 From New York, it's theCUBE, covering Blockchain Week. Now, here's John Furrier. Hello everyone, I'm John Furrier. We're here on the ground exclusive coverage for Consensus 2018, part of Blockchain Week New York. Hashtag is Blockchain Week NY for New York. I'm here with Jimmy Song who's a partner at Blockchain Capital. Celebrity in the industry, original core Bitcoiner. There's a lot of work, teaching, programming, programmingbitcoin.com. Also- Blockchain, Blockchain. Sorry, programmingblockchain.com. On the panel yesterday, really kind of calling out and really in a provocative and discourse way, civil discourse, the state of the blockchain. Welcome to theCUBE conversation, thanks for coming on. Oh, 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 in San Francisco. You see 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 and some multi-off 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 Baldette went up and she talked about her product and I just saw lots and lots of buzzwords, right? And I didn't know what the heck it was and I thought, all right, 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 like 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 because 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 it to the big ways we've seen a lot of growth coming and you can kind of easily connect those dots but the reality is it's still maturing, it's still embryonic and it's still more work to do. There's companies out there that are trying to get on the wave but their model of their business and or their tech is centralized. So you can't just flip the switch and why 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. So I wrote an article yesterday, I released an article just sort of 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 the centralization 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 just it's 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 that 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 is that I hear a lot is from people that like the wave and see possibilities 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? Because it's an important one. You either yes or no, it's kind of most 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? And 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. 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 happen 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 so much easier to understand. And there's some overhead involved in blockchains 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? Yeah, so from a blockchain's perspective, first of all, it's extremely hard to develop, right? Like 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 because 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 because 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 because 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. So 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 like backups, receipts, audits, also public key cryptography. There are ways to get a lot of the things that people are touting without necessarily using this heavy, heavy, expensive, slow apparatus. It's like building the Linux kernel when you only needed an application. Yeah, all right. I mean the developer requirements are high as well as the overhead and volume costs. Yeah, yeah, I mean you're trying to use like a construction vehicle to run your groceries or something. Yeah, it's crazy. Just not the right tool. Okay, so I've got to ask you, so what are some of the things that you could share for folks watching either an entrepreneur developer or a business executive that says, hey, you know what, I want to learn more. Obviously there's some good trends that are going on the trend as your friend when you see cloud computing, horizontally scalable, fully asynchronous platforms. You got open source rising at a whole other 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? Okay, well there's several things to unpack in that question. First, I think if you are interested in what blockchain technology is, you should really study Bitcoin because 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? Because I think that's all you need. And they were like, we never thought about that. We never heard of these receipts. What the hell are receipts? Well, they've been around for thousands of years and you can 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 like 30 years almost that you could utilize, but they just don't realize that it's there and blockchain is sort of a way to bring it 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 ways of change, efficiencies are key, right? Inefficiencies get abstracted away with abstraction layers and what we see with blockchain as early indicators of where we think it might go is it takes an inefficiency and makes it efficient. No one control, maybe some democratization thrown in there. Obviously venture capital, private financing seems to be inefficient with all the ICOs. It's like a lot of fundraising going on with ICOs. I mean, 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 or 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, right? This is 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, right? Like most startups, you fund them, you believe in the people and you go, okay, well, if it doesn't work, at least we invest it in smart people. They 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 why they're getting funded is that there's a big public demand for asymmetric payoffs. This is 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 kick starters 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. So I mean, 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? Well, so 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 the investment banking infrastructure, that might make sense, right? Like you have like a efficient distribution mechanism for dividend ends or something like that and preferred shares, whatever. So that could be useful and it does sort of take out some middlemen. But as far as ICOs as they're currently construed as a way to raise money, not really. Jim, you want to ask you, we've seen three kinds of companies in the ICO space. You know, startups selling seats to a restaurant doesn't exist yet, not going to last long. Okay, put that aside. And then the Hail Mary play. Shit, we're out of going out of business. That's open. It used to be open source and now let's do an ICO. So that, you know, we got to gas and throw money at the wall and do a Hail Mary. And then the middle one is growth. 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's your recommendation for someone, entrepreneur or techie to take their business and create a growth strategy, both CTO, CEO level approach. What's your view? Well, so 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 that's recommended because we really haven't seen much of it yet. It's a pivot. Yeah, and it's a pivot and a way to get money that's in a cheap way. I don't know how long it lasts, right? A legit growth company. Say you saw some self-funding or I've done some VC. You're seeing some guys going, hey, we want to grow. We have traction. We're an existing business. And I had 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 real growth strategy can be built? Oh man, I wish I could answer that question because I might try it. I know that's why I'm asking. It's a million zillion dollar question. No, it's really difficult to know and I encourage entrepreneurs to experiment in this area. And obviously if you were doing anything on ethical, 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 the panels. You've been doing a lot of networking, meeting a lot of folks. Thanks for spending time here on theCUBE. 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 Consensus 2018. SiliconANGLE, theCUBE coverage. I'm John Furrier. Thanks for watching more coverage here at theCUBE.net.