Blockchain, Beyond Bitcoin

Session Description: Why blockchain matters, and how it can help both business and society.
The transcript can be found below with a PDF version available here.

Blockchain, Beyond Bitcoin

(Transcription by RA Fisher Ink)

Kirkpatrick: If you’re ready, Rob, take it away and introduce your panel. Thanks for being here. Really appreciate you stepping in.
Marvin: Of course. Hey everybody, welcome to Techonomy’s blockchain panel, you know, that word that everybody who works in tech or uses Twitter is probably tired of by now. I’ve been covering blockchain at PCMag for the last two years, so I’ve seen the perception change from fascinating emerging technology to sometimes overused buzzword. Even Long Island Ice Tea changed their name to Long Island blockchain.
[LAUGHTER]
But we’re here to talk about what blockchain really is, why it has the potential to be such a transformational innovation, and why I think it’s kind of a foundational technology. I think decades from now, we’re not going to be talking about the word blockchain, because it’s decentralized, immutable tech. It’s just going to be kind of a given in how we interact with our digital worlds. We’re also not here to talk about cryptocurrency, except for Women’s Coin.
So let me bring out our panelists, which is about how blockchain-based tech has the potential to change the way society works, and really our panelists are proof of that. Everybody, take a seat.
So Christine Bamford of the Women’s Coin Foundation is helping ethical cryptocurrency purchasing become a force for good for gender equality. Dakota Gruener of ID2020 is leading a global movement to make sure that everybody in the world, especially those without a government-issued ID, can take solace in a digital one. And Jalak Jobanputra of FuturePerfect Ventures is spearheading investments in blockchain startups that are making a real difference. One of their companies is even helping make sure that the diamonds you buy are conflict-free.
So now that they’re all here, can we give our panelists a warm welcome?
[APPLAUSE]
Okay Christina, I want to start with you.  Can you give us a quick explainer of what Women’s Coin is and what this concept of ethical purchasing is?
Bamford: Okay. So Women’s Coin is a cryptocurrency with a humanitarian foundation on the side. And so why Women’s Coin? Well actually, it might be a bit of a secret. It’s not exactly out there, but women control up to 70 percent of household spend. I was just chatting to my girlfriends as you do, over a glass of prosecco and one of my girlfriends said, “Christine, you’re absolutely right. I decide what food goes on the table. I decide what clothes my children wear, the shoes, and I even decide what clothes my husband wears, and his shoes, and his socks, and his underpants. You are quite right.” And so how we came that not only is it the food that goes on the table, but it’s also discretionary spend as well, with more women working. So this is an enormous force. Globally that spend is $33 trillion, set to rise to $40 trillion end of this year. So we think, well, if only 10 percent moves to a women-only currency, then actually we’ve got a huge business there.
But it’s about how to be an ethical purchaser. So we’ve heard much, haven’t we, about organizations having a purpose and a brand. Well actually, we can decide that we want to actually purchase from those organizations. We can force the pace of change. And at the same time, what we’re saying is, well, this is great for us women who’ve got that control, but what about other women who are surviving in some very challenging environments. So by looking at how and where you actually decide to spend, through that maybe make it a donation or maybe getting the company who you’re purchasing from to make a donation, then what we have is sort of like a virtual cycle of investment and reinvestment. So that’s the sort of underpinning premise of it.
Marvin: Right. And I want to throw it over to Dakota and talk about ID2020, which at the World Economic Forum a couple of months ago added Microsoft, the Hyperledger Project, a U.N. organization—I wanted to just ask you why ID2020 feels that global identity is so important globally, and also why you’re exploring blockchain.
Gruener: Sure. So I should be the first to say that I’m an unlikely participant on a blockchain panel. I come from the international development community, and my focus on identity came out of a focus on international development. Globally, there are over a billion people who have no form of recognized identification. That prevents them from getting access to some of the most basic and critical services that we all take for granted, everything from enrolling your kid in primary school, getting access to basic vaccines, but certainly getting something like a bank account, a passport, any of the sort of tools that we use to truly have economic and social opportunity.
And ID2020 grew out the belief that that’s a fundamental human right, the ability to prove who you are. And the problem is at the moment we don’t afford that opportunity to everybody, and there are those for whom dependence on the traditional solutions, sort of a paper-based document issued by a government, simply isn’t viable. If you’re a refugee fleeing from one government to another, from one country to another, there’s real risk in having those paper-based documents on your person. Moreover, there’s risk of them being stolen or eroding, getting wet, whatever it may be. And so what’s really important is that for those individuals, they have the ability to prove their identity in a way that’s privacy protecting, that’s portable, and that’s recognized by the organizations with whom they interact. And that’s really what has taken us to thinking about blockchain.
I should stress of course that those user requirements are not unique to the humanitarian sector. I think all of us in the last couple of weeks have had sort of striking reminders of why privacy is really, really important to us, and so what we’re seeing is sort of this interesting convergence of need in some of the most vulnerable populations on the planet, as well as here in New York City, around the importance of having new models of digital identity.
And what ID2020 is, is a collection of public and private partners, all of whom are committed to upholding these standards and ethics around privacy, around user control, around portability, and laying the foundation to make that possible. And so that involves work on the technical side, of how do you bring technology to scale that could do that, lots of work on the blockchain side there. But also what are the standards that we required for interoperability or broad recognition, and then testing and implementing these in the field. So working with organizations like UNHCR, the U.N.’s Refugee Agency, to design pilots to see whether a user-controlled digital identity could actually meaningfully improve a refugee’s access to services. I just had a conversation with someone in the mayor’s office in Los Angeles and they were describing the needs of migrants in L.A. being absolutely identical, and so, you know, trying to find alternate use cases and opportunities to improve these people’s lives.
Marvin: And Jalak, FuturePerfect Ventures doesn’t invest solely in blockchain companies, but you guys have almost a dozen, I think, in the portfolio, with everything from cross-border payments and investment to Everledger with securing diamonds. So I wanted to talk about what you look for in a blockchain company when you’re looking to invest in a startup, kind of the societal good or the factors that really make them stand out for you.
Jobanputra: Actually, over 80 percent of our capital is invested in the blockchain section. We were one of the first investors worldwide to focus on the sector in 2013 when bitcoin was a dirty word. But I’m going to back up about why I became interested in this sector and it’s—I was born in Nairobi, immigrated to the U.S. when I was five years old. I grew up going back to India and Africa in the ‘80s. And I’ve always been interested in development. Then I worked on the Netscape IPO in 1995, when I was an investment banker, and kind of got hooked on this notion that technology could lead to solutions in the developing world as well as the developed world. Became a VC in ’99, and about five years ago, I left the fund I was at, decided to start my own fund, and I knew that we were ripe for a new technology wave. Every 20 years, whether it’s a PC, the internet, and now blockchain technology, there’s new technology that’s highly disruptive. And I went to my first bitcoin conference in 2013 and started digging into the technology behind bitcoin and I thought this could be the solution to identity problems that exist, or lack of identity, the 2.5 billion people around the world who are unbanked, the billions more that are underbanked.
Our institutions of the 20^th century are very centralized, very cost inefficient, just because the technology wasn’t there for more efficient ways of reaching people in rural areas or figuring out more real time credit scoring versus looking at 10 or 15 years ago. So I just started digging in more and the more I dug in, the more I thought this is not just a solution for banking, it’s not just a solution for identity, but it’s a solution across different sectors to really empower the people that haven’t been able to participate in the world economy. And that’s people here in the U.S., and that’s people in Afghanistan and Africa.
What I look for in a blockchain company? Look, we’re in a very nascent stage. I was fortunate enough to have invested in the early internet days, out in Silicon Valley in ’99. I think the key is finding the entrepreneurs who can be resilient through all the ups and downs of a nascent technology and who have mission and passion. And that’s where, if you look at our portfolio, a lot of these companies and entrepreneurs are very mission-driven to create a better world and have social impact. And those are the companies that are going to survive any downturns in technology that may happen.
Marvin: And can you talk briefly about just some of the companies that you’ve invested in that kind of exemplify that to drive this home?
Jobanputra: Yes, so there’s a company called BitPesa, I invested in 2014. And the founder wanted to use the bitcoin backend, the blockchain backend, to create more efficient money transfers. In Africa, it can cost up to 20 percent of a transaction to move money say from Kenya to Nigeria because you’re going through so many banks and FX transactions. Everything gets converted to the dollar and back to local currency, back to the dollar. Highly inefficient, because there’s not a lot of trust between these institutions. And that’s why everything reverts back to the dollar. It can often take weeks for that transfer to be completed.
So Elizabeth, the founder, thought we can just have FX transaction that’s fiat to bitcoin back to the local fiat. People can choose to be paid in crypto. Now it’s several cryptos, but at the time it was just bitcoin. And it’s almost instantaneous. These have come down to two to three percent. It’s more money back in the pockets of people who can reinvest it in their families or the community or their businesses. And now their biggest corridor is actually Nigeria/China, where there’s just a lot of B2B transfers happening. There are a number of multinationals that are using their system, even multinationals in the U.S. that are paying employees in Africa. So that’s an example where a lot of people say, well, is this really being used out there in the real world? There are lots of places in the world this technology is already being used.
Bamford: And certainly Women’s Coin will also be doing something very similar, if not working in partnership. Because that’s the concept. You have a cryptocurrency, but it should move seamlessly into fiat. And also we’ll be being prepaid credit cards for those who don’t really want to dabble in crypto. But it’s all about actually getting the brand out there, actually deciding who you’re going to be purchasing from, and using the power that we have that we’re not using particularly well to actually force more ethical working, and in a varied form of currency.
Marvin: I want to broaden the discussion now. We could spend this whole time talking about the mechanics of decentralized ledgers and networks, but I want to make it simpler than that and just sort of open it up to why blockchain matters in sort of a larger societal sense. What does the technology give us that the internet hasn’t had up until this point?
Gruener: To give a one word answer, I think it gives us trust. I think that what we see is that we’re sort of working in a trustless environment currently. You go online, you have no way of knowing that the person the other side of the transaction is who they say they are. And as we move our kind of physical transactions increasingly into dependencies with digital systems, that becomes true of even the sort of more typically in-person transactions. And what the distributed ledger does is allow you to have this trust amongst non-trusting parties.
And at least for identity, the reason that it could be valuable is that if you imagine somebody moving around trying to prove who they are to a whole group of different organizations, there’s one world in which you say every single person needs to agree on sort of a single source of the truth of who that person is. That’s never going to happen, right? You can’t sort of imagine even a way that all the U.N. member states could sort out a common model of doing identity at the national level. But if you have a model that instead allows you to very seamlessly, in a trusted manner index across lots of different stashes of information, it facilitates that portability without requiring everybody to agree on—
Jobanputra: Yeah, that’s where costs come out of the system. Because right now, we have so many intermediaries that are tasked with verifying transactions, verifying identities, and then those are all leakage points where corruption can happen. And I actually—a lot of people call blockchain the trustless trust. You do have to trust in the computer verification, the algorithms. My argument back to that is we’re already starting to do that in many other instances without knowing it. And this is a way that we can all get engaged to make sure that the standards that are set are ones that we feel comfortable with before it kind of gets away from us.
Bamford: I agree with my colleagues. When I had the rather neat idea about having a blockchain business school, which was just for the title, because of course you can have a blockchain passport, education passport, learning passport. You can have your identity. You can actually look about how you develop your skills, and it can all be done sort of transparently using blockchain. So I thought, well, I can see it really moving into the education sector. But I do support the fact that identity is the critical win-win that’s coming out of it for humanitarian reasons. And for me that is a real glimmer, real hope on the horizon, not just for refugees but for getting people out of the poor.
Jobanputra: Right. So an example with identity, if we all owned our health records, we owned our property records, and we owned our financial history, and each piece of data associated with our person would have a code that only we can permission out, then we can decide who gets access to that data and which pieces of that data we’re okay with.
Right now, insurance companies have all our information, our financial history, every single bit of our health records, our driving records, all of that, and if we can decide what goes out there, I believe that we’re actually going to live in a world of way more efficient markets and we’re not going to have the hacks that happen now and our health records being sold on the dark web. And so education, credentialing, someone sitting in rural India may have great capabilities and may have all the skills to do a project for someone sitting in the U.S. but how do we know that? If they can be credentials through a trusted system, then they have access to income that they wouldn’t otherwise have access to, I would have access to really strong talent. And that’s where I see all of this headed in terms of impact and contributing to all of our well-being.
Marvin: Right. And there’s vast potential in all this. But you also mentioned that it is obviously a nascent industry. There’s a lot of maturing to do. So I wanted to talk to you guys about, at least right now, where you’re seeing the most maturity, the applications that are the furthest along and that we look at that are leading the industry?
Bamford: The smart contracts, yeah?
Jobanputra: Well I used the example of BitPesa. I think payments in emerging markets is certainly an area. So if I look at my portfolio, that’s a part of the portfolio that has grown quite quickly. Obviously anything associated with crypto asset trading, the last year, I mean, we went a crypto winter 2014 to 17, and then exactly a year ago it kind of exploded. I think this whole idea of tokenization and being able to factionalize ownership, that’s an area the next fund is very focused on.
Bamford: Certainly we’re looking at tokenizing our city. Which I think is going to be a great scope for the future, and how you take tokenization into helping social good. And that’s almost the next emerging thing I think. For me, I think that’s really exciting, that every citizen can be part of that and you can attract inward investment and you can help those who have not. And so I see tokenization also as being “watch this space,” as they say. Watch my space as we take it into Bristol.
Marvin: Dakota?
Gruener: I would actually be the first to say identity is not there yet. There’s a lot of work going on it and there’s a lot of people actively engaged in the space. I don’t think we’re at the point where there’s an emergent consensus about how this will move forward. And I think in particular, there isn’t an entirely shared belief around what those foundational principles really are. And so what we’re really trying to do is get people together around a robust governance mechanism to have a discussion about those principals and ensure that we’re embedding them in from the get-go. I think it’s a good thing that it’s not there yet, right? I mean there are very, very serious concerns presented by identity systems and we don’t want to get the cart in front of the horse.
Bamford: But I think it is worth flagging that actually identity on your mobile phone is already there.
Marvin: Right.
Bamford: Biometric and—
Marvin: And this will be the last word.
Bamford: I’m getting to the last word, honest. [LAUGHS] But that is really cool. We’re going into proof of concept on that, so how you can put all those blockchain business skills on your phone, but you’ve also got identity. Now, I know that’s not at the government level, but it’s a little start. And I do believe that we have to grow this from the bottom up and the top down and that’s the way you make really lasting change.
Marvin: All right. Thank you guys so much.