>> Voiceover: From New York, it's the Cube! Covering Blockchain week. Now here's John Furrier. (music) >> Hello, everyone, I'm John Furrier. We're here on the ground, exclusive coverage for Consensus 2018, part of Blockchain Week New York Hashtag us BlockchainweekNY for New York. I'm here with Jimmy Song, who's a partner at Blockchain Capital. A celebrity in the industry, original core bitcoiner, does a lot of work teaching programming- programmable programming bitcoin dot com, also- >> Programmingblockchain.com >> I mean, sorry- programmingblockchain.com On the panel, yesterday, really kind of calling out in really a provocative, in discourse way- Civil discourse, state of the blockchain. Welcome to the Cube conversation. Thanks for coming on. >> Thanks for having me, it's a pleasure. >> So, great to have you on! One, you do a lot of due diligence for Blockchain Capital out in San Francisco, you seal a lot of deals. You're in the space, been there early- on a panel, yesterday, here at the event quite a lot of fireworks going on. You were kind of throwing some haymakers out there, some Molotov cocktails, creating a provocative civil conversation around the state of blockchain- we call it blockchain-washing, where people kind of throw blockchain at something and then say, "We're good, but not good." Your thoughts on that? What was the reaction? >> Yeah, so, I mean Amber Baldet went up and she talked about her product and I just saw lots and lots of buzzwords. And I didn't know what the heck it was, and I thought the rest of the audience doesn't know what it is, either, if I can't get it. I'm a technical guy, I've been around for a while, and I don't understand what the hell this is. And really, a lot of these decks, they just show different pictures of companies and say, all these other people- it's all social signaling, right? It's not about the tech at all, or what it's all about. So I just sort of gave voice to all those people in the audience that were thinking, "What the hell is this? This doesn't make any sense." So I said, "I just see a lot of buzzwords and I don't know what this is and I'm kind of cynical about all this stuff 'cause I've seen so many decks that are like this." And I said, "I don't know if there's anything here." I think a lot of the stuff that's being sold in this industry is just snake-oil. >> Snake-oil is something that people are worried about, but also there's obviously two perspectives: One is, I'm long on the sector, I love the action, I compare to the big waves we've seen. Lot of growth coming. You can kind of easily connect those dots, but the reality is it's still maturing, still embryonic, still more work to do. There's companies out there that are trying to get on the wave. But the model of their business and/or their tech is centralized. So you can't just flip the switch and that was one of your key points. I really want to unpack that. This is a fundamental ethos and also architectural challenge You got to be compatible with the infrastructure the way it's rolling out. Describe what more in detail what you mean by your thoughts on having a decentralized either, company, or architecture. >> Yeah, so a lot of these companies are taking a centralized system and trying to add a decentralized tech into it, like a blockchain. And it doesn't work because the fundamental proposition of a blockchain is that no single person controls it. But these are companies that are trying to control it. I wrote an article yesterday, I released an article yesterday morning, in preparation for what I was going to say on the panel, in part because-- and it's called, "Why Blockchain is Hard" Large part of blockchain is it's extremely expensive in so many ways. And it doesn't really make sense to do it unless you get decentralization. But if you have a centralized point, you're having to trust that centralized entity, anyway. So, putting that thing into it doesn't really make any sense and the tech is just not a good fit. >> You and I were talking before we came on camera about our computer science backgrounds and high-fiving each other, but the bottom line is we've seen paradigms in computer science that have done a lot of these things before: Gamification, token economics, rewards programs. All kinds of things that have been done with traditional databases and distributed computing. So, the question that I hear a lot is, from people that like the wave, the sea of possibilites, they ask the question: Why blockchain? So that's the question I want to ask you. If someone's out there, looking at their business and Okay, what is this? Why blockchain? What's in it for me? How do you react to that? How do you answer that question? 'Cause it's an important one. You're either "yes" or "no"-- It's kind of, almost binary. "Yes, I'm in, it's good for me" or "not compatible." What's your response to the question? >> Yeah, so first of all, that is exactly the question you should be asking as a business person. If you're not getting any ROI out of it, then why the hell are you using it? Vast majority of the time, you're not going to get anything out of the blockchain unless you're using bitcoin or something like that which actually is sort of sound money that's not inflated away by the government and things like that. But there are aspects of the blockchain that I think are very useful. I think 99% of the products that are out there that are touting blockchain-- most of them are really looking at a technology from 1991. Public key cryptography. They just want proof that certain things happened and they want transparency around that. And if you have that, you don't really need the entire apparatus of a blockchain, you just need the public key cryptography. Why do you need the whole blockchain? It's so confusing to me why they conflate the two because it's-- public key cryptography is so much easier to understand. >> And there's some overhead involved in blockchains, it's early on. What are some of those areas that are obvious, that you can just share for the folks that aren't inside the ropes on the industry? What are the obvious areas of concern in blockchain? Latency, gas, turnaround. What are some of the things? >> From a blockchain's perspective, first of all it's extremely hard to develop. As a programmer, agile methodology, obviously, has been very popular. You iterate over and over again. Facebook's motto is "Move fast and break things." You can't do that on a blockchain. You can't move fast, you can't break anything. 'Cause if you break anything, the entire data block structure is completely corrupt and then it's no longer useful. So you have to get everything right at the first time. You have to also-- like you said about gamification-- you have to be very careful about incentives 'cause if you get the incentives wrong and someone has an economic incentive to abuse your blockchain, they're going to do it. There's also all sorts of costs from a maintenance perspective 'cause you have to not only store the data, you have thousands of nodes, everyone has to store the data, everyone has to verify the data, everyone has to transmit the data. This is 1000X the cost of a centralized database. That's a tremendous cost to pay and you could do a lot of the same things that you're looking for if you're a centralized entity already, with back-ups, receipts, audits, public key cryptography. There are ways to get a lot of the things people are touting without necessarily using this heavy, heavy, expensive slow apparatus. >> It's like building the Linux kernel when all you need is an application. >> Yeah. >> And the developer requirements are high. >> Yeah, yeah. >> As well as the overhead involved, and cost. >> Yeah. You're trying to use a construction vehicle to run your groceries, or something. >> It's crazy. >> Just find the right tool. >> What are some of the things that you could share for folks watching, either entrepreneur, developer, or business executive, that says "Hey, you know what? I want to learn more." Obviously, there's some good trends going on. The trend is your friend. You see cloud computing horizontally scalable, fully synchronous platforms. You got open source rising at a whole 'nother level, really good things going on there. Now you enter blockchain decentralized applications. What's the areas that people should focus on to go to that next level? Whether it's a toe in the water or just to jump in and get going. >> There's several things to unpack in that question. First, I think if you are interested in what blockchain technology actually is you should really study bitcoin 'cause that's really the first place it came and I would argue the only place that it actually is decentralized. Everything else has some single point of failure and most of it is not really decentralized. The other thing is, there are aspects of blockchain technology that are very interesting that you could totally utilize for your own thing. Like public key cryptography. I was talking to a startup, yesterday. They were saying, "We're going to use the blockchain to do something to optimize this part." I was like, "Why don't you just use receipts that are signed? 'Cause I think that's all you need." And they were like, "We never thought about that. We've never heard of these receipts! What the hell are receipts?" Well, they've been around for thousands of years, You could have them signed with a public key-- a private key-- and you can verify with a public key. There are all sorts of things that have been around for thirty years that you could utilize but they just don't realize that it's there. And blockchain is sort of a way to bring in into the conversation. >> Jimmy, talk about the ICO craze. Obviously, one of the things that I think is important is that when you look at these new waves of change, efficiencies are key, right? Inefficiencies get abstracted away with abstraction layers and what we see with blockchain is early indicators of where we think it might go. It takes an inefficiency and makes it efficient. No one control, maybe some democratization thrown in there. I don't see venture capital private financing-- >> Mmhmm (affirmative) >> seems to be inefficient with all the ICOs, it's like, a lot fundraising going on with ICOs. What's your take on ICOs? Good, bad, ugly, at the moment? Legit? >> I think ICOs are a broken business model. Completely broken business model. You're funding something-- you're funding a restaurant, you're selling seats to a restaurant before the building's built. Right? Or you have a menu, or anything. And the whole thing about an ICO is you have to design the incentives, there's a blockchain, most of them, right? And you have to design the incentives at the beginning and it can't ever be wrong. If it's broken in any sense, then you can't pivot! Most startups, you fund them, you believe in the people, and you go, okay, well, if it doesn't work, at least we invested in smart people that could pivot they could do something else. You can't do that with an ICO. And right now, my take on it is, the reason that they're getting funded is there's a big public demand for asymmetric payoffs. That's why lotteries are popular. But the government no longer has more or less a monopoly on lotteries. You have ICOs and things of that nature so, I don't know. I just don't see them as being a legit business model or that many good things coming out of it because they are, more or less, kickstarters where the people that are delivering don't have to deliver anything to take the money. >> It sounds like a great thing if you want free cash. It's not a business model, I agree. Is it a mechanism? Do they hang around? Does it morph? Or does it just completely go away in your mind? >> I was talking more about utility tokens. I think security tokens might have a place, so if you already have a business and you want to securitize it, sort of outside that investment banking infrastructure, that might make sense. You have efficient distribution mechanism for dividends or something like that and preferred shares, whatever. That could be useful and it does sort of take out some middle-men. But as far as ICOs as they're currently construed as a way to raise money, not really. >> Jimmy, I want to ask you: we've seen three kinds of companies in the ICO space. Startups selling seats to a restaurant that doesn't exist, yet. Not going to last long. Okay, put that aside. And then, the Hail Mary play. "Shit, we're going out business!" It used to be open source, now let's do an ICO. So, we got to guess and throw money at the wall-- we do a Hail Mary. >> Uh huh (affirmative) And then the middle one is growth opportunities. Some companies that say "Hey, you know what? We have a decentralized-- we might have token economics built into our model. We could actually turn this into a growth strategy for our business-- both business model and technology platform. For those companies, what does that picture look like and what is your recommendation for someone, entrepreneurial or techie, to take their business and create a growth strategy, both CTO, CEO-level approach? What's your view? >> I've actually heard a term of exactly what you're describing and it's called the reverse ICO. And it's these companies that exist that can't raise any funding so they use an ICO to raise money. I actually don't know how that's going to shake out or whether or not it's recommended 'cause we really haven't seen much of it, yet. >> It's a pivot. >> It's a pivot and a way to get money that's in a cheap way. I don't know how long it lasts. >> Well, legit growth company-- say, self-funding or done some V.C. Say some guy's going, "Hey, we want to grow. We have traction. We're an existing business. And I have some databases. I might want to open it up and do token economics or apply blockchain if available." What should they do? What's the vision of how a growth strategy-- a real growth strategy can be built? >> Man, I wish I could answer that question, 'cause I might try it! >> I know, that's why I'm asking. It's the million-zillion-dollar-question. >> It's really difficult to know and I encourage entrepreneurs to experiment in this area and obviously if you were doing unethical I wouldn't recommend it at all but if there's a real way that you can do it without screwing up, screwing your investors or your users or your employees, then by all means, try it! But I'm not going to tell you that something's going to be successful. I really don't know. >> Jimmy, thanks for spending the time, I know you're super busy. I know your voice is going-- you've been on panels. You've been doing a lot of networking, meeting a lot of folks. Thanks for spending time here on the Cube. I really appreciate it. >> Thank you so much, it was a lot of fun. >> We're here on the ground in New York City for Blockchain Week. This is Consensus 2018, Silicon Angle the Cube Coverage. I'm John Furrier, thanks for watching more coverage here at thecube.net (music)