Twenty years ago I would connect to the Internet using a state-of-the-art 33.6k modem and hope that my parents wouldn’t notice that I’d hogged the landline again. I would browse the Web, marvelling at random websites and their web 1.0 glory. I’d spent hours chatting with people from all over the world on an IRC client or via ICQ.
Back then the Internet was a wondrous thing. However, the ecosystem of services built on top of it was a jumbled mess of underdeveloped ideas, glorified Proof-of-Concepts and confusing interface. This was partly because the Internet, despite having been around for several decades, was still in its infancy and lacked the proper infrastructure to support more sophisticated services. It was also because people were still figuring out what they could build around this technology. My point is that using online services back then was clunky and inconvenient. So inconvenient, in fact, that businesses would rather continue using their trusty fax machines instead of adopting that fancy thing called email.
Fast forward 20 years and I can now stream videos on my phone. Things have changed a bit, haven’t they?
The Internet of today is ubiquitous, a vast and complex infrastructure supporting a myriad of online services interwoven into every aspect of our lives. Just consider for a moment that seven of the top 10 most valuable public companies today are tech companies, which have online services at the core of their respective businesses. So bravo, Internet, you’ve really come a long way.
Why send an email…
"New technologies that shift the paradigm take a long time to really understand," Meltem Demirors, chief strategy officer at digital asset manager CoinShares, said in a recent interview with CNBC.
There is a general truth to this statement that is undeniable. In fact, we can find countless examples supporting it throughout our modern history alone – from the motorcar through the home computer to the Internet itself. I’m willing to wager that somebody said something along those lines in the wake of the dotcom bubble burst.
Demirors made that comment last week, when she was talking about Bitcoin and the ongoing struggles of the cryptocurrency market. She then drew a direct parallel to the early Internet stocks, pointing out how the same companies that rule the corporate landscape today struggled to recover after the dotcom bubble burst.
As much as we are a technology-driven society, we are inherently sceptical about new technologies. This attitude may seem paradoxical, but it’s actually understandable. I mean, why do I need to use this new thing when the old method works perfectly fine and is, in many ways, more efficient than the newly-proposed alternative?
"The cult of bitcoin [makes] many claims — that it's instant, free, scalable, efficient, secure, globally accepted and useful — it is none of those things," former PayPal CEO Bill Harris recently told CNBC. Harris, who is a staunch critic of Bitcoin, continued: “We've got digital currencies. And we've got digital currencies that are more stable, more widely accepted and have intrinsic value. We've already got it — it's called the dollar, the yen, you name it."
As much I disagree with Harris’ earlier assessment that “Bitcoin is a scam […] a colossal pump-and-dump scheme, the likes of which the world has never seen”, I have to admit that he is right here. The Bitcoin of today is slow, inefficient, volatile and lacking large-scale adoption, and the same is true about its crypto peers. At the same time, we have our trusty fiat money. We’ve had them for a long time, actually, and they’ve proven to be reliable, stable, secure and generally useful. On top of that, we can use them to make electronic payments without too much of a hassle. Why send an email, when I have my fax machine, right?
But the Internet was never build to compete with the fax machine. Or maybe it was, in the sense that it was meant to provide a new method of communication. But, as people continued to explore this new technology, they eventually realised that it was capable of so much more.
I suspect that the same could be true about the distributed ledger technology and cryptocurrencies. While Bitcoin might have originally been devised as an alternative payment system, pitting it against the established financial system does a great disservice to the tech, in my opinion. Not only does this way of thinking draw the crypto sector into a fight that it cannot possibly win at this current juncture, it also greatly limits its potential.
I’m looking at crypto and DLT from a different angle, not focusing on its current ability to challenge the established status quo, but on what it could potentially enable us to do in the future. With that in mind, let’s take a look at our possible blockchain-powered future (well, at least at my version of it). Don’t worry, we’ll be back to the present day in no time.
Do androids dream of electronic coins?
The Internet-of-Things has been one of the fastest growing technology trends of the past few years. The idea of everyday appliances being able to connect to the Internet to do all sorts of useful things has been gaining more and more traction among tech companies and consumers alike. This has encouraged some to take this concept even further, by bundling it with something called a “machine economy” – basically a fancy term for machines being able to pay their own bills.
When you think about it, it does seem that a machine economy is the natural progression of the Internet-of-Things concept, or, at the very least, that the two concepts are highly complementary. After all, if a refrigerator is capable of ordering orange juice, it’s only fair for it to also have the ability to pay for that juice.
I’m certain that existing payment solutions could enable this to some degree. But the way I see it, developing a full-blown machine economy would require new solutions capable of supporting billions and billions of “intelligent” machines, all communicating with one another and paying for stuff. This is where the decentralised, trustless nature of DLT and crypto will truly shine, as it can enable this vast and complex ecosystem to function without the need for external governance or oversight. A DAG-based DLT protocol like IOTA’s Tangle seems like the prime candidate for the job. In fact, Tangle is built from the ground up to be the backbone of a future machine economy. Now whether the IOTA team would be the one to realise this vision is debatable, but regardless, the idea has too much potential to be left unexplored.
I still remember when I first found out that I could watch video “on the Internet”. Upon this marvellous discovery a thought popped into my head: “Coool!”. Then, a second one: “I wonder how long it would take for someone to figure out how to make an online video rental out of this.” Little did I know…
Marketing has never been my strong suit, you see, so I couldn’t come up with a catchy term like ‘Video-on-Demand’, or even ‘streaming’. Nevertheless, I was sure that someone would make it happen. I didn’t know how they would do it, but I was certain of the imminent arrival of ‘online video rental stores’. It just made too much sense in my mind.
So I’m now coining the term ‘tokenised manufacturing’, hoping that nobody comes up with a catchier term in the future. Because I’m certain that someday someone will figure it out.
So what is tokenised manufacturing you ask? Well, as of now, just a figment of my imagination, something that may never come to fruition. Nevertheless, I think it’s a fascinating concept. Let me explain.
Imagine that instead of an old, dusty fax machine you had a flashy new 3D printer. You’re very proud of your 3D printer, but what you really need is a chair for your kitchen. So you go online, check a few online vendors and eventually settle on an appropriate design. Then you send the design of your liking to your 3D printer address. The printer, already fired up and ready for work, handles the rest – it converts the base cryptocurrency into the required tokens, buys a single-use licence to print the chair and then gets on with the printing. A few hours pass and bam! – you now have a perfectly good chair!
This may sound like science fiction, but it could work, in principle. I personally think that companies would love the idea. We often say that we live in the Information Age and that information is money. Well, tokenised manufacturing would enable companies to sell information – well, data – directly to the consumer. All they would need to do is to come up with designs for new products. Think of the savings they could make on things like logistics, transportation and the actual manufacturing. Additionally, this could potentially give rise to a new type of businesses – let’s call them printing shops – that would be able to run small-scale manufacturing operations with nothing more than a few printers and a commercial-use printing licence.
All this this will, of course, be fuelled by blockchain and cryptocurrencies which, by then, will be powering a global machine economy. There could be many different ‘special tokens’, linked to different types of products, companies or brands. Tokens that could be instantly converted into any of the ‘base cryptocurrencies’ and vice versa.
I’m aware that 3D printing technology has its limitations, but, even in its current state, it works, doesn’t it? I mean, you can make stuff with it. Maybe not something as useful as a chair, but who knows what we would be able to do with it 20 years from now. Maybe 3D printers would be the furnaces of a new Industrial Age, with crypto being the new coal.
So now that we’ve successfully tokenised manufacturing, why stop there? Let’s tokenise everything - stocks, bonds, commodities, real estate, you name it. We’re already using proxies to trade most of these things anyways. I mean, crude oil is great and all, but I don’t want 10 barrels of that stuff delivered to my front door. That’s why we’re trading oil futures, instead. It’s far less messy that way. Nowadays we even digitise these contracts for extra tidiness. So why not go full digital with the help of crypto tokens?
As it turns out, others have also been entertaining the idea. In a recent blog post regarding its bid to become a SEC-regulated dealer broker, Coinbase, the largest US cryptocurrency exchange, said the following:
“Ultimately, we can envision a world where we may even work with regulators to tokenize existing types of securities, bringing to this space the benefits of cryptocurrency-based markets — like 24/7 trading, real-time settlement, and chain-of-title. We believe this will democratize access to capital markets for companies and investors alike, lowering costs for all participants and bringing additional transparency and inclusion to the ecosystem.”
And we’re back to the present day, as promised. But now that we’ve been to the future, I feel I need to clarify a couple of things, the first being that concepts described above are purely speculative. Even though I think of them as being part of the natural evolution of our centuries-long pursuit of automatisation and our more recent fascination with data, AI and digitalisation, I’m by no means trying to make forecasts here. For all I know, these concepts may never become a reality. But that’s not the point. The important thing for me is that cryptocurrencies inspire me to look forward to the future in a way that the pound or the dollar never could. And that’s the point, as the purpose of a new technology is not to merely replace an old one, but to open up new horizons, to inspire a new way of thinking.
The second point I want to make is that in order for even a fraction of this future to materialise, the blockchain and crypto sector need to step up its game. The technology needs to be further developed and refined, proper infrastructure to be put in place to support trillions of transactions made every day (hour? minute?). Solutions like atomic swaps need to be developed to ensure instant token conversion.
There’s a lot of work still to be done, but we already know the drill. We’ve done it every time we’ve deployed a new, game-changing technology.
In order for the motorcar to become a viable method of transportation, we needed to build an entire network of petrol stations (not to mention the deeper layers of infrastructure, without which that network could never function). To ensure the mass adoption of electricity we built the electrical grid. And the Internet is nothing but a vast system of interconnected computer networks.
Speaking of infrastructure, let’s consider for a moment just how long it took us to build the infrastructure that today supports our reliable fiat currencies and the wider financial system. Yet, we still see currency and financial crises occurring with disturbing regularity. Some might say that fiat may not be so reliable after all. I won’t, because doing so will only steer this piece toward the fiat-versus-crypto debate, which I find very reductive. Besides I like fiat currencies, I think they are extremely useful, actually. I just feel that their crypto counterparts are capable of so much more.
Back to the future
Twenty years ago used to sit on my computer, my eyes widened, jaw dropped, my trusty modem blinking in a familiar, comforting pattern. Today I watch films on my phone and I’m generally bored. Boredom finds me easily, I’ve discovered. Chances are that twenty years from now I’ll be just as bored of blockchain and crypto. And, to tell you the truth, I’m excited at the prospect of this happening, however distant it may be.
Disclaimer: I own small amounts of Bitcoin and Ether.