The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.
Decrypted: Everipedia, a for-profit, wiki-based online encyclopedia announced that it raised $30 million from a group of strategic investors led by Galaxy Digital’s EOS.IO Ecosystem Fund.
Everipedia is now building the world’s first encyclopedia on the blockchain, incentivizing content creators by allowing them to become stakeholders in the encyclopedia. Originally, Everipedia started in 2015, as a modern and inclusive alternative to Wikipedia, by Theodor Forselius and Sam Kazemian.
Today Everipedia has over 3 million unique monthly users and over 6 million wiki articles and on December 6, 2017 Wikipedia co-founder Larry Sanger announced that he would be joining Everipedia team as the company’s Chief Information Officer.
Our take: Blockchain technology is disrupting everything from banking to the supply chain. Can online encyclopedias be its next frontier? Everipedia believes it can.
Internet giants, such as Google, Facebook, Twitter and others have one thing in common. They rely on the contributions of users as a means to generate value within their own platforms. But today, we are seeing more and more a new model of increasingly decentralized platforms and organizations that want to reward value contributors.
Everipedia is one of the platforms that is moving in this new direction. It uses smart contracts to record the editing workflow and store articles, in an effort to create a truly censorship-proof system.
Moreover, Everipedia plans to incentivize contributors with a cryptocurrency token, aiming to create a platform for more accurate information. It’s working on a new peer-to-peer wiki network that adds an incentive structure and a distributed backend hosted within a blockchain. The new system rewards users with tokens for curating articles and allows everyone to become a stakeholder in the network through those tokens, which are pegged to the value of the network.
The goal of the Everipedia ecosystem is to democratize the traditional encyclopedia model and economically align the incentives of the value creators and value extractors. This model would make feasible a fully autonomous encyclopedia without the need for advertisements or donations.
Everipedia’s token distribution will not take the form of a so-called Initial Coin Offering (ICO), but instead as an airdrop, basically distributing tokens for free to anyone who already holds tokens for the EOS platform.
But, Everipedia is not the only project that’s pursuing blockchain-based encyclopedias.
Lunyr is another one, that also aims to build a decentralized crowdsourced encyclopedia, that rewards users for peer-reviewing and contributing information. The underlying idea of the project is to implement an advertising system. Advertising on the platform is sold using Lunyr tokens (LUN). The long-term vision for Lunyr is to develop a knowledge base API that artificial intelligence, virtual reality, augmented reality and other software can use to create content and applications.
As a user of fan of blockchain–based platforms, I like these ideas. But I think that it’s going to be quite hard to rival Wikipedia and other Internet heavy weights.
Today, Wikipedia ranks as the sixth most visited site in the world according to Alexa rankings . It attracts 470 million unique visitors who view over 19 billion pages per month. In 2008, BusinessInsider.com performed an analysis of Wikipedia and arrived at an annual advertising revenue potential of $350 million.
Also, in 2011, Vincent Juhel published a thesis about Wikipedia for HEC Paris, and projected Wikipedia’s annual advertising revenue at $1.6 billion.
We are consuming more content than ever, with 3.6 billion people reading the news, listening to music or podcasts and watching videos and movies online every day. Supply and demand of content is constantly growing. Collectively, user-generated content has created billions of dollars worth of value for the shareholders of social media companies, such as Reddit, Facebook, and Twitter. Projects like Everipedia can shape the content industry of the future, rewarding content creators using cryptocurrencies.
I will definitely follow the progress of this project and you should too.
News Item 2: Why Blockchain Could Kill Uber
The sharing economy has made it possible to share virtually anything: from cars, homes, boats to doghouses. Today’s platforms, Uber, Airbnb, Ebay, Etsy, and others, all have one thing in common. They are intermediaries that operate a decentralized model of value creation and exchange. Their exchange is considered decentralized because both the supply and demand side are directly controlled by the platform operator.
Uber operates a decentralized transportation exchange. Once controlled by the taxi industry, through the issuance of licenses and capital expenditure requirements, these prerequisites limited the number of taxi drivers available in a given city and thus limited the supply side. By limiting supply side, the taxi industry controlled the exchange of rides in a given city, making it very difficult for anyone to become a taxi driver. Uber decentralized the supply side, by allowing any driver the opportunity to serve travelers.
While Uber seems decentralized, it exercises significant control over the its ecosystem. Uber owns the identity of its participants, the transportation logistics, the payment mechanisms, the pricing, and the rules that govern the marketplace. As a central intermediary, it manages both the openness of the platform to its participants and the governance of their participation. As an intermediary, Uber poses all the threats that traditional intermediaries have posed in the past, that tried to regulate markets.
The shortcomings of centralized peer-to-peer services have led to people lose trust in the system, and in one another. Decentralized carpooling platforms, such as Lazooz or ArcadeCity, operate very much like Uber, but without a centralized operator.
These platforms are governed only by the code deployed on a blockchain-based infrastructure, which is designed to govern peer-to-peer interactions between drivers and riders. These platforms rely on a blockchain to reward drivers contributing to the platform with specially designed tokens, that represent a share in the platform. The more a driver contributes to the network, the more they will be able to benefit from the success of that platform, and the greater their influence in the governance of that organization.
Arcade City started in the Austin, when Uber and Lyft were banned from operating in the city. Arcade City embraces a new peer-to-peer model of ride-sharing. Instead of controlling drivers from a corporate headquarters, Arcade City frees drivers to build up their own transportation businesses, like true entrepreneurs.
Drivers are free to set their own rates, build their own recurring customer base, and offer additional services like deliveries or roadside assistance. Riders can review driver profiles in advance and choose the driver they prefer. The majority of Arcade City drivers previously drove for Uber or Lyft. Top Arcade City drivers report earning two to three times more money than they earned with other services.
Distributed ledger technology allows drivers and riders, who do not know or trust each other, to securely share information through decentralized networks, completely eliminating intermediaries.
Decentralization offers the promise of nearly friction-free cooperation between members of complex networks, pushing us toward a true sharing economy, one that is not controlled by a few large middlemen, but that is governed by the people and for the people.
Decrypted: So far 2018 has not been kind to Bitcoin. The year started at around $14,000 as it climbed to $17,000 and then we saw a sharp decline, by more than 60%. But the cryptocurrency plunge seemed to come to an end on 6 February, and since the price has been slowly but consistently climbing.
While the price of Bitcoin and other cryptocurrencies is mostly stable, stock markets in the US and Asia rapidly plunged, falling from record heights achieved in recent months.
Our take: There are a number of theories out there as to why prices began to decline in the last thirty days. But, its important to note that there is no single reason that we can put our finger on and most likely its a combination of many things, such as China’s potential banning of cryptocurrencies, banks are preventing credit card holders from buying Bitcoin and Facebook banning crypto ads.
While Bitcoin and cryptocurrency price dips had many investors panic, their declining prices were unrelated to the stock markets. When the stock market crashed, the cryptocurrency market rose as if investors moved their money from traditional assets and to digital assets.
Its possible with a growing crypto market, stock investors who were getting nervous about a crash or major pullback considered investing in crypto instead of other commodities or bonds. One could argue that Bitcoin has a tangible and possibly and inverse connection to stocks. The same investor confidence that’s been fueling risk-taking and speculation in global equity markets, has also been behind the cryptocurrency rise especially in the fourth quarter of last year.
While a collapse in cryptocurrency prices won’t necessarily have an economic impact on equities, a stock market crash would lead to an even wider adoption cryptocurrencies.
For now cryptocurrencies are very small, compared to the dotcom boom. Internet stocks in the late 1990s represented a substantial portion of what was the largest sector of the economy. A direct financial impact from collapse in Bitcoin wouldn’t be overwhelming, but it could set off a lot of fear and very radically alter people’s mindset, which in turn could be damaging for financial markets.
Cryptocurrencies has its own economy, based on activity on blockchain. Equities have their own economy, based on earnings per share. While the institutional overlap is essentially zero, you can’t go anywhere without reading or hearing a mention of Bitcoin.
Make no mistake about it, the days of simply saying “send us ETH and we’ll send you tokens” are coming to an end.
On February 6th in a congressional hearing about cryptocurrencies and ICOs, SEC chairman, Jay Clayton, stated, “I believe every ICO I’ve seen is a security.” In response to Massachusetts Senator Elizabeth Warren, who asked Clayton whether any ICO had been subject to SEC registration, Clayton replied, “Not one,” and added that unregistered ICOs are illegal.
However, he stated that ICOs and cryptocurrencies deserved different regulatory approaches. Clayton also said that the SEC can not determine the exact amount of aggregate investments by US citizens in ICO projects in 2017, but he is convinced that it is large enough for the agency to pay attention. Also in his opinion, the organizers of the ICOs know that they must comply with US legislation and SEC regulations, but they ignore it, since regulators have not established a clear framework.
When all is said and done, it’s clear that ICOs are risky. Yet, this shouldn’t come as a surprise, as the entire cryptocurrency ecosystem is deregulated, decentralized and built entirely on digital trust.
Also, it looks like ICOs are going to be considered securities, and as such, will fall under the umbrella of the SEC. It’s also clear that the SEC isn’t going to let semantics or labels prevent enforcement. This means that any nonprofit agency considering an initial coin offering should be cautious, as he indicated that every ICO is a securities offering.
This will probably shift the ICO industry even move outside the United States. Most ICOs worldwide have excluded US-based investors from token crowd sales. In fact, many ICOs have already transitioned to private token sales, distributing tokens to buyers on a whitelist. This trend is likely to continue even more throughout the long-term.
The SEC and CFTC testimony, will no doubt play a major role in the regulatory future of this still very nascent space, but the hearing also affirmed that government agencies are intrigued by blockchain technology, and they don’t want to stifle innovation.
Regulation isn’t bad for crypto, its good!
Ultimately, the hearing shows that regulators are still working on understanding the cryptocurrency market and how to effectively regulate it.