Technology is meaningless unless it changes the way we behave. As many of you have pointed out, my writing is increasingly focused on blockchain, cryptocurrency, smart contracts and NFTs, decentralized finance (DeFi), Web 3.0, and the role AI and other nascent computational tools may play in the future. There’s a simple reason. They are all behavior-changing technologies.
At one end of the spectrum, there’s the potential of an alternative, decentralized system for value exchange that challenges our understanding about the role of central governance. At the other end of the spectrum, this is nothing more than a fad which can be easily ignored. In my experience, no technology is ever “either, or.”
As you know, almost $8 trillion of wealth vaporized when the dot-com bubble burst in 2000. Those speculative losses didn’t have anything to do with the underlying technology; it was all about the hype. With that in mind, think about this…
Crypto Is a Ponzi Scheme
On the surface: Yes. You’re absolutely right. If you analyze the tokenomics of almost every cryptocurrency, you will find a scheme of some sort, and it will almost certainly be to the benefit of those who sit at the center of the process. Whether there was an ICO or some other method of minting, allocating, and distributing the original number of tokens (crypto), someone has chosen the initial “big winners” in advance.
Wherever you find information asymmetry, you will find a financial engineer smart enough to take advantage of it (and you).
Under the hood: The tools and techniques used to develop decentralized value exchange systems are fundamental building blocks for the future. Whether or not you choose to use a public or private blockchain – or any blockchain at all – easily explorable, cryptographically hashed distributed ledgers serve a wide range of business use cases. The most important use for the tokens (cryptocurrencies) that reward and empower the users of any DeFi platform is to provide the financial incentives. Crypto and their associated platforms need to be tested and they are worthy of serious study.
Why Use Blockchain when a Secure, Well-structured Database Will Do?
On the surface: Yes. You’re absolutely right. This is the most important question you can ask about any potential blockchain project. Most of the time, there is zero reason to use a blockchain. Blockchains are slower and less secure than anyone will admit. They are hard to use. They are terrible places to store large amounts of data. Blockchains have very limited use cases!
Under the hood: We are so used to central authorities imposing rules and regulations on our transactions, it is hard to allow ourselves to think about a world where this is not an immutable law of life. Blockchain technologies (writ large) allow people (or machines) who do not know or trust each other to do business. You trade the security of a central bank or a central government (and their imposed rules, regulations, and costs) for the freedom to do what you like with anyone in the world at any time. This group of technologies is powerful and ubiquitous. Learning how to use them (or learning how others use them) is as fundamentally important as learning any other global IT standard.
NFTs Are a Scam!
On the surface: Yes. You’re absolutely right. What is the point of paying to “own” something that everyone else already has a free copy of? It’s madness! There’s only one Mona Lisa. Every other representation of it is clearly a copy. But who in their right mind pays $69,000,000 for a .gif that I can Google and download for free?
Under the hood: NFTs are smart contracts. The technology empowers the creator of the NFT to impose automatic business rules on the initial transaction and all subsequent transactions. Because the results are written to a public blockchain, the chain of custody is accurate and immutable. Can you imagine a business case where (regardless of when, where, or why it occurred) you would benefit from a contract that was automatically executed when the conditions of the contract were met? NFTs and smart contracts don’t require a blockchain to function, but coupled with utility tokens or cryptocurrency and a publicly explorable blockchain, they are a new way to do business. Billions of dollars of business have already been transacted using these tools. It is more than worthy of study.
Web 3.0 Is a Crippled Version of Web 2.0. It’s All Hype!
On the surface: Yes. You’re absolutely right. Web 3.0 websites are clunky and hard to build. When you’re done, if you’ve done a good job, users can’t tell if it’s a Web 3.0 or 2.0 site because (in success) it looks exactly like a Web 2.0 (current) website. What a waste of time!
Under the hood: There are technical challenges, to be sure. But the progress in the past few years has been remarkable. Big topics: Oracles vs. APIs, Content IDs vs. URLs, decentralized data vs. centralized databases, zero censorship possible vs. imposed government regulations. We all have experience with BitTorrent or other peer-to-peer file systems. They tend to suck. This is different. The ability to financially reward nodes on a Web 3.0 platform creates a way for a community of interest or a community of passion to easily exchange value. This is very clearly a new way to organize global communities. It may never be a way to rebuild the web (I’m not sure the web needs to be rebuilt), but I can rattle off a remarkably long list of potential use cases for every business I work with.
Push Back Hard, but Don’t Pretend It’s Not Happening
I have no plans to stop thinking about the future. I have no plans to stop exploring what’s new, what’s next, and what it means for your business – and mine. But please, push back hard. Tell me what I’m missing. Tell me what you know. Tell me what I should know, don’t know, etc. I’m looking forward to hearing from you.
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Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.