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On September 24, 2018, MIT Connection Science and IBM issued a 41-page joint report on the results of three roundtable discussions on the role of Blockchain in government. Authored by MIT’s technical director at the MIT Internet Trust Consortium, which is part of MIT Connection Science, Thomas Hardjono, the findings illuminated discussions held by private and public sector leaders on the blockchain’s impact for government on digital identity, payments and supply chain/provenance.The report was released in consultation with the Congressional Blockchain Caucus.

The report highlighted three repetitive themes that occurred throughout the roundtables, namely, the need for leadership and vision from the U.S. government, the need for collaboration between the industry and the government, and increased support for research and testbed deployments of blockchain technology.

Leadership and Vision From the Government

The report cites “a need for greater vision and leadership across government regarding the development for a digital-blockchain economy.” IBM’s SVP of Blockchain, Jerry Cuomo, echoed this sentiment, stating, “Blockchain is ready for government now, it’s time for government to get ready for blockchain.”

The report suggests that Arizona’s creation of a “sandbox” for companies to develop and innovate blockchain technology is an applicable model for the federal government to use. It should be noted that the report states one roundtable participant opined “that sandboxes are too late today and the U.S. Government needs to do something drastic to make up for the loss of technology leadership.”

Close Collaboration Between Industry and Government

The second recurring theme among the roundtable discussions was that “the technology industry needs to collaborate closely with all levels of government, and clearly communicate the value proposition of blockchain technology and its potential role in the future economy.”

While the report seemingly puts the onus for this collaboration on the private sector, especially when it states that the “industry needs to demonstrate real production examples of blockchain deployment across various segments of the economy,” the report also shows widespread sentiment that the U.S. government has to be educated and a willing collaborator to help the industry grow and mature.

Increased Research and Test-Bed Deployments

The report details roundtable moderators analogizing the need for government support of research and testbed deployments of blockchain technology with the the hundreds of millions of dollars of government support through DARPA (the Defense Advanced Research Projects Agency) that were invested in the 1970s and 1980s in research into the IP Internet.

Attendee members floated ideas of “the government establishing a commission for digital-blockchain economics and blockchain technology,” while another cited the need for interoperability and ease of use, backed by “guidelines/best practices, not legislation or onerous rules, around different ways government will interact with blockchain networks.”

Some notable private sector attendees to the roundtables on which these discussions were based: IBM, Intel, Microsoft (Decentralized Identity Foundation), Project Indy, Ripple, Joust Bank, Seagate, Risk Cooperative, Endor and Sweetbridge.

Public Sector attendees included NIST Applied Cyber Security Division, NIST Cryptographic Technology Group, U.S. Department of Health and Human Services and members of the Congressional Blockchain Caucus.

On September 24, 2018, MIT Connection Science and IBM issued a 41-page joint report on the results of three roundtable discussions on the role of Blockchain in government. Authored by MIT’s technical director at the MIT Internet Trust Consortium, which is part of MIT Connection Science, Thomas Hardjono, the findings illuminated discussions held by private and public sector leaders on the blockchain’s impact for government on digital identity, payments and supply chain/provenance.The report was released in consultation with the Congressional Blockchain Caucus.

The report highlighted three repetitive themes that occurred throughout the roundtables, namely, the need for leadership and vision from the U.S. government, the need for collaboration between the industry and the government, and increased support for research and testbed deployments of blockchain technology.

Leadership and Vision From the Government

The report cites “a need for greater vision and leadership across government regarding the development for a digital-blockchain economy.” IBM’s SVP of Blockchain, Jerry Cuomo, echoed this sentiment, stating, “Blockchain is ready for government now, it’s time for government to get ready for blockchain.”

The report suggests that Arizona’s creation of a “sandbox” for companies to develop and innovate blockchain technology is an applicable model for the federal government to use. It should be noted that the report states one roundtable participant opined “that sandboxes are too late today and the U.S. Government needs to do something drastic to make up for the loss of technology leadership.”

Close Collaboration Between Industry and Government

The second recurring theme among the roundtable discussions was that “the technology industry needs to collaborate closely with all levels of government, and clearly communicate the value proposition of blockchain technology and its potential role in the future economy.”

While the report seemingly puts the onus for this collaboration on the private sector, especially when it states that the “industry needs to demonstrate real production examples of blockchain deployment across various segments of the economy,” the report also shows widespread sentiment that the U.S. government has to be educated and a willing collaborator to help the industry grow and mature.

Increased Research and Test-Bed Deployments

The report details roundtable moderators analogizing the need for government support of research and testbed deployments of blockchain technology with the the hundreds of millions of dollars of government support through DARPA (the Defense Advanced Research Projects Agency) that were invested in the 1970s and 1980s in research into the IP Internet.

Attendee members floated ideas of “the government establishing a commission for digital-blockchain economics and blockchain technology,” while another cited the need for interoperability and ease of use, backed by “guidelines/best practices, not legislation or onerous rules, around different ways government will interact with blockchain networks.”

Some notable private sector attendees to the roundtables on which these discussions were based: IBM, Intel, Microsoft (Decentralized Identity Foundation), Project Indy, Ripple, Joust Bank, Seagate, Risk Cooperative, Endor and Sweetbridge.

Public Sector attendees included NIST Applied Cyber Security Division, NIST Cryptographic Technology Group, U.S. Department of Health and Human Services and members of the Congressional Blockchain Caucus.

Boston-based cryptocurrency finance firm Circle has just joined the multitudes of other crypto exchange platforms now issuing and trading their own stablecoins.

As of September 26, 2018, dollar-pegged USDC is now trading on Poloniex, the crypto-to-crypto exchange Circle acquired in February 2018, and on Circle Trade, the company’s over-the-counter (OTC) platform. Circle co-founders Sean Neville and Jeremy Allaire spelled out the details in a blog post.

Acting as a sort of safe haven where crypto traders can park their assets in volatile markets, stablecoins have become increasingly popular. They are especially useful in exchanges that offer only crypto-to-crypto trades. Right now, there are roughly 29 active stablecoins on the market.

All of these coins make their own promises. For Circle, USDC is an Ethereum-based ERC-20 coin. A commonly used token standard, ERC-20 makes it easy for wallets, exchanges and other smart contracts to interact with the token. This helps Circle create an instant ecosystem for the token.

“More than 20 companies are also announcing or launching support for USDC today,” Circle said.

Other exchanges planning to list the coin include OKCoin, DigiFinex, CoinEx, KuCoin, Coinplug and XDAEX, a spokesperson from Circle confirmed.

Similar to the Gemini Dollar and Paxos Standard, USDC is a fiat-collateralized coin. That means that a centralized company holds assets in a bank account and issues tokens that represent a claim on those underlying assets. (In contrast, dai, the stablecoin of MakerDAO, is backed by crypto.)

All of these coins go head-to-head with tether, the most widely used stablecoin in the space. But unlike tether, USDC is regulated as a registered money services business (MSB) under U.S. money transmission laws. As a virtual currency, it is also regulated under the New York BitLicense. What’s more, bank accounts holding fiat to back the token are subject to monthly audits.

Circle will be the first issuer of USDC. Other entities can issue the coin as well, but they need to go through Circle’s non-profit CENTRE consortium. Leveraging $20 million raised in a SAFT token sale last year, CENTRE is focused on defining standards and policies for stablecoins. Each entity that wishes to enroll and issue USDC is held to the same regulatory-compliant standards.

To help create its new stablecoin, Circle raised $110 million in May 2018 in a round led by China-based cryptocurrency giant Bitmain. It was, at the time, the biggest venture capital round raised by a cryptocurrency or blockchain company to date.

Overstock.com CEO Patrick Byrne has acquired a stake in blockchain startup, Medici Land Governance (MLG). Byrne purchased a 43 percent stake in the blockchain land registry in a private transaction.

Blockchain land registries have been getting a lot of traction around the world, as they promise a viable solution to the problem of fragmented paper records and unverifiable claims.

Medici Land Governance, the blockchain-powered property rights subsidiary of Overstock, was founded in 2018 to help people legitimize the ownership of their properties using blockchain and other technologies.

MLG is one of the portfolio companies under Medici Ventures — Overstock's blockchain tech accelerator wing — which includes other blockchain projects such as tZero and Factom.

“Proper land governance is the crystallization of the rule of law and the foundation of a successful, prosperous and free society," Byrne noted in the announcement.

In an interview with Bitcoin Magazine, Byrne said he believes secure land titling and property management systems have the potential to eliminate poverty across the world.

“Once individuals in emerging economies have systems in place to help them establish formal ownership of their property, they can more easily access credit and public services necessary to become a true, sustainable member of the global economy," he said.

“Blockchain land registry systems are a large step in the goal to democratize capital, and I’m proud to be a member of the team leading that charge."

Medici Land Governance CEO Dr. Ali El Husseini describes the investment from the Overstock CEO as a "vote of confidence” in the land registry's “unprecedented mission.”

“Patrick Byrne’s investment comes at a pivotal time as we are coordinating staff, resources and technology at two locations separated by continents with the aid of governmental and global partners, most notably the World Bank,” he remarked. “Teams both in the African nation and the U.S. are implementing the basic infrastructure and formal digital tools to deliver land titles to holders.”

Medici Land Governance recently signed an MOU with the World Bank to create, implement and evaluate pilot programs that ensure secure land tenure for underdeveloped communities. The blockchain startup also inked a deal with the Zambian government to overhaul the current land ownership system in a bid to allow rural landowners to formalize the ownership of their estates and gain access to the financial world.

It’s no secret that DApps have struggled to achieve adoption; in fact, according to stateofthedapps.com, the most popular DApp currently has just 1,811 daily active users (DAUs). In our opinion, the poor adoption rates of DApps can be attributed to the high adoption costs of using DApps, such as the time required to sign up, monetary cost or the fear of loss. These adoption costs are particularly high relative to the perceived value gained, especially when compared to Web 2.0 platforms that are designed with much lower adoption costs.

Crypto Kitties (which is currently the third most popular DApp with 530 DAUs) is a perfect illustration of the high barrier to entry faced by users. Before users can start to build up their Kitty collection, they are required to have a desktop or laptop, own some Ether and have a Metamask account. Assuming a user has all three, they must also make sure that they don’t lose their password or seed words, as recovering these is simply not possible (a fear of loss that most users are not accustomed to).

When comparing this signup process to that of Web 2.0 platforms, for the pragmatic user, these requirements are too cumbersome. Web 2.0 apps have invested considerable effort in streamlining the time and mental effort required to interact with their platforms, with companies such as Apple taking a “two taps away” approach. And so, unsurprisingly, the user experience of Web 2.0 is still years ahead of current DApps.

Such high adoption costs at the initial stages of an innovation are nothing new. History is littered with examples of innovative products, including mobile phones, computer and mobile operating systems and the internet, that initially were not accessible to the majority of users due to the complexity and costs of using them. However, as the technology improved and costs dropped, adoption grew.

In his 1991 book Crossing the Chasm, Geoffrey Moore argued that the key to achieving breakthrough adoption for high-tech innovations was overcoming the “chasm” in order to reach the “early majority” (the pragmatists). He describes this chasm as the massive gap that lies between the early adopters (tech enthusiasts and visionaries) and the early majority, which exists when a new product has the potential to be highly disruptive and thus require behavioral changes.

Thus far, when it comes to DApps, the pragmatists are not willing to put up with what can be seen as a bad user experience compared to the UX offered by Web 2.0 platforms (i.e. they are not willing to change their behaviors). Current DApps have not yet been able to cross over this chasm and are, instead, only managing to reach the “early adopters.”

Source: (Moore, 1991; Nesmith, 2018)

The question is, then, how can DApps successfully achieve this crossing?

We believe that crossing the chasm will come with a DApp that is centralized, with decentralized functionality i.e. a hybrid, quasi-centralized approach.

Now, before the pitchforks are raised, we first ask you to hear us out. A hybrid approach would allow the “early majority” to use DApps with the low barrier to entry that they are accustomed to with Web 2.0 apps. This low-friction approach would expose and inform the early majority of the value offered by Web 3.0 functionality and, in doing so, cross the chasm. In other words, this approach would whet the appetite of the early majority for Web 3.0 and leave them wanting more. And so, as time goes on and more adoption occurs, DApps will incorporate more Web 3.0 and less Web 2.0 functionality, before finally reaching full Web 3.0.

In the past, hybrid solutions were not possible; that is, one could not experience the magic of a mobile phone (it is magic) without, well, having a mobile phone: The landline system couldn’t expose the user to mobile phone functionality.

In crypto, this is different; we have the Web 2.0 world (with its low adoption cost), and we can use this low cost to our advantage while decentralized infrastructures are being built out. After all, the main thing that decentralization enables is trust (well, strictly operating without it).

We believe that this can be adopted as a philosophy by the early majority before the technology has caught up to enable it. As an example, let’s go back to Crypto Kitties and apply this philosophy. The in-game rarity of the cats would still be guaranteed by Web 3.0 functionality; however, the sign-up process would incorporate more Web 2.0 functionality, such as allowing mobile users (possibly through an app) and allowing the use of USD on the platform. Such changes would make the Crypto Kitties platform far more accessible to the early majority.

We bet you’re saying, “Wait, but Bitcoin couldn’t be quasi-centralized, so this approach is obviously wrong.” Yes, you are right, a quasi-centralized, censorship-resistant digital currency (cash or gold) wouldn’t work.

This, however, does not mean that such a quasi-centralized approach is wrong. Rather, it is use-case and sector specific. In fact, if one investigates Bitcoin further, many users interact with it through centralized businesses. For example, users on exchanges like Coinbase or wallets like Jaxx interact with Bitcoin in a quasi-centralized manner. Users do this because the centralized businesses reduce friction for users. The key aspects of Bitcoin (inflation rate, consensus) are decentralized, but many of the user-facing aspects (storage, sale, transfer, etc.) use centralized Web 2.0 functionality.

It would, therefore, seem that, even when wealth is at stake, users are comfortable with centralized solutions and are unwilling to overcome the current high adoption cost of true decentralization. Another example is the gaming industry, which we believe is a perfect target market for quasi-centralized DApps to experience a breakout success.

Why is gaming primed for this type of breakout? Three main reasons: 1) Gamers, as a whole, are accustomed to high adoption costs of learning and then grinding on a new game. 2) Gamers enjoy trying new ideas and concepts, such as a new scarce currency. 3) Gamers already assign a lot of value to digital goods. The amount of money Fortnite makes on skins is frightening, but it’s also a good indication of the value gamers assign to being able to express themselves digitally. Actually owning the digital asset is the natural progression within many games.

An example of a quasi-centralized game is the augmented reality mobile game, Augmentors. Here, players can purchase a package using fiat currency from the in-app store. Each package contains several elements including, but not limited to, creatures, consumables and Emeralds. Databits is the standard crypto-asset and Emeralds is an off-chain asset that is pegged to Databits at a set ratio. But, critically, from the perspective of the early majority, Augmentors is just a normal mobile game. They don’t need to know that it is a crypto-backed game that aims to be the first mobile game to guarantee in-game asset rarity. All they know is that players can train and customize their creature and thus increase its rarity and can legally sell it for real money, outside of the game. The technology behind it disappears for the majority of users.

In summary, we believe that the first breakout successes of Web 3.0 will be DApps that harness Web 2.0 to build themselves initially — and that’s okay. Also, we acknowledge that such a hybrid solution will eventually be deemed unacceptable to users in the long term, but a compromise in the short term is ultimately needed in order to achieve long-term success by breaking through to the early majority. Such a quasi-centralized approach and a breakout success will expose the early majority users to the value that can only be offered by Web 3.0 functionality. Nudging us closer to a future Web 3.0 world.

Disclosure: This is a guest post by James Kilroe and Seamus Hennessy of Newtown Partners. Newtown Partners is an investor in Augmentors and holds Databits. View expressed are theirs alone and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.