Reflections on NYC Cryptocurrency Conference

It’s been almost a month since I returned from my first ever blockchain/cryptocurrency conference and I am still trying to process what I witnessed. Calling Consensus 2018 a spectacle would be like calling Gary Busey different; 8,500 people – up from 2,700 the year before – crammed the Midtown Manhattan Hilton for three full days of talks and panels on all things blockchain and cryptocurrency. After hours entertainment, for the lucky few – of which I was not – featured a Snoop Dogg concert and a yacht party in New York Harbor replete with a raffle for two Aston Martins.

Upon walking past three Lamborghinis parked outside on day 1, attendees were confronted with a crushing line that took 45 minutes to work through – inordinate even by New York standards. Naturally, I pondered the purpose and meaning of the line. What was awaiting me at the front, and what was the point of downloading the official conference app and QR code that represented my ticket? A lanyard, representing my official ticket, was the answer to the former question. As to the latter question, the answer eludes me, as I had to present a photo ID to receive my lanyard. This arrangement inevitably elicited grumbles and jokes that fell flat: “Isn’t blockchain supposed to do away with such anachronisms as IDs and lines?” The joke was revived by Republican Congressman David Schweikert – Co-Chair of the Congressional Blockchain Caucus – on a panel titled: “Blockchain Governance – A Legislator’s Perspective.”

I came as a neutral observer and healthy skeptic. My interest in the subject matter stems from my role at Duke Law, where I teach FinTech and the Law. My course covers the legal and policy issues associated with cryptocurrencies, but I am less familiar with how the underlying blockchain technology works in practice. So I was hoping to sharpen my technological skills, as well as learn more about how blockchain was being utilized in other industries. I was also trying to gain a feel for where the cryptocurrency industry may be heading and the types of people involved. Students often ask me how much I think Bitcoin is worth, and if the cryptocurrency market is a bubble. Like any good professor, I offer my authoritative opinion, but the truth is, I don’t really know. Perhaps I would find out at Consensus.

My first impression, after shock over the crowd size, was that these were true believers. Many attendees were wearing hats or shirts stamped with the logo of their favorite cryptocurrency or blockchain company. There was a palpable energy, a feeling that by simply being there, you were on the ground floor (or maybe the 1^st or 2^nd floor) of a technological revolution that will soon upend all industries. The excitement was fueled by the presence of multiple media outlets reporting and conducting interviews live from the conference, and costumed characters dressed up as cryptocurrency logos.

I was struck by the audience demographics. These were not your stereotypical tech bros in jeans and hoodies, or Donald Trump’s 400-pound hacker. By my informal count, there were more suits than hoodies, and while attendees skewed young, there were plenty of greybeards. However, women and minorities were in short supply – a problem that permeates the tech industry.

Looking at attendees’ lanyards, I noticed that suited attendees were typically from more staid institutions like venture capital firms, investment banks, and consulting firms; a sign that cryptocurrency has gone mainstream. Given the valuations attached to various cryptocurrencies and blockchain firms, the presence of the professional money class was not entirely surprising. What did surprise me was the sense that they too were true believers in the transformative potential of blockchain, and were not there simply because they smelled an opportunity to make a buck (admittedly, the two are not mutually exclusive.) In fact, many traditional financial institutions and consulting firms have begun to deploy their own blockchain products and services, and one of the more interesting speakers at the conference was FedEx founder and CEO Fred Smith, who talked about FedEx’s experimentation with blockchain.

Attendees were united not only in their faith in blockchain, but also in their disdain for those who dare stand in their way, mainly regulators and central banks.  When Federal Reserve Bank of St. Louis president James Bullard appeared on stage the first morning of the conference, he was greeted by a smattering of boos. Needless to say, his presentation on the contributions of cryptocurrency to socially harmful exchange rate volatility failed to win the crowd over.

Sharing the title for most reviled were a pair of former New York state government officials. Benjamin Lawsky, former superintendent of the New York State Department of Financial Services (NYDFS), authored the despised BitLicense regime, which took effect in 2015 and imposed new requirements on cryptocurrency firms wishing to do business in New York. On a panel titled, “What Will It Take For You to Love NY Again?,” Mr. Lawsky was accused of building a moat (the BitLicense) while head of the NYDFS and then charging firms to get across the moat upon leaving that role to start his own consulting firm. This is made all the more galling by Mr. Lawsky’s decision to join the board of directors of Ripple, a prominent cryptocurrency company that just so happens to hold a BitLicense.  Joining Mr. Lawsky on the rostrum is recently disgraced former New York Attorney General Eric Schneiderman, who earlier this year sent a burdensome information request to 13 cryptocurrency exchanges in order to “increase transparency and accountability.” When the cryptocurrency exchange Kraken, which is based in San Francisco and does not serve New York customers, refused to comply with the request, its CEO Jesse Powell was instantly hailed a hero within the cryptocurrency community. Speaking on the panel, Mr. Powell made the unfortunate comparison between Mr. Schneiderman’s treatment of Kraken and his treatment of women.

Crypto enthusiasts recognize that not all regulators are bad. Within the U.S., the Commodities Futures Trading Commission (CFTC) has been fairly accommodative when it comes to cryptocurrency; they even permitted Bitcoin futures contracts to come to market last December. The CFTC’s Chairman, Chris Giancarlo, has earned the moniker Crypto Dad for his embrace of cryptocurrencies – a title which he apparently relishes considering his frequent use of #CryptoDad on Twitter. Therefore, it was no surprise when CFTC Commissioner Brian Quintenz received a warm welcome when he walked out on stage to deliver some brief remarks. After passing along Crypto Dad’s regards, Commissioner Quintenz encouraged regulators to move quickly to clarify the status of Ether (is it a security or a commodity?).

While U.S. regulators are still grappling with how to treat cryptocurrencies, other countries have fully embraced the technology and came to Consensus to let everyone know. Bermuda Premier David Burt delivered a ten minute sales pitch on why blockchain and crypto companies should locate in Bermuda due to the country’s “friendly” regulatory environment and welcoming climate. Down on the vendor floor, the Australian trade and Investment Commission rented an entire room to let attendees know that, “Australia is perfectly positioned to play a leading role in the future of blockchain with a vibrant and rapidly growing ecosystem and proven use cases.”  My fellow neutral observer, Switzerland, was also in on the action, with a booth promoting their Crypto Valley, a 30-kilometer stretch of land from Zurich to Zug that is home to a number of blockchain projects and startups. And representatives from Hong Kong’s government where also there to let you know that their fair city is the best place to grow your FinTech business. 

I found the talks and panels to be informative, but the real action at Consensus was on the vendor hall a floor below, where hundreds of companies – most which I had never heard of – were hocking every sort of cryptocurrency and blockchain product imaginable. While sipping on some unknown concoction designed to resemble fog, I learned that I could rent out my laptop’s excess computing power through SONM’s decentralized fog computing platform. For the gambling inclined, there’s Bodhi, a decentralized prediction market that allows you to bet on the outcome of finance, sports, politics, and other global events. Perhaps you are a high net worth individual looking to invest in cryptocurrency; then Bankorus, “the world’s first crypto wealth management platform,” is made for you. Or, maybe you just want liquidity for your crypto assets without having to sell them. Good news, BlockFi will lend you US dollars in exchange for holding your crypto assets as collateral. Tired of having to manage your crypto assets across multiple blockchains; then move them onto Wanchain’s blockchain, which allows you to access any digital asset belonging to any blockchain. And if you’re looking to digitize your art collection and put it on the blockchain – and who isn’t – AlphaPoint is for you.

I know what you’re thinking: “this all sounds fine and dandy but what I’m really looking for is a way to combine my passion for cryptocurrency with my love for videogames.” You’re in luck! With CRYPTOCARZ, you can purchase your own sports car that is modeled and stored as a digital token on the Ethereum blockchain and upload your car to a virtual reality gaming platform that lets you compete against other car owners.

I could go on and on but you get the idea. Walking the vendor hall, I couldn’t help but wonder: how many of these companies will still exist next year (maybe I can place that bet on Bodhi)? Speaking with their representatives and reviewing their handouts, I had a hard time understanding exactly what many of these companies did, or how they would make money. But why spoil a good time with dull talk of things like cash flow? The vendor hall was proof of the incredible investment sums that have been pouring into the cryptocurrency/blockchain industry. The fact that many of these companies are destined to fail seemed irrelevant to those I spoke with. If you believe blockchain is going to change the world, betting on the right horse is all that matters.

By the time the conference ended Wednesday afternoon, I needed a break and time to process my experience. The conference confirmed what I already suspected, cryptocurrencies are not a fad that will simply go the way of Beanie Babies. There is too much talent, passion, and money going into the industry for this to be true. But I am still uncertain about the future. I was struck by the open talk amongst conference attendees that current valuations for cryptocurrencies and blockchain companies were unsustainable. Yet, talk of a bubble wasn’t dampening anyone’s enthusiasm for the future. The mood was captured in the official conference program by Michael Casey, who serves on CoinDesk’s advisory board (CoinDesk sponsored the conference) and is a senior advisor at MIT Media Lab’s Digital Currency Initiative.  Mr. Casey notes:

“At times like this, there’s a broad understanding that something big is happening. It’s just hard to predict its economic impacts. So people throw scattershot money at everything. Inevitably, their bets overshoot and prices decline. That this is going on in crypto is perhaps vindication of the underlying technology’s importance.”

Consensus 2018 convinced me that Mr. Casey is right in at least one regard, something big is indeed happening. Whether this proves the technology’s underlying importance, I just don’t know. I remain a healthy skeptic.

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