re:publica Special: BTC-ECHO Searches for Blockchain Innovations

Also on the last day of the re:publica in Berlin BTC-ECHO was there again and looked for blockchain lectures and discussions. If you want to know what the re:publica had to offer in terms of blockchain on the first day, you are welcome to read our part 1.

Bitcoin news in the energy sector

The freelance energy journalist Ralph Diermann gave an exciting insight into which Bitcoin news blockchain solutions would be conceivable in the energy sector and which concrete projects already exist in his lecture „Electricity trading via the garden fence – blockchain in the energy sector“ found here

The disruptive potential of the blockchain in the energy sector is in no way inferior to that in the financial sector, stresses Ralph Diermann. The blockchain is in a position to turn the entire energy sector upside down, albeit in the long term.

The current situation of the Bitcoin formula

Up to now it has not been possible for private individuals to sell Bitcoin formula to other private individuals. If the solar system on the roof produces more electricity than is consumed, the only option is to sell it to the energy service provider at a specified Bitcoin formula. The energy service provider as a third party therefore has full control over the electricity transactions and the offer and sales prices.

It is also not possible to choose the electricity provider flexibly, depending on where the electricity price is currently the cheapest, so that the end device (e.g. washing machine) could automatically choose the cheapest electricity provider. The highly regulated and oligopolistic energy sector is currently still drawing sharp lines for innovations.

Blockchain as a solution
In order to break down these rigid and inflexible structures, the blockchain as a decentralized peer-to-peer solution can give back more autonomy to power consumers and private producers. The blockchain infrastructure is able to switch off the energy service provider in its intermediary function. This would make it possible to trade electricity from solar roofs within a residential area with each other without having to go through the energy supplier.

There are already projects that have put this project into practice. With the help of the Ethereum blockchain, this approach has already been successfully tested in New York (article).

Another model would be the collective financing of a photovoltaic system within a multi-party building. Billing could also be automated using smart contracts.

We have already reported on many projects presented by Ralph Diermann in the past. Who would like to experience more, can read itself gladly the following articles:

Solar storage for grid stability from TenneT and sonnen (article)
Wien Energie (Article)
Share and Charge from (article)
It will be some time before the blockchain has established itself in the energy sector, Diermann says. Regulation and deadlocked structures make rapid disruption unlikely.

Meetup on Non-Financial Blockchain-Use Cases
Meetups were held at the re:publica to ensure that the participants not only listened passively to the speakers in their presentations, but were also actively involved in the discussion. In the small chair circles, everyone was invited to join in the discussion.

The Blockchain-Meetup discussed the question how the Blockchain can be used outside the financial sector and especially in development aid. It quickly became clear that it is not always as simple as it seems at first glance.

Although the implementation of Smart Contracts can enormously accelerate processes and reduce costs, the question remains how to ensure that everything is „fair“ in programming. How can it be ensured that the programmer considers all interests equally and is free of conflicts of interest? How can errors in the Smart Contract be dealt with? What are the risks posed by interfaces to the outside world? No simple questions.

In addition, possible areas of application of the blockchain were discussed in regions whose infrastructure and institutional structure is inadequate for sufficient supply of the population. One example was refugee camps in Jordan, where the UN uses the Ethereum blockchain to distribute relief supplies (article). Another example was the consideration of how insurance policies that run through a blockchain can help earthquake victims.

The many ideas were discussed even after the official time had expired.

ICOs: Healthy speculation or blistering?

With over five million US dollars, Humaniq has made speeches about his ICO. That was on April 19, 2017 and was eclipsed as a gigantic ICO, just a week later by the gigantic ICO of Gnosis. It took just a quarter of an hour for the tokens to be sold to investors for 12 million US dollars.

But these are just two examples: If you compare the amount of money that projects received through ICOs with what VC companies provided as funding, the ratio between these funding strategies is almost 50/50.
What can worry you, however, is that more than 75% of investors are not looking for long-term investments, but are speculating on strong increases in value.

There is nothing against investments with high risk and high reward opportunities. But the lack of structure, the novelty of the ICOs and the opacity of many initial coin offerings should remind you to be prudent.

The next hot currency for the Bitcoin trader

A big problem with speculation is that ultimately weak projects are highly speculated about their actual value by a lot of capital like this:

Unlike applications from classic Web 1.0 or Web 2.0 like Facebook, Pinterest or Google, blockchain applications have a rather thin, minimalistic application layer on an extensive Bitcoin trader blockchain layer. In the case of classic webapps, this is rather the other way around: on a minimalist HTTP or TCP/IP protocol there is an extensive application layer.

This means that applications can move from one blockchain to another – depending on the success of the blockchain. For example, there have been applications that have migrated to the Ethereum blockchain – one example is Storj.
However, this also means that an enormous number of often thin applications are started on existing blockchains.

„The boom in ICOs can be traced back to the app explosion of the early 2010s,“ says Brad Hines of the e-commerce website, „As you search for interesting ICOs, you have to dig through hundreds of crypto currencies that often don’t really differ.“

Hines added that not all ICO tokens were successful and many were quickly thrown back by Exchanges.

The experience with Bitcoin has made many crypto trader greedy

„Oh. If I had invested in 2012, I would have been a multimillionaire now“ – that’s how many crypto trader read a review. Accordingly, it is not surprising that many crypto trader people sense an opportunity within the framework of the ICOs.

In such an environment it is important to make conscientious, well-founded investment decisions. Unfortunately, the initiators of the ICOs do not make this easy, since there is no standard with regard to the presentation of possible risks. As the project The DAO showed, additional significant risks can occur that were not previously clear.

The search for an ICO standard
To be fair, many people think that the ICO model is currently in an optimization process, so there is hope that this process will become more standardized and thus risk-free.

„There is currently no set of best practices for these initial coin offerings,“ said William Mougayar, founder of Startup Management and author of The Business Blockchain.

Ultimately, however, this is not surprising: a big advantage of the ICOs is the fast access to capital. As Gnosis shows, an ICO can implement seed funding in extreme cases in just a few minutes.

This of course makes speculation dangerous as well, since the true and hypothetical value of an investment is indistinguishable and therefore signs representing the health and future position of an asset can be overlooked.

Liquidity is the trump card
That being said, it’s too easy to call all speculation evil. Speculation is ultimately even necessary to improve the liquidity of an asset. This is necessary for assets that would otherwise not be sufficiently visible. Speculation increases the trading volume of an asset, which preserves the liquidity of the investment.

To illustrate this, let’s look at an example beyond the crypto world: Let’s say someone has an eye on a fancy car that is to be sold for 30,000 euros. The potential buyer has however only 12,000 euro – however a collection at original-packed Comicbücher in the value of 20.000 euro. Currently the collection is not liquid, since he cannot use these in the purchase for the car.

The buyer must find someone who buys the collection – if necessary with a discount, it should go fast – and wait accordingly, until the sale of the comic books is completed.

But the car lover is faced with a problem: even if he can sell his collection quickly at ComicCon – it is not now. Au

The consequences for Bitcoin owners

Bitcoins are distributed to Bitcoin addresses, which can be imagined as a Swiss numbered account. The distribution of the Bitcoins to the addresses can be fully traced at any time using the transaction history recorded in the block chain. Bitcoin Cash has taken over this transaction history up to the time of the fork. The initial distribution of the currency units of Bitcoin Cash therefore corresponds exactly to the distribution of the Bitcoins on August 1.

Many users, however, do not hold their Bitcoin themselves, but keep deposits at a Bitcoin exchange. This takes care of the technical handling of account management. The exchange thus controls the Bitcoin addresses and thus also the handling of the new Bitcoin Cash. Many stock exchanges have announced that they will provide their users with access to the Bitcoin Cash that is attributable to their Bitcoin holdings, and some have already done so. The most prominent exception is Coinbase, which has announced by e-mail to its users that it will boycott the new currency and not distribute the Bitcoin Cash amounts. After a massive protest and a wave of migration, Coinbase has now given in and wants to support Bitcoin Cash after all.

To whom Bitcoin Cash belongs – to the investor or the stock exchange?

With the Bitcoin Cash a considerable economic value developed. In the meantime, the new units have been valued at 1/4 of the Bitcoin value. At the time of this writing they are at 8% of the Bitcoin value. This corresponds to a market capitalization of more than three billion dollars. The question is therefore: Who owns Bitcoin Cash – the Bitcoin investor or his stock exchange?

Technically this means that with the new blockchain an identical Bitcoin Cash address has been created for each Bitcoin address, which contains the same number of (Bitcoin Cash) currency units. The result is similar to a stock split: 10 Bitcoin becomes 10 Bitcoin + 10 Bitcoin Cash. Those who use their own „wallet“ and thus have control over their Bitcoin address(es) can trade both currencies independently since the hard fork.

No legal vacuum

Can the question be clarified legally at all or do crypto currencies float in a legal vacuum? It is true that the existing laws are not made for crypto currencies. How one can grasp Bitcoins under the existing right terms, is therefore partly controversial. This situation is however nothing new for the right. Jurists apply daily regulations to circumstances, which were not considered with the remission of the regulations. Legal tools for such cases are in particular

the broadening interpretation of existing regulations according to „sense and purpose“,
the filling of regulatory gaps through the appropriate application of rules that are not 100% relevant, but fit the bill („analogous application“), or
the „supplementary interpretation of contracts“, i.e. the filling of gaps in contracts in good faith.
Therefore, nobody has to fear a legal vacuum at Bitcoins. The European Court of Justice, for example, has shown that the law can provide answers. It ruled in 2015 that although Bitcoins is not a legal tender, it must be covered by a certain exception in the law and is therefore not subject to VAT.