Understanding blockchain is going to take a bit longer. But until then there's a new gadget you can preorder.

PAMPLIN MEDIA GROUP: JOSEPH GALLIVAN  - Robin Jones of Public Market sees blockchain as a secure network and a way of exchanging online rewards. The company outsources that part of the technology New Alchemy of Seattle.

What is blockchain anyway? Can you buy it shrink-wrapped at Best Buy?

Can you SaaS it from some San Francisco startup?

Do you have to pay developers to write millions of lines of code where every colon counts?

I am getting close to an answer, but I'm not quite there yet.

In my bid to find out what blockchain actually is, I went to Robin Jones the Chief operating officer of Public Market.

The company is trying to offer a retail marketplace based on the blockchain. Because Amazon has price agreements with vendors — if you undercut them you get booted off — they are trying to build a consumer-focused retail marketplace that allows vendors to seemingly sell at their Amazon price, but allowing them to give shoppers a discount in the form of digital tokens, otherwise known as a crypto currency.

"Public Market came out of a frustration our founders had with the ecommerce industry. Seventy percent of what's sold online is from a third-party entity, they're not the operator of the marketplace. There's a middle man taking a fee, a $1.6 trillion market, in this country $120 billion."

She says Amazon is close to being a monopoly now, and eBay, Rakuten, Walmart and Alibaba aren't far behind.

Amazon takes 16 to 40 percent cut of sales on its platform. And the platform is very good. It's peer-to-peer but with great convenience and trust. People like Amazon because it's secure, it is quite good at guessing your preferences, it's easy to buy and return stuff, and it's been around a long time in Internet years.

"We wanted to replicate the assets that those companies and amassed over time that they were keeping as a walled garden that allowed them to create a competitive moat." Public Market wanted to do this in an open source manner and make it open to anyone with goods for sale. (Within reason of course. Jones was clicking around a blockchain marketplace recently, the Origin Protocol, and saw a human liver for sale. She's thinking more like sneakers.)

They have established a Public Market protocol, which is an inventory and catalog system. The inventory is listing products, shipping terms and prices, the catalog is the product data, the image and descriptions, and making that a publicly available resource.

COURTESY: PUBLIC MARKET - A screen grab from Public Market.


The next element is to do with reputation.

"We've created a global reputation system, any time they buy something they can leave a review of the seller and the product, and those reviews are transferable to any other marketplace in the ecosystem."

The idea is sellers would rather you shopped with them — Nike wants you at rather than at Amazon — and this helps keep you there.

Shoppers are incentivized by being given discounts in the form of electronic currency, or tokens. Of course, Public Market are going to mint their own. They'll be called Patrons, and they'll come out around the end of the year, just as soon as the Perkins Coie lawyers have hammered out the riles with the SEC. (Crypto currencies are like securities, and that gives the SEC the heebie-jeebies.)

Someone can sell their sneakers on Amazon for $100, and stay within Amazon's rules by selling them from $100 on their own site, but give the buyer a $15 discount in the form of tokens, which can be hoarded like air miles and then cashed in. (Jones says Amazon probably won't do much about it for fear of triggering anti-trust action by the government.)

Buyers leave comments and get more tokens. These records are written to the blockchain network and remain immutable, so reputation accrues. This is valuable to sellers, and gives them some independence from the middle men like Amazon — assuming anyone shows up.

Public Market is in the Portland Business School Business Accelerator. The requirements for getting in were "quite loose," Jones says. In return for half price rent and good exposure to investors, they have to give back by doing talks about blockchain to students and faculty.

They didn't have to give up an ownership stake either. Jones has been here since 2008, when she came as a part of a Bluetooth luxury jewelry company called 88 Inc, and now gives talks to investors about blockchain.

Sitting in her office near the business end of the Ross Island Bridge, what I'd learned so far is that blockchain has two elements: the secure database that no one can cheat on, and cryptocurrencies, which attract speculators.

There will be a "token launch event" (which sounds fun but might just be a guy in a basement clicking a link) but Jones stresses it won't be an initial coin offering or token sale. Public Market's tokens will be perks of taking part on the marketplace, not just another print-your-own-electronic-money-and-see-what-happens stunt.

It's an ERC 20 token. (Drop that in at Thanksgiving when you're explaining all this to your uncle.)


Just to sweeten the pot, in addition there will be a daily rewards pool. "The algorithm will be asymptotic in nature," she says. (According to Wolfram MathWorld, "the term asymptotic means approaching a value or curve arbitrarily closely (i.e., as some sort of limit is taken)." Or never gets there.

There will be a set number of tokens at the token generation event, in the millions. Every day a tenth of a percent of 20 million Patron tokens will go in a drawing. Each day the proportion would be slightly less. The earlier you get on in it the more they are worth.

The two firms with deep expertise in securities law as it relates to security law and tokens, are Perkins Coie and Cooley Goddard. Their teams are in the Silicon Valley.

An initial coin offering is offering a token for sale, and it may be treated as a security, or a utility, where it has a function within the network.

"There are no hard and fast rules around what would be deemed a security and a utility."

Many of the early ICOs don't pass the Howey Test and would be deemed securities. (The "Howey Test" was created by the Supreme Court for determining whether certain transactions qualify as investment contracts. Under the Securities Act of 1933 and the Securities Exchange Act of 1934, those transactions are considered securities and therefore subject to certain disclosure and registration requirements.)

Jones teaches this stuff, so she's careful to say Public Market is, well, a public market.

"Using an ICO as your fundraising source is a very iffy thing to do, because you don't know if the SEC is going to come around and say they are all securities. There are penalties, but it's also a black mark on your reputation. We went to do business in the U.S. so we have to abide." For now, the law is not clear.

The USA is not number one. Singapore, incidentally, is the farthest ahead in making laws that make it an ICO- and blockchain-friendly country.

Public Market's tokens will work with any Ethereum supported wallet, such as online ones, MetaMask and MyEther, and hard storage ones, such as the Ledger Nano S and the Tresor. (They look like thumb drives.) Since they are trying to make a consumer-friendly market, they want to wallet to be easy to use. "You end up with these long hashes of characters, and if you get one digit out of place you end up sending your bitcoin to the wrong person, and I can't get it back. So, we think we'll create our own wallet that is user friendly. Not in the beginning, because we expect out early adopters to be very cryptofluent.

But what about BestBuy?

Jones says if you are setting up a trusted market place you go to one of the blockchains standards. The first was Bitcoin, the ledger behind that cryptocurrency. Next most well known is Ethereum, which she says was built as a developer platform so people could make their own token, without reinventing the wheel (how things are mined, how you prove ownerships, etc.)

Public Market used an ICO advisory firm, New Alchemy out of Seattle.

"There's a ton of these firms that have popped up. They helped us choose a platform, they looked at the kind of volume we're looking at, what kind of smart contract needs we had, the needs for speed and scale."

And when it's time to mint, New Alchemy will write to code and test it all out.

So, there you go. If you and your uncle can't figure out how to do blockchain, just call New Alchemy.


COURTESY: LUMZAG - The Lumzag bag has GPS, a wifi hotstpot, alarm and rear facing camera.

After all that I needed something concrete to think about. Something graspable. There's a new backpack coming out on Indiegogo

called the Lumzag that has it all.

First, it looks a bit weird, as good backpacks should. The antithesis of a middle school Jansport. It's like Thule box for your back.

Second, it has massive feature overload: not just a built-in wireless charger and interior light, but a GPS so you never lose it. It has an open alert alarm, and a rear facing camera. And it has its own cellular connection. And it's made of carbon fiber in case you ever get into a shoot-out.

As of Sept. 30, the account had raised $520,762 and it was 1,010% funded.

Joseph Gallivan
Reporter, The Business Tribune
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