It’s February 2019. The cryptocurrency bubble has pretty much burst. Actual use of the public blockchain beyond currency is rare. And for many consumers, blockchain and bitcoin are the same thing (they’re actually not).
That’s OK with supporters of EthDenver, an event promoting Ethereum blockchain technology that starts Friday. With bitcoin values down by 65 percent from last year, gone (mostly) are the speculators trying to get rich quick from initial coin offerings based on dubious business models. Those who’ve stuck around realize the industry must do better if it wants regular people to start using blockchain the way they use the internet every day.
“If you revisit the same conference from last year, attendance looks quite different,” said Jeffrey Vier, chief operating officer at Ideas By Nature, a Denver blockchain consultancy. “There is consistency in the blockchain technology community versus the opportunistic inconsistency you saw with the ICO community. That’s indicative of the focus on building technology and useful products, instead of making quick money.”
At the Sports Castle in Denver this weekend, about 2,000 people — about a third more than last year — are expected at the educational event aimed at curious developers who want to build better voting systems, secure personal health records and discuss a litany of ideas with blockchain potential. But organizers also wanted to offer attendees a real blockchain experience. So a team of developers came together to build something practical: buying a slice of pizza from a food truck without handing over cash or a credit card.
“We glued it all together to make the entire procurement process work all on blockchain,” said John Paller, an EthDenver cofounder and also founder of Opolis, which provides employee benefits on the blockchain. “This is a real-life-use case and an example of what we’ll see software development look like in the future.”
Of course, you can indirectly buy pizza with bitcoin today, just like the first guy did in 2008. Back then, Florida programmer Laszlo Hanyecz offered 10,000 bitcoins (worth about $40 at the time) to anyone who’d deliver pizza to his house. A man in England used his credit card and ordered from Papa John’s so Hanyecz paid up, making it the first real-world bitcoin transaction, according to Wired. But it’s not like a lot of retailers jumped on the trend and started accepting bitcoin. Today, you’ll have to settle with buying a pizza gift card from sites like eGifter, which accepts bitcoin.
Paller didn’t want to fake it. He wanted attendees to use real cryptocurrency. He wanted the process to be credit-card fast, and not like the drawn out 15, 30 seconds or even minutes that it can take for a bitcoin transaction to be completed today. He wanted it streamlined so newbies at the event wouldn’t have to fuss with signing up for multiple accounts and passwords just to buy a slice of pizza.
“We wanted to do really simple demonstrations of blockchain technology so people who come to our event, they don’t just hear about it, they experience it but not in a kludgy, hard way,” Paller said.
While some skeptics may snarkily suggest to use a credit card and file this away as a service you didn’t know you needed, the whole point of blockchain is a decentralized computer network that isn’t owned by an Amazon, Google or the U.S. government. We trust banks to store our money, or Facebook to keep our messages and data within friend circles. We trust newspapers to keep an accurate history of events. That doesn’t always happen. Stories get deleted. Companies lie. And imposters can take accounts over. Blockchain technology keeps data on millions of computers, making it near impossible to hack or delete or change without anyone noticing.
Blockchain has been around for more than a decade, but real-life uses are mostly relegated to buying, trading and selling digital currency. However, other experiments are getting closer to real-world uses.
In November, 144 West Virginians, mostly in the military, used a blockchain-based voting app to cast ballots while out of the country, according to StateScoop. Journalism company Civil, which provides some funding to The Colorado Sun, added tools to put stories on the blockchain to prevent deletion, with newsroom Popula archiving its first story in December. And in Denver, BurstIQ builds private blockchains for enterprise healthcare companies to store health data that is HIPAA compliant — and it currently has about 50 customers doing just that.
“In a lot of ways, we’re still really early,” said Frank Ricotta, BurstIQ’s CEO and founder. “I think we’ve got a way to go before we see pure consumer applications, other than cryptocurrency.”
For EthDenver organizers, building a food-truck payment system is something consumers can understand. But they needed to piece together digital currency, a virtual wallet and someone who would convert it to U.S. dollars.
Paller reached out to a company called Maker last summer because the California firm had recently launched a new digital coin, the Dai. Dai was different from the more volatile cryptocurrencies like bitcoin, though both are akin to apps built on blockchain. It’s called a stablecoin because Dai’s value is pegged to the U.S. dollar and always stays the same, no matter how many exist. One Dai is always worth one U.S. dollar and requires collateral, which in this case is Ether, the digital currency used on the Ethereum blockchain.
“Then what we needed (next) was a bank because if I’m giving Dai to someone, how do you convert Dai to U.S. dollars for the food truck guy who wants to pay his rent,” Paller said. “That’s where Wyre comes in.”
Wyre Payments, an FDIC-insured online money transmitter in San Francisco, essentially exchanges Dai for U.S. dollars so the recipient can cash out.
Paller also looped in Quantstamp, which offers security tools to audit transactions and verify that these smart contracts are authentic.
Authenticity and security are very important for the community. The industry lost some luster as cryptocurrency values skyrocketed in 2017, pushing bitcoin’s value 17 times higher to $17,000 and then plunging to about $3,500 this week. At the same time, the Securities & Exchange Commission and Colorado’s division of securities clamped down on fraud and speculators promising big returns. They issued multiple warnings to investors of risks.
“Consumers should not be confused about this: When someone asks you to invest your money with them and promises that you will profit as a result, that activity of raising money from you is most likely a regulated one,” Colorado Securities Commissioner Chris Myklebust wrote in an email.
Also last year, two high-profile Denver blockchain companies, ShapeShift AG and Salt Lending Holdings, were being investigated by federal authorities, according to The Wall Street Journal. The SEC was looking into a token sale by Salt Lending, which makes loans using crypto as collateral, while digital-asset exchange ShapeShift was linked to suspected criminals laundering money.
Salt declined to comment. And ShapeShift CEO Erik Voorhees has declined interviews as well. But in blog posts online, Voorhees has been vocal about the accusations and called the Journal story “factually incorrect and deceptive.” He wrote that ShapeShift complies with law-enforcement requests and actively identifies and blocks thieves and criminals from using the service.
Meanwhile, the local blockchain developer community kept plugging away. There’s not as many spectators involved nowadays, said Kevin Owocki, founder of Gitcoin, a Boulder-based community of 19,500 developers who work on blockchain projects and get paid in crypto.
“We’re builders and not in the speculation community,” said Owocki, who also runs a blockchain meetup in Boulder and has seen attendance decline by half since bitcoin’s peak.
Coincidentally, Austin Griffith, Gitcoin’s director of research, was looking at emerging markets and trying to figure out how Venezuelans could switch to a more stable currency to buy goods. The Venezuelan bolivar has been in sad shape because of high inflation in the country. But in order for locals to use digital currency like crypto, they needed it to work on older phones, circa 2014. Modern crypto apps were built for newer smartphones.
Griffith developed a mobile browser-based wallet so users don’t need to download phone apps. Called the Burner wallet, it’s more like a regular leather wallet, which can be lost or pick-pocketed. The Burner wallet isn’t as secure as a bank so users are advised not to store their life savings in it. (But if you get logged out, there is a security seed phrase users can use.) The tradeoff, however, is speed. Transactions are processed in 5 seconds.
“My usual transactions on Ethereum take 15 seconds to a minute and a half, which is OK, but five seconds is better,” Griffith said. “…We have to get rid of that (wait) or we’re not going to get to mass adoption. And my gamgam is not going to want to type in a 12-word seed phrase.”
The Burner wallet is another piece in the EthDenver food-truck payment project.
Other pieces of the project were built by different companies. POA Networks brought in a newer technology called sidechains, which connect different blockchains to speed up transactions.
Solidcoin supplied an actual physical token, which wasn’t technically needed. But each is stamped with a QR code so EthDenver attendees can walk in, scan the token and have their phone up and running with the Burner wallet and some Dai to start buying pizza from the Wheels of Fire food truck, vegan tater tots from Chibby Wibbitz or BBQ platters from Rolling Smoke.
And after the show ends, the project will live on. The technology can be easily shared with other food trucks and retailers. And because it uses a decentralized payment system, transaction fees are much less, around 2 cents for Dai versus 2.9 percent of the sale for Visa transactions.
“These food trucks will be equipped after we’re done with the ability to accept cryptocurrency anywhere in the world,” Paller said. “And they’ll have the ability to turn it into U.S. dollars anytime they want.”
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