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If we can get over the Bitcoin blues, Blockchain might be a tool for economic development

PMG PHOTO: JOSEPH GALLIVAN - PSU instructor Alpen Sheth took a business audience from a 101 look at distributed networks through to what he called a medium dive into the revolutionary file sharing technology. Blockchain has gone far beyond cryptocurrencies such as Bitcoin. Here he explains consensus algorithms.

Blockchain remains one of the most exciting developments in business of the last five years, but non-technical people are still trying to grasp what it does.

The basic definition of blockchain by the Massachusetts Institute of Technology is "a public, permanent, append-only distributed ledger."

In other words, a computer database where no one can falsify anything without everyone else knowing. It's the software equivalent of a Tarantino movie: Everyone is locked in a Mexican standoff, each person aiming a loaded gun at each other.

This makes it great for tracking documents, since each change is time- and place-stamped. The system gave birth to Bitcoin and hundreds of other cryptocurrencies, where there was no need for a trusted third party backing the currency (like the Federal Reserve). Each coin was valid because it was approved by strong cryptography called a hash. It's like Napster without the copying.

PMG PHOTO: JOSEPH GALLIVAN - Scary hackers in hoodies have no chance in a decentralized network. Anything they change is instantly viewable by all nodes or members.

PSU, blockchain hub

Portland State University has a Center for Executive and Professional Education in the Crown Plaza building downtown. There, PSU professors and business leaders teach classes to people looking for continuing education credits, or perhaps just a certificate for a day's introductory course. That was the scene last Wednesday when a couple dozen people paid $600-plus for a day-long seminar called Unlocking Blockchain for Business Leaders. The format was lectures, PowerPoint and an expert panel, rather than hands-on coding for blockchain, but the instructors, Alpen Sheth and Ketan Sampat, managed to introduce blockchain while answering more complex questions.

Students ranged from executives from IBM and Tillamook Creamery (those cheese people, who are currently rebuilding their entire computer network) to the unemployed people looking for new skills sent there by the state employment department's program, Reboot.

Sheth started by asking who could explain in detail Simple Mail Transfer Protocol (SMTP) or Hyper Text Transfer Protocol (HTTP). Very few could, but they all use email and the web. His point was that you don't need to understand a technical protocol to benefit from it.

Much of the discussion was about downplaying Bitcoin, the crazed currency that gripped the American imagination. Issues discussed included how the overhyped Bitcoin (est. 2009) was just a subset of blockchain technology and how newer protocols and currencies such as Ethereum (est. 2015), Coinbase and Ripple have moved the ball down the field.

"If Bitcoin was a calculator, Ethereum is a smart phone," said Sampat."

"The bitcoin spike made blockchain relevant, but the elements of blockchain were in place before the year 2000," said Sheth. (The Internet, private key cryptography and a protocol governing incentivization.)

Bubbles

Companies went on a tear during the 2017-18 crypto bubble with initial coin offerings (ICOs), raising funds by issuing their own tokens or currencies, only to see most of them end up hugely devalued.

To show that blockchain is already here, Sheth pointed out that on LinkedIn "blockchain engineer" was one of the fasted growing job categories last year, and the big four accounting firms have all embraced the technology and are actively hiring them.

However, in his conversations with Accenture and IBM, it became clear after 30 minutes that they were just trying the technology out and that many companies are fearful of the logistical risk and reputational risk of going all-in. "The more conservative the industry the more likely they are to need a neutral standard," he said.

PMG PHOTO: JOSEPH GALLIVAN - Jeff Gaus of the Oregon Enterprise Blockchain Venture Studio believes Oregon can become a leader in blockchain for enterprise while other states get caught up in the cryptocurrency craze.

High standards

Jeff Gaus of the Oregon Enterprise Blockchain Venture Studio, said that standards issue from one of two places: academia or business consortiums (private companies cooperating). He urges people not to wait for academia. He said academics had been working on HL7 since 1993 and were still arguing over commas instead of use cases. (Health Level Seven is the standard that allows computers to talk to each other, including exchanging medical records. Gaus calls it a beast of a protocol, not widely adopted.)

"You have the clout to drive the adoption of a standard. Don't wait," said Gaus.

It was a big day for Gaus. The Oregon Enterprise Blockchain Venture Studio had just announced that morning that it was ready to accept applications from startups to work in the Pearl District office of R/GA Ventures. The startups will officially launch their stint in the studio on July 29, and conclude in October.

Oregon has a few other things going for it: Brian Lio the Founder and CEO of Smith + Crown, moved his blockchain research group that focuses on cryptoeconomics, asset intelligence, and industry analysis, from Brooklyn to Portland. Ken Weber, who runs the Ripple Foundation, is based in Lake Oswego. And R/GA's Portland office, which has been here eight years, has been chosen to lead the venture studio.

PMG: JOSEPH GALLIVAN  - Blockchain brain trust (l-r) Jonathan Bradley R/GA Ventures, Michael Reed of Intel, Kate Mitselmakher the CEO, Founder and General Partner of Bloccelerate VC, Issac Hines of Sila, Brian Lio CEO of Smith + Crown and  attorney Tyler Harkness of Tonkon Torp LLP.

One identity to rule them all

R/GA is managing the incubator, but Gaus is especially proud to have the buy-in of Portland State University, Oregon Health & Science University, Business Oregon and Governor Kate Brown.

Other blockchain concepts discussed included:

n Consensus algorithms. These are the same mechanism that give us page rank on Google search and do load balancing for Netflix so that popular movies stream without interruption.

n Hybrid networks. A blockchain can be private, but ultimately, they should be public to include more nodes and increase transparency.

Oregon State Treasurer Tobias Read, who addressed the group first, said the greatest short-term value of blockchain would be to establish a citizen-centric identity. The state of Oregon keeps more than 100 different types of identity on its citizens, including tax, criminal, education and employment records, and none of the databases talk to each other.

Gaus said, "What if you had one that says 'Joe is Joe' and attach others to it? And I think it's going to emanate from the healthcare identity, because the only identity that every American carries is the health benefits eligibility identity." They are more consistent than even tax or social security identities.

"Oregon has taken a unique position in terms of the industrial use cases, the enterprise. That's why the venture studio changed its name. No other state in the country has taken a systemic approach of public private partnership, educational curriculum, lining up the real estate for the companies and bringing in our incumbent industries, so it happens because of, not to us, and looking if there are new ways of doing business. Oregon should become a center of excellence."

He hopes, as does Read, that of the 30 or so companies that will go through the venture studio, a few will make it big and stay in Oregon, seeding a new blockchain-heavy ecosystem. "As Delaware is to corporate law, Oregon will be to blockchain."

(Gaus has no formal title with OEBVS now and is in stealth mode with his own blockchain-centric startup.)

PMG PHOTO: JOSEPH GALLIVAN - During a panel Kate Mitselmakher the CEO, Founder, and General Partner of Bloccelerate VC in Seattle, drew a useful chart showing which industries might most benefit from blockchain. On the X axis was increasing complexity, and on the Y axis was standardization. In the top right portion were supply chain companies. They could enable blockchain and likely will not be put out of business. Below them, businesses more standardized but less complex, are more vulnerable to disruption by blockchain. They have products for sale, such as books and Airbnbs.

Cowboy country

Other states are chasing this idea of a single identity which could be secured by blockchain: California because of its tech sector, New York its financial sector, and Wyoming, whose legislature has gone big on cryptocurrencies.

During a panel Kate Mitselmakher the CEO, Founder, and General Partner of Bloccelerate VC in Seattle, drew a useful chart showing which industries might most benefit from blockchain. On the X axis was increasing complexity, and on the Y axis was standardization, At the extreme end were supply chain companies: they could enable blockchain and won't be put out of business. Below them, so more standardized but less complex, were the more vulnerable to disruption by blockchain, products for sale, such as books and Airbnbs.

Tyler Harkness of Tonkon Torp does a lot of M&A work and startup financing. About 18 months ago he had to tell a lot of startups that ICOs would not work for them. Harkness said he was not impressed with what the government in Wyoming is doing, He also told the Business Tribune that lawyering itself maybe be disrupted by blockchain, since a lot of the support staff it takes to maintain labor intensive paper trail, such as paralegals and assistants, might not be needed.

During the panel, Brian Lio said that industries such as Hollywood, which have long had problems with funding and paying residuals, could use a switch to blockchain as a chance to fix those problems and roll out a bunch of other changes at the same time.

Once people are educated about blockchain, startups will have the advantage of starting afresh without legacy technology. They may well head to the OEBVS.

PMG PHOTO: JOSEPH GALLIVAN - Founding member of the R/GA Ventures team, Jonathan Bradley. The Oregon Enterprise Blockchain Venture Studio (OEBVS) is a partnership between R/GA Ventures and several other companies such as ConsenSys, Moda, the Oregon Health and Science University, Business Oregon, Portland State University, Umpqua Bank and Smith + Crown.

A founding member of the R/GA Ventures team, Jonathan Bradley says the R/GA way is to find companies to make strategic connections more than a simple investments, which is why the OEBVS wanted them.

"OEBVS is the name and operating title of the initiative," said Bradley. "R/GA is the contracting partner for all of the engagements with the various corporates and with the government, we're the ones with the operational budget and providing the program staff, and Jeff is one of the many community members who is involved as well."

If it's possible to watch Bradley and Gaus at the same time, it would be instructive. Both are predicting great things for Portland's next wave of enterprises.

Asked how a business leader might go about putting their work on the blockchain, Sheth said they would need to go through a strategy process. The work itself involves a lot of rewriting databases, something perhaps best left to consultants and specialists. Speaking more directly, Gaus added, "They should hire Portland State alumni to do it for them."

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PMG PHOTO: JOSEPH GALLIVAN - Xuehong Liu has BS in electrical engineering and a PHD in physiology and is looking for work. She was at the seminar to learn about blockchain, which might help her with her quest to become a data scientist. She studies online course all day.

A blockchain student: Xuehong Liu

Xuehong Liu has BS in electrical engineering and a Ph.D in physiology, but is looking for work. She was at the seminar to learn.

"The Reboot program helped me to make a career transition into tech," she said of Reboot NW, a partner of WorkSource Oregon. "I thought this is a chance to make a new career as a data scientist, because I've been working with data all my career." Since last June she has taken over 100 courses online, got her certifications on Data Science with Python, Data Science with R tracks and SQL from DataCamp and Data Analyst track from DataQuest. She wants to be a data scientist, but blockchain seemed like an interesting sideline.

Liu is finding the job market tough because employers demand work experience. "Today I learned how the token works. All I knew before was blockchain is a decentralized system, but now I've got a little more detail."

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Joseph Gallivan
Reporter, The Business Tribune
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