Cryptocurrency or Myth of Currency?

By Eric Olson

Tsoma Nakamoto speaking at Georgetown University Law Center on 10 November 2017

On 10 November 2017, an eager crowd packed into Georgetown University Law Center to hear from experts in one of the hottest technology fields, cryptocurrency. Friday’s event, the first in an ongoing Cryptocurrency Speaker Series, featured Tsoma Nakamoto, Bitcoin venture capitalist, and Ryan Lester, founder and CEO of Cyph, an encrypted messaging platform. Sponsored by the Cyberlaw Society, Georgetown International Law Society, and Society for the Cessation of Tobacco Death, last week’s event drew a strong crowd, indicating significant public interest in this developing technology.

Mr. Nakamoto - who shares a last name, but apparently no relation, to the rumored inventor of Bitcoin, Satoshi Nakamoto - began the evening with an overview of cryptocurrency technology. Framing new currencies such as Bitcoin as the next evolution of ledger technology, Mr. Nakamato suggested currencies like bitcoin are merely a more technologically advanced solution than the double spend problem of recording transactions that humans historically solved through seashells or stone tablets. Now, currencies such as Bitcoin, Ethereum, and Polkadot, include the complete transaction history of a currency unit in a distributed ledger, preventing both forged currency and currency double use.

His comments, however, alluded to the sometimes volatile nature of cryptocurrency technology. In addition to market volatility (evidenced by this past weekend’s sharp drop in Bitcoin prices), Mr. Nakamoto expounded on the new currencies’ technological volatility. Obstacles to a stable currency include technological mishaps, such as the bug that locked up $300 million worth of cryptocurrency last month, and targeted attacks on the markets such as the Mt. Gox hack, which Mr. Nakamoto said wiped out half his holdings. Cryptocurrencies also may soon face legal obstacles to ensure compliance with SEC regulations, and Mr. Nakamato believes assets bought in future ICOs (initial coin offerings, the cryptocurrency equivalent of an IPO) will be subject to the capital gains tax. Mr. Nakamato’s view regarding SEC enforcement is supported by the July 2017 Investor Bulletin issued by the SEC, which alerted investors that currencies issued through ICOs may be securities, falling within the purview of SEC regulation. The September 2017 arrest of Maksim Zaslavsky for selling unregistered securities in ICOs further suggests increased regulation of cryptocurrencies.

Looking forward, Mr. Nakamoto believes that the future of blockchain technology will move towards eco-friendly algorithms due to the severe environmental costs of these transactions. In fact, a recent report indicated that a single bitcoin transaction uses as much energy as a house uses in a week. Mr. Nakamoto posited ‘holochains,’ which contain data stored on a holographic image, as a possible solution to environmental concerns.

Ryan Lester continued the evening with an overview of his new secure messaging program, Cyph. Growing out of his use of ‘off-the-record’ encrypted chat to communicate with his friend and co-founder, Josh Boehm, Cyph aims to provide users with the security of encrypted chat and the easy user experience of popular messaging applications such as Gchat or iMessage. After the Snowden leaks, Mr. Lester realized encrypted chat services could have broader appeal beyond niche tech-sector users. 

Mr. Lester is poised to scale Cyph for greater public use in the near future. In addition to presenting his work on Cyph at prominent conferences such as Defcon and Blackhat, Mr. Lester will release the full version of Cyph in the near future. He evaded questions about any IPO, stating he wanted to retain control over the company for at least the next few years. Mr. Lester ended his lecture with a call for sensible encryption regulations, telling his law school audience to work towards a future with greater privacy protections for consumers.

The large turnout for this event indicates strong interest among the legal and greater Washington community for information on these developing technologies. For those interested, keep an eye out for announcements regarding the next event in the Cryptocurrency Speaker Series.