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W3C Vets Forego ICO for Government-Friendly Blockchain Launch

“Greed brings attention to things,” Manu Sporny says.

He’s thought about this for some time, brainstorming the pros and cons of an immensely popular, yet flagrantly hyped new mechanism for raising money – the initial coin offering (ICO).

So, today, Sporny and his team at Digital Bazaar, a successful software provider 15 years in the making, are launching the Veres One identity blockchain without its own token.

The project isn’t ready for general availability just yet, but is being released for testing and tweaking (should bugs be found in the code).

However, what seems most notable, especially in today’s frothy crypto ecosystem of multimillion-dollar token raises, is that Digital Bazaar’s identity blockchain does not need an ICO, it does not need a token.

“Our goal is not attention seeking, it’s trying to build the most cost-effective infrastructure for this thing,” Sporny said.

And that infrastructure needs to clean up the mess that is digital identity today, where large, powerful gatekeepers control the system and keep silos of data that have proven vulnerable to data breaches. Not only that, but an identity blockchain needs to be a global public utility that everyone – even the poorest of the poor in developing nations – can benefit from.

Yet, how could that dream come to fruition if the platform’s token is being pumped and dumped and speculated on rampantly every day, in turn making the fees to operate and use the network unpredictable?

As such, the Digital Bazaar team designed Veres One as a public, permissionless distributed ledger where three groups of stakeholders work together to keep the system running: nodes that run that software, maintainers that develop the software continually and a diverse (both gender-wise, ethnically, culturally and geographically) board of governors that sets the operational rules of the network that maintainers then execute on.

All these groups will provide checks and balances on each other, according to Sporny.

Without a token, the blockchain will subsist on fees for users – currently set for users at around $1 and anticipated to stay low, since Digital Bazaar won’t start in debt with its investors, Sporny said.

He continued:

“A project that does do a token sale versus one that doesn’t do a token sale, all things being equal … the one that doesn’t do a token sale will fundamentally be a more cost-effective solution since it doesn’t have investors to pay back. So, the cost of the network can be much lower.”

Downsides of being different

That’s not to say Sporny doesn’t see a place for crypto tokens and ICOs anywhere.

If a network was going to generate billions of dollars in value, he said, it could successfully implement a token. With identity as the business, though, he doesn’t see that happening. And he’s OK with that.

Sporny told CoinDesk:

“We’re not optimizing for the ICO frenzy, we’re optimizing for the long haul.”

Although, Sporny said, Digital Bazaar almost did hold an ICO. The team hired lawyers and started designing a token, but a couple of months into writing the white paper, they decided it made no sense, he said.

“The problem is that if you have a competitor that comes in without an ICO, they’ll be able to do things much more cost-effectively,” said Sporny.

Not everyone agrees.

Drummond Reed, the chief trust officer of Evernym, another blockchain identity provider, has raised private equity, but is also planning a token sale in the future.

“We believe the best answer is a balance of both,” Reed told CoinDesk. “All equity, which is the conventional route, is both slower and more dilutive than tokens. However, [just doing a token] goes too far the other way – it doesn’t lay a solid foundation for a company as a business.”

He continued, speaking to the trend in the crypto space today, saying:

“Tokens are here to stay as a powerful new way to offer incentives and support value exchange in a blockchain-based network. So ignoring tokens altogether is not, in my honest opinion, wise.”

With money in the bank from the work Digital Bazaar has provided and continues to provide for clients, the company didn’t need to raise another round. It’s used that money to build the infrastructure already.

Although, Sporny acknowledges that, without a token, the platform might not garner as much attention as some of the other projects in the cryptocurrency space. Yet, with the crypto space hinting at the first signs of ICO exhaustion, according to several investors CoinDesk has spoke with, it’s not guaranteed a token will even lure that much enthusiasm anyway.

Plus, token sales generate the “wrong kind of attention” for Veres One, said Sporny. According to him, the project needs to entice decision makers such as government agencies and international non-profits, instead of western investors.

The ‘right’ interest

Digital Bazaar has been successful in that area already.

The firm was given grants by the Department of Homeland Security twice – both times for its work building a fit-for-purpose blockchain for digital identity.

Evernym also received a grant from the U.S. government agency.

According to Sporny, this work with the Department of Homeland Security was how some of the Veres One blockchain was built and why it’s designed the way it is.

Decision makers and government agencies (the grants not only gave them access to U.S. stakeholders, but internationally too) want a system that is “simple, predictable and the cheapest thing out there,” he said.

“Frankly, doing an ICO is a mark against anything that will potentially be used in government,” Sporny continued, adding:

“It’s not a hard and fast rule, but it makes people skeptical of the project that there might be a possibility that you raise money and then stop caring about your customers and go into naval-gazing land.”

Not only does Digital Bazaar already have contacts within government, but what’s also notable about the team is that it has serious street cred in the digital identity space.

They’ve been working with groups like the World Wide Web Consortium (W3C), the international standards organization founded by Sir Tim Berners-Lee, the eccentric computer scientist known as the inventor of the world wide web, for years now on both payments and identity.

On the Veres One project specifically, the group has worked with Rebooting the Web of Trust, a community started by Blockstream’s principal architect Christopher Allen; the Internet Identity Workshop; the Decentralized Identity Foundation; and the W3C Credentials Community Group and Verifiable Claims Working Group.

Digital Bazaar’s work in W3C undertaking with groups within the organization actually inspired the architecture and governance structures of Veres One.

For instance, the system is patent and royalty-free, and transparency is at the core of the project, with every meeting the board of governors (who hold their position only for two years) and the team has will be public and recorded.

For Sporny, that means the ledger can’t be corrupted as easily as others in the space.

While he isn’t interested in pointing fingers at any one group specifically, Sporny mentioned the momentum for hard forks, where a group of people effectively start competing networks. And this practice puts pressure on network stakeholders and could incentivize certain things that aren’t ideal for the network in an effort to keep certain parties happy.

High hopes

And those politics are what Sporny and Digital Bazaar want to avoid.

Because of the nascency of the technology, “I don’t think people have done really good economic analysis about what an ICO does to a network,” Sporny said. “Investors put money in and want a 10X return, in crypto, they want returns that are many times more than that. The problem with doing that in the identity space is not everyone can afford to pay the enormous fees associated with rampant speculation on a cryptocurrency.”

He continued, “If the costs are predictable then people that are in situations where they don’t have access to a lot of capital can still use the system and control their own identity. We aren’t building an identity system for people in the West that are rich.”

There’s a bit a sermonizing, sure, but it’s struck a chord with a whole spate of people that think this is the winning ticket for changing identity online. It seems there’s a growing number of people becoming disillusioned with the ICO.

Allen at Blockstream commended Digital Bazaar for bootstrapping the build of an identity platform and not corroding it with a token.

“There are a lot of people out there that would like to take advantage of some of these technologies [in the crypto space] but the token, the pump-and-dump game is a barrier for them,” Allen said, pointing to governments, social impact organizations and international NGOs.

And Pindar Wong, Internet pioneer and VerFi chairman, pointed to Peter Steiner cartoon featured in The New Yorker in 1993 – “On the internet, nobody knows you’re a dog” – saying that during that time people’s comments on the internet were judged by their merits.

While the commercial use (and exploitation) of digital identity now rules the web, Wong believes Veres One “elegantly” solves several issues with decentralizing identity online.

According to Sporny, if everything in this testing phase goes as planned, the Veres One blockchain will be stabilized and ready for production within two to four months.

Sporny concluded:

“Fundamentally, what we’re trying to do is build a fit for purpose ledger that is built for [the digital identity] use case and only for that use case – no token, no speculation. And we’re inviting developers to bang on the network and break it.”

Disclosure: Pindar Wong is a member of CoinDesk’s advisory board and CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Blockstream.  

Crossroads image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Bitcoin in the Browser: Google, Apple and More to Adopt Crypto-Compatible API

Developers at some of the top tech companies have created a browser API that could soon make it easier to buy goods and services online with cryptocurrency.

The work, started by the World Wide Web Consortium (W3C) with the help of Microsoft, Google, Facebook, Apple and Mozilla, is a tangible step forward for a currency-agnostic web payment standard first conceived in 2013. Equally, as bitcoin and other cryptocurrencies gain more momentum, the launch signifies the growing recognition of cryptocurrency as a payments technology.

Indeed, the W3C has gotten more interested in blockchain technologies over the years, hosting its first ever blockchain workshop in June last year. But while participants were left with interest in standardizing and democratizing the technology’s use, no formal work was decided upon then. That, however, has changed.

Announced on Thursday, the API is currently being implemented in browsers including Google’s Chrome, Microsoft’s Edge, Apple’s Webkit, Mozilla’s Firefox, the Samsung Internet Browser and Facebook’s in-app browser. When activated, the Payment Request API will allow new payment types, including bitcoin, ether any any other available cryptocurrency (as well as more traditional online payment methods) to be stored directly in the browser.

Consumers will then be able to choose from a drop-down menu of available payment methods supported, a kind of expansion on the auto-fill feature already widely enabled at checkout.

And with that, Ian Jacobs, head of the W3C’s payments activity, said now’s a good time for developers to start writing code for payment methods they’d like to see available.

In an exclusive interview, Jacobs told CoinDesk:

“This is a great opportunity for people to start writing blockchain-based payment method descriptions and to try to test the API. That’s sort of the period that we’re in, the test and interoperability development phase.”

A stable state

The API, and the W3C’s call for the “broad implementation” of it, is based on what the group sees as a way to offer consumers more payment options and merchants a more secure online checkout.

As part of that growth, the WebKit browser engine that powers Safari and Apple’s App store earlier this month moved the status of its work from “under consideration” to “in development,” though other more advanced stages still lie ahead.

“The specification has matured enough within the W3C process that we’ve moved from draft state to stable state,” said Jacobs, who added:

“And that means, now we know what the API is going to do, and we are building test suites and working on browser interoperability so the implementations are secure and they behave the same way.”

The W3C’s standardization efforts are notoriously slow moving, with work advancing from community groups to interest groups to working groups, all of which can take years. This is one of the reasons cryptocurrency entrepreneurs have been hesitant to join the group’s ranks, even though the Tim Berners-Lee created consortium has quite the reputation.

Not so fast

But, the process ahead isn’t as easy as it sounds.

Jacobs compared the next steps to matchmaking, where merchants will need to integrate the API and pick which payment methods they want to accept. At this stage, customers will need to download the browser extension and signal what payment methods they use.

In other words, merchants need to build websites that acknowledge the new payment methods, while users need to have wallets that “speak the protocol that were writing,” Jacobs said. “That’s how the ecosystem pieces together the merchant-side and the user-side.”

The W3C is already working with third-party payments apps to integrate both cryptocurrency and non-credit card forms of payment into the API in a way that can be interpreted by merchants and consumers.

“So, for example, you might identify a particular bitcoin payment method with a URL, and then people can distribute payment apps that declare their support for that payment method,” Jacobs said.

The Web Payment Working Group’s next face-to-face meeting on the browser-based API is scheduled for November 6 and 7, with a demo scheduled to take place on October 23 to show how Airbnb, Google and Mastercard are using the API.

Jacobs, optimistic about the recent step forward, concluded:

“You will begin to see early adopters of the API using it and you will see an increase in browser support over time that I’m hoping by the middle of next year it’s widely deployed.”

Bitcoin on phone image via Shutterstock

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