NGC Boston Meetup: About DID and STO

【2018-09-28】
There has been no shortage of conversation surrounding blockchain development, investment, and regulation. As the space continues to evolve, how does one decipher between what is noise in a crowded space and what warrants serious conversation? NGC Ventures, one of the world’s leading blockchain investment firms, recently brought some of the industry’s most prominent thought leaders, business professionals, and investors together to narrow it down.

Blockchain heavyweights converge for NGC’s inaugural Boston meetup

On September 15, NGC held its inaugural meetup in Boston — a comprehensive event that provided attendees with a unique insight on project funding and development, ongoing industry trends, and the future direction of the blockchain industry. The event hosted moderated panels and discussions dedicated to distributed identity, the future of security tokens and exchanges, VC fund investment, and more, with notable speakers from Republic, Arrington XRP Capital, GBIC, and Algorand.
 
So, what were the key takeaways, and what might be the next big opportunity amidst the turbulent crypto market?
 
Distributed Identity: An integral part in the transition of blockchain from a disruptive force to mass adoption
 
In the keynote speech dedicated to distributed identity, Mya Hong, Investment Director at NGC, believed that in order to achieve mass blockchain adoption, we need a universal distributed identity system that can enforce security — one that anchors investors to assets and the real world to the virtual world. 
 
As people look for more control over their digital identities, blockchain is often referenced as a tool that can make it possible. Similar protection exists already in the form of the highly debated GDPR, which protects the privacy of digital identities of EU residents. However, its jurisdiction conflicts with blockchain in two key ways:
1. GDPR entitles the data subject to have the data controller erase or amend his/her personal data. Removing data from traditional systems can be easy, not so with blockchain. Transactions on blockchain are generally immutable. In short, GDPR prohibits us from storing data on a blockchain level. Our privacy, now and in the future, will emerge from a combination of technology, social and legal constructs, market forces, and human behavior — it cannot be trivialized as a tech problem.
2. Cryptography has a time value, and with enough time, we may crack current algorithms. However, GDPR does not consider the time dimension.

Projects like Civic, uPort, Sovrin, and Ontology are four examples in a very broad distributed identity landscape that are working towards building an identity verification layer. Each arises from a different background with different sets of resources to utilize, but each works toward the same goal: a “self-sovereign identity” where users have full control of their data using blockchain. Sovrin and Ontology take one step further to use more advanced cryptography technology like CL signature algorithm and zero-knowledge proofs. What differs is the two projects’ architecture. Sovrin focuses more on the underlying protocol using advanced cryptography, while Ontology currently focuses more on the product side, applying DID to build a digital ID ecosystem on top of Ontology blockchain.
 
Both blockchain technology and GDPR are in line with the idea that sharing data within a circle of complementary entities can create a distributed, trusted identity that benefits all. The best identity verification layer will have a well-designed ecosystem with a solid user base to lower the cost of data sharing while maintaining data privacy and control by owners. In this way, DID could be distributed and universal, which could make tokenizing real-world assets truly secure.

Security Token: The important bridge to bring real-world assets to blockchain
 
The event also included a panel of industry experts from Republic, RenGen Labs, RenGenx, Leaseum Partners, and Sheppard Mullin, discussing a popular theme in the industry: security tokens. With unique backgrounds in law, compliance, investment, real estate, compliant security tokens, and decentralized exchanges, the panel addressed the need for security tokens and how they fit into today’s regulation.
 
So, what’s the need for a security token? Andrea Zhang, Investment Director at NGC explained, for issuers, they can get a wider investor pool. For investors, they can get wider investment targets. The average person can’t buy real estate like the Empire State building, but with security tokens people can share a portion. For entrepreneurs, it’s the incredible potential to tokenize real-world assets. 
 
*Some security tokens can also have utility functions. For illustration purpose, we divide the     
tokens into two categories here.
 
A major issue with security tokens is that there are currently no specific laws for blockchain. There are security laws, tax laws, commodity laws, and money transfer laws that are written pretty broadly that can be used for guidance. As there is no hard line between security tokens and utility tokens from a regulatory perspective, it falls in the hands of those issuing tokens to decide who is buying them and why. 
 
From NGC’s perspective, demand for infrastructure-level technology will continue to rise in the security token scheme, especially support in off-chain scaling solutions, safety, privacy, side channel, cross-chain solutions, and decentralized ID — and NGC’s portfolio will continue to represent this. In addition to the infrastructure-layer support, in the security token vertical, NGC aims to invest in regulated security token exchanges, security tokens backed by real-work assets, and everything else that can bring good assets on blockchain.
 
What’s next?
 
How could we possibly design a system that excels in its technological, legal, and business aspects? How could we bring mass adoption to blockchain? At NGC, these are the kind of questions we ask ourselves every day. We hope to invest and partner with projects who are asking the same important questions.