Blockchain, DLTs, and a Lot of Crypto-Bashing: Main Takeaways From Davos WEF
Recap of what went on at WEF Davos 2019 (spoiler: a lot of “blockchain before Bitcoin”)
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Similar to the last year, cryptocurrencies were one of the major talking points in Davos. In general, it seems that the “Blockchain before Bitcoin” attitude prevailed this time, as the overall positive outlook on the technology coincided with a significant portion of crypto-bashing.
WEF announced Global Council on Blockchain, co-chaired by BitPesa founder
As one of the most important takeaways from the forum, the WEF appointed the CEO and founder of BitPesa, Elizabeth Rossiello, to serve as one of two co-chairs of the Global Council on Blockchain. BitPesa is a Kenya-headquartered startup with the focus on blockchain-powered fiat remittances among the United Kingdom, Kenya and several other African and European countries. The firm was allegedly the first blockchain company to be licensed by the U.K.’s Financial Conduct Authority (FCA), as per a press release from the company.
The newly established Blockchain Council, in turn, is part of the San Francisco-based Fourth Industrial Revolution and Cybersecurity Center created by the WEF in 2017. The forum has notably recognized blockchain’s major role in the Fourth Industrial Revolution as early as 2016, naming it a “World Economic Forum Technology Pioneer” alongside the likes of Google and Wikimedia, which have received the award in the past.
At the latest WEF Annual Meeting in Davos, Rossiello reportedly worked with industry experts and the council’s thirty members — including representatives of regulatory agencies, as well as the civil and fintech spheres — to outline the council’s agenda and main priorities.
Later, in May 2019, the council will hold its convention in San Francisco, where it will commence its formal advisory role to the WEF. Its mission seems quite ambitious, given Rossiello’s statement that “2019 will be a critical year for the blockchain industry.”
Sheila Warren, head of blockchain at the WEF, said that Rossiello was chosen for the role of the council’s co-chair “not only for her diverse background in this space, from technical expertise as well as regulatory, but also for her ability to bring together members of this often fragmented ecosystem.”
“Whether we like it or not, governments are some of the most successful distribution platforms. If we can find a way to use government to actually deploy and use blockchain technology, we’re going to move a long way towards adoption.”
Global Blockchain Business Council reported that 40 percent of institutional investors are really bullish about blockchain
The trade association titled the Global Blockchain Business Council (GBBC) presented some evidence regarding investors’ interest in blockchain at the WEF meeting. As much as 40 percent of institutional investors believe blockchain may be the most important innovation since the internet, according to the association’s survey.
GBBC reportedly interviewed 71 investors over two last months to gather data for the survey, 40 percent of whom agreed that blockchain could be the “most transformative” tech since the internet. Additionally, just under a third of the respondents believed businesses would need to find a head of blockchain on their boards within the next five years. Further, 38 percent of the interviewed investors considered that firms would need to present their blockchain-related roadmaps within that time frame.
“There is little doubt about the potential impact blockchain can have on most sectors, and key areas of everyday life,” GBBC CEO Sandra Ro commented at the WEF:
“Increasingly, the winning organisations of the future will be those that have a clear and comprehensive strategy for blockchain […].”
Circle CEO Jeremy Allaire stood up for crypto
Jeremy Allaire, CEO and co-founder of Goldman Sachs-backed crypto finance company Circle, who was a panelist at the “Building a Sustainable Crypto-Architecture” talk, countered the obligatory crypto mongering (which will be detailed further below) by arguing that virtual currencies will be essential for surviving the digital age due to their decentralized nature:
“Crypto is fundamental to the future. […] We need tamper-proof, resilient, decentralized infrastructure if we want society to survive the digital age.”
Allaire also commented on the stigma attached to cryptocurrencies. “People throw around ‘crypto’ like it’s a bad thing — it’s scary,” he said. “Guess what? Cryptography is at the foundation of protecting modern society, human privacy. It’s a fundamental tool of our cyber defenses. It’s a fundamental tool of every corporation.”
Furthermore, Circle’s CEO claimed that crypto can go hand in hand with centralized, conventional institutions like central banks. Allaire referenced Circle’s stablecoin, which it co-launched with Coinbase in October, to support his argument:
“We’re huge proponents of central bank digital currency and we believed in that for a very long time. […] Our view is that the creation of cryptocurrencies that are based on central bank money is happening in the private sector first. We launched USD Coin last fall. It’s growing rapidly.”
Jamie Dimon refused to take a victory lap after Bitcoin’s fall, appeared positive about blockchain
JPMorgan Chase CEO Jamie Dimon, who famously said that he doesn’t “really give a s—” about Bitcoin (BTC) in the past, was asked if he took any satisfaction when the cryptocurrency plunged in 2018. Dimon replied that he didn’t.
Moreover, the JPMorgan Chase CEO noted that he is pro-blockchain, despite the excessive hype around the technology. In his view, blockchain is a better replacement for certain online databases.
“Blockchain is a real technology — it’s just a database we can all access that’s kept up-to-date,” Dimon told CNBC at the meeting.
Indeed, the American investment bank has a history with blockchain. In October 2017, JPMorgan Chase announced its own blockchain-enabled system for global payments that will “significantly reduce” the number of parties involved in the transaction chain, hence reducing remittance time “from weeks to hours.” Further, in May 2018, the bank filed a patent for a peer-to-peer payment network based on blockchain.
In October 2018, the research group ResearchAndMarkets.com (RM) published a study claiming that blockchain is a key technology for JPMorgan Chase’s development roadmap to become a major digital bank.
‘Dr. Doom,’ PayPal CEO, and others slammed crypto
Other industry representatives appeared less collected in their remarks about crypto. Perhaps the harshest of them was New York-based economist Nouriel Roubini also known as “Dr. Doom,” who introduced himself as the “number one public critic of cryptocurrencies and blockchain” during a panel hosted by crypto exchange LaToken.
The economist started off by referencing his testimony for a hearing of the United States Senate Committee on Banking, Housing and Community Affairs, which was released in October 2018. In it, he claimed that blockchain is “no better than an Excel spreadsheet,” a remark he recalled as being “provocative” during his speech at the WEF forum. In the paper, Roubini also called crypto “the mother of all scams and bubbles” and blockchain “the most over-hyped technology ever.”
Further, speaking during the panel, Dr. Doom criticized the use of private distributed ledger technology (DLT), stressing that they are neither trustless nor decentralized and are falsely marketed as blockchains. He also pointed out that central bank digital currencies (CBDCs) don’t have anything to do with either blockchain or crypto.
Nouriel also harshly criticized what he described as the “tokenization of everything,” explaining that having a token for everything essentially implies going back to bartering. He also pointed out how the characters in the Flintstones cartoon, which is set in the Stone Age, have seashells for a single currency, arguing that tokenization is worse than that.
PayPal CEO Dan Schulman also criticized Bitcoin, focusing on its limited use for retail purposes and scarce merchant adoption. However, he recognized the potential of blockchain.
“We’re not seeing many retailers at all accept any of the cryptocurrencies. But I think the underlying technology is interesting,” Schulman argued during an interview with CNBC. He then carried on to stress the technology’s importance over the digital assets it supports:
“I have always thought that crypto was more of a reward mechanism for implementing blockchain, as opposed to really a currency.”
Schulman has expressed his skepticism about cryptocurrencies in the past. Specifically, in January 2018, he said that PayPal’s mobile payment service, Venmo, has no plans for crypto due to its volatility:
“The volatility of the cryptocurrency [Bitcoin] makes it actually unsuitable to be a real currency that retailers can accept.”
Another WEF attendee, Huw van Steenis, who is the senior adviser to Bank of England governor Mark Carney, told Bloomberg that he is not worried about cryptocurrencies, curiously naming their speed as one of the main shortcomings:
“I’m not so worried about cryptocurrencies. They fail the basic tests of financial services. They’re not a great unit of exchange. They don’t hold value, and they’re slower.”
Ripple’s CEO subtly called out Joseph Lubin on centralization
The panel dubbed “Where is Blockchain Headed in 2019?” saw both Ripple CEO Brad Garlinghouse and Joseph Lubin, a co-founder of Ethereum (ETH) and founder of the blockchain company ConsenSys, featured in the expert panel. While the discussing was overall tranquil, at one point, a light contention occured.
When the panel host, Robert Hackett of Fortune magazine, asked Lubin to elaborate on how he manages ConsenSys’ and his personal treasuries, Lubin replied that there would be no comment from him, adding that the assumption that he is one of the biggest ETH holders is “based on no data.”
At that point, Garlinghouse stepped in, claiming that Ripple is “attacked for being transparent,” referring to quarterly XRP markets report, the latest of which was presented soon after the talk:
“Because we share them [market reports] we’re attacked for it, yet other platforms don’t share that information, so they’re insulated from the same critiques and criticisms. I think in the dictionary that’s called ‘hypocrisy.’ I’m not 100% sure, but it’s close”.
The moderator then asked whether ConsenSys has plans for greater transparency, to which Lubin replied that they’re a private company, and he has not considered releasing information about its operating costs. “Ripple is a private company, too,” Garlinghouse interjected.
Blockchain’s potential for the health care industry was highlighted
One of the panels centering on blockchain was dedicated to the health care industry specifically. Titled “Blockchain in Healthcare Insurance and Beyond,” it featured Lata Varghese, the head of blockchain at the U.S. IT corporation Cognizant, and Zia Zaman, the chief of innovations Asia at global insurance provider Metlife, as experts.
The talk’s moderator asked to focus on real-life use cases for blockchain, aiming to “cut through the hype.” The panelists mentioned Vitana, a blockchain-powered insurance solution for diabetes sufferers developed by Singapore-based digital innovation center Lumenlab, as one of the examples.
Additionally, the talk covered other benefits that blockchain can bring into the health care insurance industry, like speeding up insurance claim payments and better access to patients’ records.
Hong Kong regulator sheds more light on the Bitmain’s IPO
The head of the Hong Kong Stock Exchange (HKEX) addressed queries about initial public offering (IPO) listings amid confusion over Chinese Bitcoin mining giant Bitmain’s application while speaking at the forum.
Bitmain made the majority of its revenue from mining hardware sales in the first half of last year. In May 2018, it announced plans to turn toward the area of artificial intelligence, citing the Chinese crackdown on the crypto industry.
The company had planned to conduct an IPO in Hong Kong throughout the second half of 2018. However, after financial performance figures suggested the company was in trouble, rumors began surfacing that the local regulator was hesitant to grant a cryptocurrency IPO.
At the WEF forum, HKEX CEO Charles Li Xiaojia said that it was important that IPO candidates are consistent about their business offerings.
“If a company made billions of US dollars through Business A, but suddenly said it will do Business B without showing any performance, or said Business B is better, then I don’t think the Business A featured in their application will be sustainable,” English-language newspaper South China Morning Post (SCMP) quoted him as saying. Xiaojia continued:
“Besides, if regulators were hands off [on Business A] in the past but will regulate it in the future, will you be able to continue the business and still make money from it?”
However, Xiaojia did not directly mention Bitmain, although the journalists had referred to the company by name when asking for clarification.
Recap of what went on at WEF Davos 2019 (spoiler: a lot of “blockchain before Bitcoin”)