What in the world is going on with all this blockchain stuff? There’s bitcoins and NFTs and wallets and it seems like EVERYBODY is getting involved. Back in my day, we were perfectly fine just doing the Macarena.
Some say this is the future of currency, commerce and control. Others say it’s all fundamentally flawed. But which is the truth?
Our take is: yes. We believe blockchain, cryptocurrencies and crypto tokens offer massive potential to fundamentally shift commerce and society. And, at the same time, we believe the current implementation ain’t quite it.
Before we get into what’s possible, we figured we’d begin with a rundown of where we are today.
What in the hell is an NFT, anyway?
A non-fungible token.
That probably made you even more confused than when you started, right? A better way to think about it is as a uniquely verifiable digital asset. For example, if you copy and paste an image or a document, those files are identical to one another. There is only ever one NFT.
So are all NFTs just, like, cat images and stuff?
No, not at all. The initial proof of concept is generally image based, however an NFT could be literally any unique digital file, such as a contract or art or data. The current NFT craze is more of a proof of concept for more viable and useful future applications.
The best explanation I’ve heard so far came from my buddy the other day who said to me:
I bought an NFT awhile back with Eth. I’m pretty sure that I paid like $30 just in gas fees to buy a stupid picture of a whale. And that right there is a sign that we’re just so early into this. Which to me, means that there’s a lot of room for growth and the future is going to be really interesting, but also scary in some regard.
I heard one of these NFTs sold for $69 Million? What gives?
Well, frankly, we live in silly times. And 69 is a silly number. The silliest, perhaps. A pandemic happened and we pumped trillions of dollars into the economy which had to go somewhere. Could we have found better uses for that money? Maybe. Probably. Definitely, yes.
But the bigger thing that sale represents is a proof of concept for what’s possible. This was the first NFT ever offered at a major auction house, Christie’s, for something many perceive as the future. Remember, we’re making all this shit up as we go along, and everything, even money, is a social construct.
But couldn’t I just copy that picture?
You could, however there is only one crypto based token associated with that NFT, which is stored in a digital wallet (like a regular wallet, but inside computers instead of busting out of your back pocket) that is securely controlled by the owner yet publicly verifiable. You could also copy a dollar, however it would be much easier to determine the authenticity of the NFT than your dollar.
NFTs are generated through blockchain technology, which is essentially an increasingly complicated series of math problems calculated by a decentralized network of computers. In solving these math problems to generate this network, coins are created to reward the owner of the computing resources that solved the problem.
In addition to generating coins, tokens including NFTs can be generated on a blockchain network. Unlike traditional currencies, every single transaction is publicly visible and associated with a wallet.
And what’s a wallet?
A wallet is basically an account just like you would open in a bank. It operates similarly to any digital encryption (or physical security, for that matter) in that it has a publicly visible identifier (like a lock) and a private key (like, well, a key).
As noted, because blockchain network transactions are publicly visible, all activity is verifiable. When a coin is mined it is added to a crypto wallet, which can then be exchanged with others via wallets. Because the key to unlock the wallet is private, there is limited inherent risk (more on this and metadata later…it’s always the metadata).
OK, then, what’s crypto?
So, crypto can sort of mean two things. At the highest level, all of this stuff is cryptographic security (remember, super complicated math problem), so it can all be referred to as crypto. On the other hand, cryptocurrency is the coin generated when the blockchain is expanded by solving more math problems (thus, strengthening the chain and its crypto security).
Wait, sorry, but what’s blockchain?
Yeah, I haven’t really gone in a linear order here, as I wanted to go through how people are likely exposed to all of this. And no need to apologize, this shit is confusing! (though, way less so than traditional banking…just nobody cares about how that works).
Blockchain is the technology at the top level that enables all of this complicated math to happen. When the chain is beginning, the math problems are much easier to solve. Over time, the chain of math problems becomes much more complicated to solve, which also increases its security and inherent value.
The blockchain network essentially validates its authenticity by having all of the decentralized contributing computers agreeing that, yes, this is indeed the answer. Different blockchains include Bitcoin, Ethereum and Cardano, which each have their own cryptocurrencies and other unique functionality, strengths and weaknesses.
What else can you do with these fancy blockchains?
In addition to generating and trading coins, some of the blockchain networks (e.g., Ethereum) have become entire platforms, enabling individuals to build applications and generate other types of tokens, like those NFTs and contracts we started talking about at the top.
What’s the difference between crypto and, you know, a bank?
There are a variety of differences, however I feel the biggest and most important is security. Blockchain based cryptocurrencies have decentralized security while banks have centralized security, creating multiple single points of failure. In a world of increasingly sophisticated cyber attacks focusing especially on legacy vulnerabilities, traditional banking presents massive risk.
Another major difference is transaction speed, which can require days for traditional banking compared to the near instantaneous nature of cryptocurrencies. The transparency and security offered by blockchain based cryptocurrencies also presents tremendous upside, while digital wallets offer increased accessibility for underserved markets as compared to traditional banking.
Of course, I can go to a store to buy things with dollars, so that’s a pretty big upside to traditional banking.
This still sounds dumb.
Yeah….yeah. Yeah, I don’t disagree. I’ll also admit that I have never knowingly purchased a cryptocurrency, despite being aware of Bitcoin when it was $250 and believing that blockchain would be our future.
My issues with it then are my issues with it today. Specifically, cryptocurrency disproportionately rewards early mover advantage, presents a massive drain on resources and, as I mentioned, isn’t super useful yet. Further, it seems like the same entities that have benefited most from the status quo are the most influential adopters of the initial dominant crypto platforms, and we feel they deserve some competition.
So, what’s the deal? Why’d you write all this?
Well, like I said, I believe blockchain is our future. No new technology is immediately perfect, however that’s not a reason to discard it entirely.
At the same time, as awareness steadily increases, I think the message is muddled and most articles on the topic generally suck. Overall, blockchain is viewed as some mysteriously complicated voodoo, however the more I’ve learned about blockchain vs traditional banking, traditional banking seems infinitely more complicated. The problem is that blockchain hasn’t been made accessible for the ordinary person yet.
Of course, Commerce is one of the central pillars we’re working on here, as we believe providing access to capital is fundamental to enabling people to start their own businesses, providing for themselves and creating a more sustainable and prosperous future for everyone.
Likewise, we have a much more detailed vision for how all of this can be done to address the fundamental issues while providing substantial benefit, however to get those details you’re going to have to Join the Union. While we believe transparency is critical, we also recognize that untimely transparency can result in entities with less human centric objectives being able to extend their advantage. Suffice to say, we believe individual data ownership and prosperity are fundamental to getting blockchain right.