18 TUESDAY 10 JULY 2018FEATURE CITYAM.COM 19TUESDAY 10 JULY 2018 FEATURECITYAM.COM

A new series on AI, Blockchain, Cryptocurrency and Tokenisation

hard bit is done by a box marked“smart contract.” They’re just saying“we do it with computers,” but moreimpressively.Smart contracts are hard to pro-gram and hard to debug — the idea isthat they are immutable, whichmeans that bugs are much more dif-ficult to fix.This is very trepidatious whenyou’re dealing with money. Some peo-ple have lost hundreds of millions ofdollars on Ethereum to smart con-tract bugs — including Dr. GavinWood, who wrote the Ethereum pro-tocol design, when his startup Parity

The more people and businesses I meet inthe fascinating world of Blockchain andCrypto, the more I realise how

absolutely convinced they are of being able todeliver world changing solutions byunleashing the power of Blockchain. What isalso very clear to me is how blighted the industrybecame in 2017 as a consequence of so many ‘SnakeOil’ merchants spoiling the broth for genuine and sensibleprojects. The only solution, clearly, is legislation and for therelevant financial authorities to make sure that new rules are notonly effective but also flexible enough not to stifle innovation –this is happening.Focusing on Malta, the day after my column was published on

25th June they passed three comprehensive pieces of legislationfor the industry and as of 3rd July 2018 the legislative frameworkcame into force. I am hoping that in the coming weeks that I willbe visiting Malta and interviewing the relevant authoritiesincluding the MFSA and the MDIA to see how their vision forbecoming the most Blockchain friendly ‘open for business’ islandin the world is progressing by encouraging exchanges,companies and developers to locate there receiving them with a‘can do’ attitude from the Maltese banking and legal services. Returning to the problems of 2017, when my mother

suggested I join her at the intelligence2 Debate Blockchain:Quantum Leap Forward or Digital Snake Oil I jumped at thechance. I highly recommend that you listen to the intelligence2podcast of the session which should be released this comingFriday. You can take it from me that the audience was moresceptical about Blockchain after the debate than it was prior. Thiswas largely down to the fact that the arguments against wereeloquently put with sensible factual examples. As aconsequence, I invited the most sceptical of the panel, DavidGerard, to write this weeks main feature article entitled‘Approach Blockchain with Caution’ – hopefully you will enjoyreading it too!For the record, I remain completely convinced that it is through

the combination of established tried and tested technologieswith new ones – Blockchain as a component is no exception. Soit was refreshing to meet Agne Kazakauskaite and Emile Delam,Co-Founders of Crypto Rally, in the air-conditioned cool ofBalthazar, Covent Garden. They explained that “the Crypto Rallyis a movement and a platform to showcase the innovations ofthe 4th Industrial Revolution, such as Blockchain, AI, smart citiesand enhanced living in a fun and engaging way, givingcompanies involved global exposure as well as access to anexclusive network of innovators, thought leaders, investors andentrepreneurs”.

had a minor bug in their Ethereumwallet software last November. Evenhe couldn’t do smart contracts wellenough not to lose millions.Smart contracts are also slow — theprice of being highly distributed. Vi-talik Buterin, the inventor ofEthereum compares a smart con-tract’s computing power to “a smart-phone from 1999.” It won’t replaceyour back-office systems.

GDPRThe GDPR is anathema toblockchains. Never put Personal Datainto a blockchain! You’ll have a very

painful time performing redaction.Any blockchain use case that in-volves Personal Data on theblockchain is asking for trouble —avoid.

BUT WHERE’S THE MAGIC?You might think — but where are themagical promises in that? What willautomatically give me trustless per-fection? What will process my datafor free?The answer is, of course — magicdoesn’t happen. But business realitycan. Many claimed blockchain usecases have no working examples —there’s furious confusion of “could”and “is.” There’s no smoke without fire— but there’s a lot of fog machines.

Ask your blockchain salesman to pro-duce working examples of every singlepromise. Not a pilot programme heheard of — but checkable examples,that do in fact check out.Do they sound pie-in-the-sky? Or doesthis sound like an ordinary, mundaneIT project? That second one’s what youwant — someone reality-based, andmatter-of-fact.If they say “but imagine predictingFacebook in 1993!” then show themthe door.But a system based on the append-only ledger can do good work. If it’smarketed as “blockchain,” that’s anoutcome we can work with.

David Gerard is the author of the book At-tack of the 50 Foot Blockchain — Bitcoin,Blockchain, Ethereum and Smart Contracts,and the news blog of the same name.https://davidgerard.co.uk/blockchain/

Blockchain” is a hugely popu-lar buzzword. There’s allmanner of promises beingmade — how good would itbe if your business could get

some or all of those!Beware the realities, though — thereare good and useful parts ofblockchain, but there’s a lot of hype.

THE PROMISESBlockchain originated in Bitcoin, thefirst cryptocurrency, in 2009. Bitcoinmade a series of promises — decen-tralised, secured against bad actors,immutable and incorruptible, fastand free.By about 2015, most of these hadfailed — mining (Bitcoin creation) iscentralised, the blockchain is securebut the ecosystem is prey to the ill-in-tentioned, transactions are clogged.But that list of promises will look fa-miliar — because the consultants sell-ing “blockchain” took that list ofpromises, and claimed their newthing would do all of them … whetherit could or not.Remember: if it sounds too good to betrue — it is.

THE GOOD BIT: THE LEDGERThe useful part is the append-onlyledger. This is just like a paper ac-count book that you can only addnew lines to — you can’t cross out oldones. This is a “Merkle tree,” inventedin 1979. It’s a ledger you can only addto, and if you try to alter the past it’simmediately evident.The Merkle tree has been widelyused since — but it’s got a new leaseof life being promoted under thename “blockchain.”The new part of Bitcoin was a con-sensus mechanism — to decide whowas allowed to add new lines to theledger. Bitcoin’s inventor, Satoshi

Nakamoto, wanted a completely auto-matic mechanism, with no centralcontroller. So mining works by a lot-tery — computers guess numbers tril-lions of times a second, and onewinning number comes up every tenminutes. The more computers yourun, the more lottery tickets you canprint. So bitcoin mining uses moreand more electricity all the time, tostay in the same place.For business use, this would beridiculously wasteful. You would alsousually not want to put your back-of-fice onto the Internet. So businessblockchains are set up with known

participants, and the consensusmechanism is some variant on justtaking turns.So practical business blockchainsare a variety of distributed database.It’s often slower, but highly robustand redundant.

SMART CONTRACTSA “smart contract” is not a contract —it’s a jargon term for “computer pro-gram” — one designed to trigger whencertain conditions are met on itsblockchain.Blockchain pitches often include adiagram of the system, where the

SilhouetteArtist: AlliKirkham BackgroundDesign: PhillipSnelling,Bowater Media

IMPORTANT INFORMATION:THE VIEWS ANDOPINIONS PROVIDED BY CITY A.M.'S CRYPTOINSIDER ARE OF THOSE NAMED IN THE ARTICLEAND SHOULD NOT BE TAKEN AS INVESTMENTADVICE. THIS COMMUNICATION IS MARKETINGMATERIAL.

Remember: if itsounds too good to be true — it is

In association with

Phillip Nunn is becoming one ofthe UK’s if not Europe’s mostinfluential online Blockchain andcryptocurrency experts, and hasa social media following of more

than 400,000 people organically growndue to the fascination surrounding thisnew exciting and profound movement.Nunn has a background in financialmarkets and Fintech and has blendedthe two to become a figurehead for thenext wave of Blockchain andcryptocurrency - the institutional entrypoint.

This month Phillip was appointed theManaging Director of the Stockholm ITVentures (“SITV”) a Swedish technologycompany listed on the main FrankfurtStock Exchange. This will mean SITV isset to become one of, if not the first, fullylisted entity with a full focus onBlockchain and cryptocurrency.

Roger Tamraz, Chairman of SITV, said“The board and I are delighted thatPhillip has agreed to join our company to

develop and expand our business into awider decentralised crypto focusedfinancial services business. This heralds’the beginning of our journey to become amajor global player in the Blockchainworld by building a vibrant newcommunity driven financial servicesecosystem.”

Speaking with Phillip, he enthused:“I’m excited to be joining Stockholm ITVentures. This business previously had amarket cap of €1bn and the board hasmade the conscious decision to

transform from a tech company, to solelya Blockchain and cryptocurrencysolution. Our strategy is to become aprivate bank for Blockchain and tobecome a powerhouse in this new andexciting industry. This is a market leading

Rick O’Neill,Founder of Look, Touch & Feel - a Specialist DigitalMarketing Agency, pulls back the curtains on ICOs, and their Marketingcampaigns, to reveal the real indicators of potential success and failure.

Last week we looked at the competitivelandscape of ICOs, and this week Iwant to talk about Community, and

what TRUE community building takeswhen running an ICO (and how to tell thefakes when participating).In the past, it was enough to have a loyal

community around your project and to ex-pect the funds to come from that samegroup. Now, that’s increasingly less thecase. Today, if you are running an ICO, thecommunity is (generally speaking) there to“do your marketing for you”, by which Imean if they are properly engaged and in-centivised, then they can and will have ahuge impact on your social following, andthe profile of your project in the market. In-vestors will look at the size of an ICO’s com-munity and following when reviewing a

£Mentions in mainstream technologymedia and in prominent financepublications.£The number of search engine results.£Traffic on the main website.If you are joining an ICO community as apotential participant, then there arecertain red flags you should be lookingout for.

COMMUNITY RED FLAGS£Big numbers but no genuineengagement or conversation£No team founders in the telegramchat group£Suspiciously attractive profile photos£ETH addresses published into thechat group£Traffic on the main website.

CITY AM’SCRYPTO INSIDER

City A.M.’s Crypto Insiderinterviewed Phillip Nunn, CEOof The Blackmore Group, abespoke Investment House

Whatever the controversy aroundICOs blockchain technology isriding a wave that’s sweeping

through the mainstream. Just aboutevery bank and financial institution hasa blockchain lab of their own or isquietly experimenting with blockchaintechnology.Reflected in record-breaking registra-tions for last week's Blockchain Summitwith over 3,200 senior professionals anddecision makers from the world's mostinfluential organisations attending tostart riding that wave. Everyone it seemshas their own blockchain or is buildingone. From Accenture to Zerobank.We saw the coming together of the‘Coinistas’ and the corporate and, attimes, the clash of this new, decen-tralised, world views with the old. Exem-plified in one of the panels I chaired onregulation where both the panel and apacked room were divided betweenthose who see ICOs as a temporary phe-nomenon - whose main or only benefitis freedom from regulation, and whichthey expect will be regulated out of exis-tence in due course - and those who seeit as the beginning of a new internet agethat will bring decentralisation acrossthe board and across the world.Passions ran yet higher in the session Imoderated asking the question "Will ICOsRevolutionise Startup Funding?". WhileICOs have already made a major impact,rivalling VCs, if not replacing them,whether they will ultimately make them

redundant was hotly debated.What emerged though, through thelens of crowdfunding, was that VCs, An-gels, Seed Crowdfunding (via Kickstarter,Indiegogo etc.) and the different kinds ofICO (or more broadly ‘Token Offerings’)each have different strengths and weak-nesses. There is no ‘one size fits all’ hereand they are useful at different stages inthe life of a venture and play very differ-ent roles.Where seed crowdfunding workswell at a very early stage a typicalraise is around £20K- 30K and up to£200K, and in equity crowdfundingup to around £250k, up to £2m. Datafrom our TokenIntelligence platformreveals that with ICOs the average iswell over £10m with raises of $200mor more not uncommon. Some, suchas Telegram, over $1B ($1.7B).Perhaps the most hotly debatedtopic though is that although theselatter are more like seed crowdfund-ing than its equity counterpart (offer-ing usage tokens rather thanshares/equity) they can raise suchlarge amounts without sacrificing eq-uity. Yet they keep on coming withmore than 350 ICOs now in thepipeline - at least two or three $100mones in that room.

Tweet/Telegram questions to @BarryEJames or listen at ICOrad.io.

Analysis from ICOradio’s Barry E James, CEO of TokenIntelligence

ICO NEWS

@CityAm_CryptoE:CryptoInsider@cityam.com

The Blockchain Summit

APPROACHBLOCKCHAIN WITH CAUTION

Larger institutionsneed to adoptBlockchainstrategies to avoidbeing left behind

BUILDING TRUE COMMUNITY

JAMES BOWATER

PARTNER CONTENTCRYPTO

project: if it’s very low or non-existent, theywill worry about the future prospects ofsuccess. The community gives an ICOcredibility. If nothing else, it demonstratesto the investors that you have the skills andcommitment to build market awareness –a key skill in building what will eventuallybe your business.ICO Rating sites work on “Hype Scores”,

and your community size, social following,website traffic, and YouTube views all formpart of that calculation. One popular ICORating website has their Hype Score basedon the following criteria:

HOW HYPE SCORES ARE CALCULATED£The number of users on the mainsocial media pages of the project.£The number of mentions in the press.

venture and I’ve been given full backingto build a strong team, to deploy all ofthe ideas and solutions I have beenformulating and developing with myteam over several years.

At its peak in 2017 we saw the crypto

market cap rise over $750bn and this wasall crowd based. People are becomingintrigued and excited about this moveaway from the Internet of information toan Internet of value, whereby we cansafely exchange value with one another.This can be anything from money anddata records through to personalinformation. It is incredibly profound.

As I see it, the fundamental differencebetween the cryptocurrency movementand the dotcom boom is that the crowdhave entered first, an ecosystem alreadyexists whereas the dotcom boom wasextremely speculative and driven byinstitutional money.

I predict that 2019 will be the year ofHedge Funds, Family Offices and PensionFunds more actively entering the space.What's more profound is all of theselarger institutions need to pivot to thisnew way of working and will be forced toadopt Blockchain strategies to avoidbeing left behind by competitors whowant to satisfy the appetite of theiryounger customers who want safety andsecurity online and exposure tocryptocurrency.

It's an exciting time to be alive! Withthe right wind behind us we could easilysee the record market cap exceededbefore 2018 is out and potentially we willhit the $1tn dollars for the first time. I amalso absolutely convinced that we willsee the worlds first trillionaires spawnedfrom this new and fascinating industry.”

There’s tremendousexcitement around“blockchain.” Butwhat’s the substance?

Why are you supporting CGD? Our fabulous transcriptionists and proofreaders are hoping to raise as much money aswe can for Starlight Children’s Foundation.“The whole team is bonding over a commoncause and collaborating on ways to raisedonations for City Giving Day – some verywhacky ideas being discussed!” Kirstie White,VoiceNotes.

Which charities do you support?VoiceNotes is supporting the Starlight

It’s a pleasure to be helping The StarlightChildren’s Foundation. We hope our modestdonation will help a wish or two come true.

Kirstie White, Founder, VoiceNotesShelter

This year, as part of City Giving Day, we’d liketo pledge funds raised to Starlight Children’sFoundation.

Supporting City Giving Day

This year we are supporting theStarlight Children’s Foundation whogrant wishes-of-a-lifetime to children inhospitals and hospices across the UK.

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JOIN US AND REGISTER NOW AT

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Children’s Foundation this year. Starlightbrightens the lives of seriously and terminallyill children by granting wishes-of-a-lifetimeand providing fun, laughter andentertainment to children in hospitals andhospices across the UK.

How will you celebrate CGD?We will celebrate by having a good old-fashioned quiz night and a speed typingchallenge. We are also promoting City GivingDay within our clients among the Londoninvestment community, pledging donationsfrom new revenue generated through theCity Giving Day campaign.

“