IEEE Spectrum October, 2017 - 35

T H I N G S T O D O W I T H A B L O C KC H A I N

Educational Records: Most people would change some detail of their school records if they could. Today,
principles and the fear of being caught keep us honest. But tomorrow it might be the blockchain. Sony and IBM are
creating a new blockchain for tracking and storing diplomas, transcripts, and other kinds of educational records.

ing, or IPO) has turned out to be wildly lucrative,
although legally questionable.
Groups that choose to fund their projects with ICOs
design their smart contracts in such a way that a user
must own an app-specific coin in order to use the
app. These groups then create a bunch of the coins
before their launch and sell them on the open market.
In the nondigital world, it would be like someone
opening a laundromat where you could use only custom coins to run the machines. And so, instead of just
getting investors, the owner stamps out a bunch of
coins to sell to the public, which can then be traded at
prices determined by the value of the laundry service.
To date, over half a billion dollars has flooded
into blockchain companies by way of token sales,
and the last few months have seen an eye-popping
acceleration in the rate and price of new offerings.
This July, a blockchain project called Tezos set a
record by raking in over $200 million with an ICO.
Such astronomical investments have led some
observers to complain that there is a grim hypocrisy
at work. "The blockchain entrepreneurs who are
pushing these schemes are really demonstrating all
the avarice and cupidity which they ascribe to standard financial services" and government-backed
currencies, says Preston Byrne, the cofounder of
Monax Industries, an open platform for blockchain
developers. "So, when the money starts flowing in
their direction, they're becoming equally careless
about the public-whom they once were."
However, others argue that the ICO, as a new
class of investment vehicle, is just as disruptive
as the applications being funded.

smart contract accepts the
premium, it then asks the
oracle to report on the status
of the flight in question.

ILLUSTRATION BY

Nicholas Little

"Money is not the root of all evil. Equity is the root of all evil," says
Joel Monegro, who left Union Square Ventures to start Placeholder,
a new fund devoted exclusively to blockchain technologies.
His argument, which is often repeated by blockchain startup leaders,
is that giving founders and employees equity in a company encourages
them to hoard that wealth rather than use it to improve their products.
An app-specific coin, on the other hand, is not only a financial
instrument but the means for accessing a technology. It follows that
the more people use a service, the more demand there will be for
the token required to access that service.
"My incentive as a company is not to extract more profits but to get
more usage, because the token appreciates in value with the usage
of the service. You completely flip the incentives," says Monegro.
In the United States at least, the ICO binge has likely come to an
end. In late July, the U.S. Securities and Exchange Commission sent
a chill through the startup scene. It issued a warning that many of
the ICOs reviewed by the department fell into the category of securities and would therefore be bound by its rules.
Nevertheless, the trailing edge of the tsunami of ICO cash is still
washing up on the shores of the industry. Only time will tell if it's
put to good use.
"Times have changed, and very quickly. Some of us early adopters,
who struggled financially three and four years ago but held onto
their beliefs and their coins, are very well off now," says Hacera's
Levi. "We still need Bitcoin and Ethereum to operate at larger scales,
and enterprises need to decentralize more and secure their sensitive data. We are now facing a new and different kind of a challenge:
Given the vast amounts of money invested, it remains to be seen how
many old-timers and newcomers will stay true to the cause and continue to work to change the world with the technology that already
changed theirs." n
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The oracle uses information from
RealTimeFlightData to report the status
of the flight to the smart contract.

If the flight is delayed, the contract pays the
passenger. If the flight is on time, the contract
pays itself.

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Table of Contents for the Digital Edition of IEEE Spectrum October, 2017