more. The door is open, and no one is shutting it.

Companies behind these ICOs are promising the moon and the stars, putting out polished websites, white papers, advisory boards, Slack channels, GitHubs, peppering with some legalese language, and topping it with the full dressing support enchilada they can think of; in order to appear as legitimate, as hard-working, as smart and as credible as possible.

Don’t get me wrong. ICOs are a good alternative funding model that holds an exciting promise, as I’ve explained in How Cryptocurrencies and Blockchain-based Startups Are Turning The Traditional Venture Capital Model on Its Head, in addition to outlining some steps and criteria on how to evaluate them.

But I see some issues with the current environment.

Startup diligence is pretty light

Diligence is tilted towards appearances, parabolic claims, white papers, a minimum of legal and lots of online dressing-up. There is relatively little involvement from traditional venture capitalists who typically dispense startup investment. VCs aren’t always right, and granted their model is being disrupted by the ICOs, but they generally have a sense about startups anatomies.

Previously, you were funded because your ideas, teams and initial product progress were worthy of it, at least someone thought so. Now, companies publish a paper making the case for their idea, open some docs for reviews, and ask for money in return for a promise to deliver something maybe in one or two years, that may or may not be accepted by the market.

Along the way, they drag a crowd of investors who buy into it, without necessarily being well informed, nor having used the product. During that process, there isn’t much talk about execution abilities, operational experience, or the rest of the team that will end-up being hired. Much of the analysis is on the surface, often tough to prove or disprove, in part due to a rushing and artificial urgency.

The 3 typical characteristics, team, product and market seem to have taken a secondary position to the 3 new magical words: tokens, blockchain and decentralization.

Token utility linkage is not always there

The assumption that everything with a potential network effect is going to work with a decentralization starting point is not entirely true. The blockchain is not for everything.

The solution or product being developed needs to have a solid business model linkage that has a particular value when decentralization and/or tokenization of actions take place. The promise of a new model needs to be very compelling.

In the name of decentralization, the promises are big. You can’t just slap a token to anything, and expect magic to happen.

The token is not the business model. The value proposition or utility that is enabled by the token is the business model, and that linkage needs to be there early on. If the direction is not right, the chosen path will not lead to a good place.

The marketing hype is frightening

Some ICOs are being marketed like a rocket ship, but in reality, no startup is a rocket ship. A lot of the communication is biased towards the most optimistic assumptions, but nothing goes up in a straight line.

With an ICO, 3 asynchronous periods seem to have blurred and collapsed into one: early stage, go-to market, product-to-market fit. Just because it makes sense in theory doesn’t mean that it will make sense when the market realities enter the picture.

True that some level of speculatory fever can help to fund projects and give them a longer runway life, but if the expectations get far ahead of reality, the gaps may be harder to bridge, resulting in a downward spiral snap.

For good or bad reasons, raising lots of money can hide a lot of mistakes along the way, and there is some of that going on.

Financial engineering has its traps

A rule of thumb for many ICOs has been to allocate 85% of the tokens to the market, and keep 15% for developers and company, but this is a risky ratio. It is equivalent to raising all your funding at once. In the best cases, companies assume that the token will go up in price, which would enable the company (or protocol operator) to never need to raise money again. But not every company is like Bitcoin or Ethereum, just as not every startup is like Facebook or Twitter.

Of course, a smart company would not release more funding to itself until milestones are reached, but few will exercise that type of discipline. Fewer ICOs make a provision for subsequent funding events beyond the ICO.

All and all, funding a startup is not a one shot deal. Too much financial engineering is just that. I would urge anyone planning an ICO to re-read the excellent Security Laws Framework for Blockchain Tokens paper, especially the Appendix.

ICO success doesn’t equate to company success

Success means many users with continuous engagement, steady ecosystem activity, visible benefits from the service or product, and some early revenues or wealth creation to prove that the product-to-market fit alignment is working.

All of these take time and several steps along the way that typically happen gradually and commensurably. No startup ever nails everything from the first go. Iterations and evolutions are the norm, and ICO companies need to be realistic about it.

The best ICOs will be the ones where users have a stake in the future of the business, and where their actions does something to increase the value of the network or underlying business. For example, token holders can be direct participants as users of the product or service. That is the ultimate incentivized setup (assuming that the service is bonafide valuable), in addition to figuring out the circular economy aspects of the business model.

The legal grounds are still shaky

Despite appearances of success in circumventing legal or regulatory hurdles, some practices just don’t make sense.

Why are tokens allowed to trade before the protocol or product is even out in the marketplace? Heightening expectations with the hope that token prices rise months and years ahead of going to market can go so far before the regulators start raising their eyebrows on that practice. Not all companies can survive the price fluctuations, volatility and speculative waves that will be expected when there is nothing but speculation and trading that drives your token price. Look at the volatility of BTC, ETH and STEEM, and these are examples with actual products that work and have thousands of users.

Still, too many regulatory unknowns remain: Will there be a cap on total amounts being raised? Will there be tighter overall compliance requirements? Will tokens be allowed to trade, ahead of product availability? Are reporting or audit requirements likely to be enforced? Are reasonable vesting and liquidity requirements likely to be mandated?

The irony about listing tokens too early is that now consumers who trade them can lose their money many times over (via multiple trades), not just once via a buy and hold pattern.

It’s too early to play the hedge fund game

Most hedge funds are clueless in terms of business insights and experience with picking startups and working with them. Speculating on uncertain instruments is like turbocharging a car that is already headed into a ditch. The accident will happen faster.

Hedge funds act based on what they are fed in a prospectus offering, or by their superficial understanding of a company’s prospects, let alone the market surrounding it. They optimize their operations around quantitative analytics, trading prowess, and recently machine learning or AI-supported decision-making.

Some are gaming the token initial buying with automated wallet-crawlers and other mischievous tools that allow them to automatically grab tokens early (by beating the average buyer), and subsequently claim a “gain” a few hours later. Some funds are being aggressively marketed based on these short-term exploits and paper profits about ICOs that aren’t even operational yet. The fund’s relationship with the ICO founders is mostly transactional.

Smart founders are better served with smart money or benign crowds as influential points to their destiny, and they should not let funds that have been set-up for trading purposes to take large positions in their token distribution.

ICOs should attract partner-funders that can help them, and not be at the mercy of those can trade them and pump them, because they will later dump them at their own will. If you are familiar with the over-the-counter penny stock environment and the on-going needs to promote stocks with press releases and superficial announcements, we are in this territory.

The type of diligence that funds undertake on a token offering is not the same as the diligence that is needed on a company, idea, or product.

Most funds are going to feed the speculative train without caring (or knowing) about the real underlying business. Funds that focus on cryptocurrency trading could become that artificial de-stabilizer and the tipping point for a subsequent crash that eventually will bring us back to reality.

Crashing the party or priming a launch

Yes, I want the ICO party to continue, but I’m seeing participants that are just there for the ride. I’m seeing companies and ideas getting ICO-funded on a wing and prayer chance of being successful. Some others who have even previously failed to raise in private circles, are now opting for the ICO route. As I said earlier, here comes everybody. When the party gets overcrowded and unwanted visitors want it louder and bigger, events can turn to the unpredictable.

In technology, nothing great is often achieved without irrational exuberance, but when the pendulum swings too far, there will some damage. In the long term, we hope that benefits far outweigh the pitfalls that are encountered along the way, and maybe that is the only way that good things happen.

ICOs are supposed to be like an IPO with a cryptocurrency, but in reality, these are early-stage funding bets. Most of these companies won’t stand the scrutiny of public markets (which they entered, whether they like it or not), while they wished they had the private lives of early stage startups.

An ICO is the beginning and the means to an end, not the end itself. The ICO is not the great enabler of business models and incredible innovation. The blockchain is. An ICO is an alternative funding, operational and ownership model. You still need to bolt a sound business to it. You don’t get a pass there, and you need to get a few things right.

Take everything with a grain of salt, two pinches of hype, and three sprinklings of wishful thinking.

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The Blockchain is Still Waiting for its Web, Here is a Blueprint for Getting us There

By William Mougayar

On January 16, 2017

In Entrepreneurship, Featured

The blockchain landscape is still very technical. Aside from the early enthusiasts and pioneers, it is hardly comprehensible to the masses, and it will continue to be that way, unless it breaks out of its technical shell.

This isn’t unlike the predicament the Internet was stuck in, prior to the Web.

So, what if blockchain technology is more like the Internet, which means that we are still waiting for its Web layers to emerge, in order to fully exploit its capabilities?

Today, blockchain protocols, solutions, or platforms are not straightforward to work with. At least, they require a good degree of technical know-how that far exceeds what an average web developer or savvy semi-technical business person can do with the Web today. But does it have to be that way forever?

Blockchains Have Many Common Features

If you examine the variety of available blockchains, many of them handle the same few basic functions, centered around recording (digital) value without requiring a third party to move it.

Outside of this core capability, a number of additional functions and features are typically found:

Central nucleus: Records of Value
Basic Features Layer: Ownerships, Balances, Transfers, Assets creation, Time-stamping, Security, Programmability.
Interaction Layer: Verification of transactions, Proofs (of existence, or other), Movement history, Technical or Business Logic, Storage, Settlements, Identity, Naming.

If this set of functionality is generic in multiple blockchain platforms, why do we need many ways to call them up? Why not institute a common way to check identity, asset ownerships, time-stamping, etc. across any blockchain?

Note that I didn’t include cryptocurrencies, shared distributed ledgers, or even decentralized protocols in these layers because they are applications and outcomes of blockchains.

If you stand back from the nitty gritty of these layers, you will realize a key abstraction that is common to most blockchains: how they shatter the intermediary trust paradigm by enabling transactions to occur at the peer-to-peer level, without the necessity of central choke or delay points.

Since there is so much homogeneity in functionality intent, then why are there so many different and incompatible blockchain technologies and software? That’s because each blockchain implements these basic features and interaction layers in its own way.

Learning from the Web’s History

This scenario is not unlike the position the Internet was in, prior to the Web. Tim Berners-Lee described that period well, circa 1989: “In those days, there was different information on different computers, but you had to log on to different computers to get at it. Also, sometimes you had to learn a different program on each computer. Often it was just easier to go and ask people when they were having coffee…”.

Since millions of computers were already being connected to a fast growing Internet, Tim figured the way to solve this problem was to have them share information via an emerging technology he proposed, called hypertext (structured text that uses logical links between nodes containing text) that he described in a seminal 1989 document called “Information Management: A Proposal”.

“By October of 1990, Tim had written the three fundamental technologies that remain the foundation of today’s web (and which you may have seen appear on parts of your web browser):

HTML: HyperText Markup Language. The markup (formatting) language for the web. URI: Uniform Resource Identifier. A kind of “address” that is unique and used to identify to each resource on the web. It is also commonly called a URL. HTTP: Hypertext Transfer Protocol. Allows for the retrieval of linked resources from across the web.” [Source: http://webfoundation.org/about/vision/history-of-the-web/]

As a footnote to this backdrop, Tim’s boss originally gave a lukewarm response to the paper, handwriting on it “Vague, but exciting”. In truth, some vagueness in a protocol is a good feature, because it implies that its scope is widely encompassing, without being too restrictive. One could argue that Satoshi Nakamoto’s paper was also vague, pertaining to the fullness of its targeted applications beyond the peer-to-peer exchange of electronic money. Ethereum, for example was built specifically as a general-purpose blockchain platform environment, and didn’t want to be specific, as an original design objective.

Since their early days, the Internet and the Web have matured nicely, and today they both rely on close to 200 standards, categorized along the following segments:

Web Layer: HTML, URI, Java, CSS and more.
Application Layer: HTTP, DNS, FTP, SMTP, POP and more.
Transport Layer: TCP, UDP, DCCP, RSVP and more.
Internet Layer: IPv4, IPv6, IPsec, ICMP, IGMP and more.
Link Layer: ARP, PPP, Ethernet, DSL, ISDN, FDDI and more.

[Derived from: Internet protocol suite, https://en.wikipedia.org/wiki/Internet_protocol_suite.]

These standards are what make the Web work so well. When you are developing Web applications, setting up an infrastructure, or building new products, you interact (directly or indirectly) with these standards, knowing exactly what to expect.

Unfortunately, blockchains don’t have that luxury yet, as each platform is made-up of its own set of technologies and methods to work with it, resulting in a balkanized learning curve and adoption behavior for software developers and architects.

Blockchain Technology is Too Fragmented

Each blockchain has its own set of technology tools, middleware and API’s that applications developers need to contend with. An engineer that knows how to program Bitcoin needs to relearn what they know, in order to develop on other blockchains. For example, exchanges that support multiple cryptocurrencies have to deal with different integration technologies for each implementation.

It is true that each blockchain platform has developed its own technology stacks and interaction methods, but these are vertically integrated to themselves, and for their own ecosystem. In fact, most blockchain platforms don’t share that much in common, resulting in choice lock-ins, lack of interoperability, and potentially dead-ends that are hard to untangle.

The state of collaboration between blockchains is even worse, and plagued by timid efforts for building bridges and lateral co-operative capabilities. One day, it shouldn’t be inconceivable to have technology that crawls entire blockchains, in the same way that search crawlers spider websites to index or categorize vast content.

Of course, many technologies start by being proprietary. What follows is that some of them get adopted widely, and they become de-facto standards. In other cases, groups get together and agree to support a given standard, to serve everybody. Today, not enough of the latter is taking place, although many leading blockchain technologies are hoping to gain enough market klout that would let them become that de-facto choice.

In hindsight, I wished we didn’t give up on Bitcoin APIs so quickly. Two years ago, Bitcoin APIs were all the rage with more than a dozen companies vying for that space, as the entry point to develop Bitcoin applications. Then, the majority of them slowly opted out of that business, or stopped highlighting it as a key offering. Today, we still have several (Bitcoin) API-based offerings from companies like Factom, Tierion, Gem, Colu, BlockCypher, Neuroware, and Coinbase (to name a few). There are benefits to seeing a multitude of APIs take hold and get adopted. Even if some of them overlap in functionality, at least they will point to the need for an eventual standardization.

Bitcoin is making progress at its own pace, via technology releases aimed primarily at solidifying its own ecosystem. Although they have the largest cryptocurrency footprint, that doesn’t negate the need for their technology to also work with other parts of the overall crypto-tech ecosystem.

The Decentralization of the Web Rewires Standards

In order to grow-up, blockchains will eventually need a lot of standards that are vendor and solutions agnostic.

So many areas are ripe for standards developments: smart contracts, tokens, security, storage, messaging, identities, naming, record-keeping, and more.

The Internet and the Web have their standards. Where are the blockchain equivalent?

A standard set of middleware interfaces would insulate participants from the hardest parts of the technology, and expose more succinctly its utilitarian features. Lowering the barriers of entries would empower more developers to enter the blockchain, similar to the roles that HTML, HTTP, URLs and Java played for the Web.

Distributed applications that run on a blockchain infrastructure are architected differently than Web applications that were built for the Web’s architecture.

In a traditional web application, you have client side Javascript code that is run by users inside their browsers and server-side code that is run by a host or company. By contrast, in a distributed application, you have smart logic running on a virtual network of computers (the peer-to-peer network), and client-side code running in a special browser (or client), with the blockchain ledger acting as a shared resource.

With this new type of rewiring, comes the need to also rewire a variety of blockchain standards and technology layers.

Conceivably, blockchains could rely on a number of standards above the Internet’s existing standards, to allow a smooth bridging from one layer to another. That would be a breakthrough.

A blockchain universal stack could resemble something like this. Basically, we would add 3 layers on top of the Internet:

B-Browsers – Users interact with them, Apps gets plugged here.
B-Standards – Where Trust-related standards would play, as depicted in my “Interaction Layers” diagram.
Blockchains – Various blockchain technology and platforms serve functions.
Internet
Networks
Computers

Blockchain browsers (B-Browsers) are going to be important, as we will start to see them in 2017. They will be used to launch blockchain applications, and might look like normal applications we are familiar with, except that they will carry with them some new features that are enabled by blockchain back-ends (instead of databases).

Some of the exciting new blockchain browsers to watch include MetaMask, Blockstack and Mist. These currently have a technical slant, and they are not yet geared at the casual end-user, but they will eventually evolve to become more end-user friendly. A new breed of blockchain applications will come in the form of peer-to-peer browser experiences (e.g. OpenBazaar), while another type will be bolted straight on the current Web, but with a blockchain back-end (e.g. Steemit).

A trust services layer could be that API veneer that homogenizes how we create, move, check states, inspect proofs, follow historical paths, etc.- i.e. perform the functions that blockchains handle well.

Blockchains interoperability is inevitable, but we don’t know exactly yet at what levels, unless we get closer by iterating near the real friction points.

Discrete Efforts Are Not Enough

Nothing great has ever been adopted widely all over the world, unless it was somehow homogenized to make it easily assimilated by the masses.

We need universal tools that no one owns, but that benefit everybody, similar to the Web technologies that liberated the Internet.

Tim Berners-Lee explained why this was so important for the Web: “Had the technology been proprietary, and in my total control, it would probably not have taken off. You can’t propose that something be a universal space and at the same time keep control of it.”

There are promising examples of blockchain related standards, and we need to see more of them.

In the de-facto category, two notable mentions are IPFS (Inter Planetary File System), and an Ethereum-led token issuance standard, labelled ERC20 (which is becoming a de-facto standard in Initial Cryptocurrency Offerings). IPFS is not just focused on the blockchain, although they are a good match, as IPFS has proven to be popular with blockchain applications (e.g. OpenBazaar), where permanent IPFS links get placed into a blockchain transaction.

A few consortiums have also placed blockchain standards on their working agenda, and I enumerated them in my State of Global Blockchain Consortia article.

In the industry-led camp, we will need to follow the ISO/TC 307 Blockchain and electronic distributed ledger technologies technical committee who has stated their serious intentions by partaking in the blockchain standards roll call.

On the enterprise-side, the jury is still out, as vendors place their software in open source repositories, or declare an open standard with a handful of their customers, in the hopes of letting this work become a real standard via sheer adoption, e.g. Hyperledger, Digital Assets, Chain, and R3. Placing software in the open source realm is a good practice, but there is a difference when it starts that way from Day 1 (e.g. Bitcoin, Ethereum) versus doing it a posteriori to gain more market acceptance.

Furthermore, I am a firm believer that private and public blockchains need to also share common standards. It would be inconceivable that the Internet and private Intranets wouldn’t interoperate or interconnect at the very least; yet, we are building private and public blockchain technologies and applications without due regard to the inevitability of that intersection.

Let’s Not Compete on Standards

Yes, I am seriously talking about standards. It is not too early, even if I thought last year that we shouldn’t rush blockchain standards before their time. In 2017, we will need to start seeing serious discussions about universal standards, along with real intentions from industry participants to work together for that aim to materialize.

We need to realize that, in addition to competing in the marketplace, we have to also co-operate on common technical objectives.

In an ideal world, the blockchain field would produce an orderly architecture stack that carries popular standards, commonly used by all of its participants. It would be the resulting mix of de-facto and industry-led standards.

As a side benefit, the existence of standards could also lubricate network effects, a much needed success characteristic. In turn, that would entice new marketplace entrants to focus on their differentiation, instead of building the same overlapping technology pieces.

You don’t typically win by competing on standards, yet you don’t know what is a standard initially, so you might start by competing on everything. A sign of industry maturity will be seen when we hear of companies dropping certain proprietary technologies in favor of cooperative efforts.

That said, we shouldn’t suspend everything in order to just work on standards, in a vacuum. Vendors and blockchain core developers must continue to work on their own technologies while closely monitoring adoption, and always being sensitive about opportunities for industry collaboration. We can’t force standards on the market, but the market will need to embrace standards over time.

If blockchain technologies ignore the eventuality of standards, we are going to see less adoption.

Maybe we should think of the blockchain as a public good utility, and encourage an evolution that is not unlike the Internet’s, in terms of openness and neutrality of access.

Will the collection of blockchain technologies turn into another giant Internet, or will their journey unfold into a messy and fragmented evolution, like the database market, prior to its consolidation?

We have had the blockchain for a while, and it is gaining adoption. New and exciting applications are being built on blockchain technologies. Now is the time to realize that the blockchain’s best future days ahead will depend on how well we expose its capabilities more universally, and more openly. If not now, when?

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Public Blockchains: The Community vs. The Ecosystem

By William Mougayar

On July 31, 2016

In Think Tank

In the recent blockchain related debates pertaining to forking or block size decisions, we always hear the word “community” as a reference to the body of players who are supposed to be the stakeholders that care the most about such or such blockchain. Given that blockchains are decentralized organisms, their “community” reflects this topology by being a sprawling entity made up of eclectic and dispersed actors and players.

Why is it important to understand who the community is?

According to blockchain theory, the community is supposed to determine the future of a given blockchain via the proverbial decentralized governance magic of consensus. Consensus decision-making is at the heart of blockchains, because a plain majority can sway it one way or the other. Just like an election, more or less. The baseline of a blockchain rests on its economic soundness, and the reality is that some players hold the strings to this economic soundness more than others. Economic soundness also directly relates to blockchain security, but let’s not digress on that (yet important) tangent.

With such deciding power on the future of public blockchains, the Community is an important body, because they represent the current governance.

So I went on a research investigation to figure out the composition of a typical blockchain Community because they have been the most vocal about being who they are. What I found is that this deciding community is a subset of a larger ecosystem. The Community represents the Base Players that have had an earlier economic role in the ecosystem. They are mostly the insiders, and they have an advantage in being more in-the-know that others. Their voices are louder, and their collective actions (or inactions) can effectively determine a blockchain’s trajectory.

There is something contrarian about cryptocurrency communities. In the traditional sense, most companies will firstly gain users or customers, either as end-users or as developers. Then the body and variety of users becomes the community. In the cryptocurrency space, that sequence seems to be inverted. We start with the community of core supporters before we get to a large set of end-users. That’s ok, and perhaps a characteristic of fundamental technologies that need to garner a strong base before it flourishes.

Generically, the Base Players of a cryptocurrency “Community” are largely this group:

Token/Currency Holders (mostly owning it via wallets, not exchanges)
Core Developers
Tools Developers (software tools that are close to the blockchain)
Miners
Exchanges
Cryptocurrency Researchers and Scientists

The larger ecosystem involves several other participants. It can be portrayed to include the Base Players, in addition to:

Venture Capitalists
Software Applications Developers
Startups with thousands of ideas and projects
90% of Token Holders (the rest of us)
Regular Users waiting for mainstream Apps and who haven’t participated yet
Large Services Providers who can implement large scale solutions
Corporate Developers who want to bring these technologies inside the enterprise
Governments who are like other corporate users, but they can serve the public with blockchain-based services
Influencers, Analysts and Supporters

Let us take the cases of the recent Ethereum hard fork decision, and the Bitcoin block size debate epitomized by the Scaling Bitcoin conference. In both instances, the deciding community was mostly formed of the respective Base Players. But these Base Players are a relatively small group. In the Bitcoin case, the number of influential attendees to the widely publicized Scaling BItcoin process was probably under 100. And in the case of Ethereum, when the Carbonvote was tallied, only a total of 1,325 addresses voted, which is a relatively small number compared to the overall number of ETH holders, considering there is an available supply of 82 million ETH.

I hope we eventually use the word Ecosystem instead of Community, because it is more representative of a marketplace in the making. And I wished that a part of this larger ecosystem would also have a voice into the future of these public blockchains. Currently, the larger ecosystem is mostly a powerless silent majority that is watching events unfold, while being hopeful that the vocal and more powerful minority is going to lead the market in the right direction.

Eventually, any large scale public blockchain will need to reach a more balanced state where community leadership and ecosystem inclusion work together to strengthen its longevity and sustainability potential.

The Base Players are the Community today, and they are steering the boat right now, but will they in the future?

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