Blockchain, crypto tokens, and Non-Fungible Tokens (NFTs) are going mainstream and hot discussion topics. But have you wondered why? What is novel about the technology? To answer these questions, Ryan Berckmans, Strategy & Engineering Consultant, Ethereum, welcomed that audience to the world of crypto at the AMEC Global Measurement and Evaluation Summit. He further added that the crypto community is a radically open industry. It is very welcoming, appreciative of outside contributions and contributors, as well as outside opinions and questions.
Why are blockchains novel?
Bitcoin was created in 2008 and the innovation was such that before it was invented, it was not possible to have computers with a trusted network where its reliability was guaranteed, or there was high confidence in that reliability. With blockchain, a situation arose, where it was possible for a computer network to have up to half of the computers be run by malicious actors, or even negligent or careless actors but the overall integrity of the network was not harmed. This was, hence, incredible innovation.
Blockchain-enabled the creation of a new era of coordination and global commerce and the first was Bitcoin which solved the global coordination problem. However, Bitcoin is only a currency and was not designed to be an app platform. One can buy or trade bitcoin. There is a bit of scripting language in the Bitcoin blockchain that enables some app like features of low to moderate complexity. Bitcoin was not designed to be an app platform and therefore has no future as an app platform as it would not evolve in that direction.
Vitalik Buterin, a Canadian educated from Russia realised that the technology of Bitcoin could be combined with general-purpose computing to create an application platform that was effectively a global commons with a high level of trust. With the Ethereum project, Buterin was able to take the novelty of Bitcoin and combine it with the power of an application platform. And this is when things started to take off in terms of the growth of the industry. Ethereum will complete six years of existence in a month and Berckmans remarks that it was an incredibly busy six years.
What can blockchains do?
Well, technically, anything, because it is an application platform, like the app store says Berckmans. Comparing blockchain and an app store, Berckmans says that one can build similar applications on both. The difference is that an app store offers graphical capabilities and lower costs while blockchain is purely data. App Store is also on the edge of the network, they run directly on the phone, providing kind of a snappier experience. The rise of blockchain is a complementary technology to websites and apps in the app store. Blockchain is more like an infrastructure technology than an edge technology.
According to Berckmans, what we are going to see is an increasing complementarity between all the development technologies today as blockchain and Ethereum continued to grow. The development technologies like app stores, web apps, server-side programming have created a niche for themselves and are thriving. There is a tonne of innovation going on in those industries and all of that will be complementary with blockchain and Ethereum. Ethereum and blockchain shine when it comes to data that must be correct, such as bank account balances, coordination problems, such as multilateral agreements between parties, these kinds of things can be secured and automated on the blockchain.
Berckmans says that Ethereum and Bitcoin, are almost like a modern form of digital steel. When steel was first invented, it took some time for the skyscrapers to start using steel. It didn’t happen overnight. It will be similar in the case of crypto. To substantially enjoy the benefits of blockchain and Ethereum, it is necessary to rebuild or at least re-architect certain key components of existing systems. This will be an ongoing process that needs to occur in each distinct industry that adopts blockchain, while the blockchain industry itself is rising and growing. The infrastructure approach gives a peek into the potential of blockchain. Speaking on behalf of the industry, Berckmans said that the power of Ethereum and blockchain will lead to a renaissance in web applications. Back in the 90s, it was web and when Facebook started, it was web 2.0. Ethereum and Ethereum web apps are Web 3.0 says Berckmans.
What else can Ethereum and blockchain do?
Generally, it’s a great driver in reducing monetary transaction costs such as fees. But also non-monetary transaction costs such as triangulation, transfer and trust, where if a person is looking for some kind of service or business relationship, or needs to find a vendor or needs to execute that agreement and perform the exchange for the service. Then one needs to trust that the entire process will be smooth and Ethereum will help in these areas. Sharing few examples, Berckmans talked about how Ethereum can be used.
One of them is crypto tokens. So, what is a crypto token? It is just a piece of property that you load digitally using your crypto wallet. When you have a crypto wallet, which is just an app on your phone, or an extension on your web browser on your laptop, you are able to take possession of crypto tokens in a way that is very similar to having cash and more secure with recovery options. And once you are able to take possession of a crypto token, it sort of motivates the question of what is the crypto token good for?
The first thing that crypto token is good for, because of how Ethereum apps work, it’s possible to encapsulate or wrap all kinds of advanced functionality behind a token. One example is the launch of the very first Ethereum and blockchain-based actively managed mutual fund. In the US, a popular Vanguard is a popular investment option. The same technology has been replicated in Ethereum, using a token approach, where a person is able to have a single piece of property like a mutual fund token which appears like a regular piece of property, no different than $1 in the wallet. But the technology behind the token enables an entire mutual fund activity supporting the value of the token. Berckmans further said that there are many other examples of amazing things one can do under the surface and tokens, and he encouraged the audience to take a look at these by googling for popular tokens.
Since crypto tokens are a global public utility, anyone can access these without permissions. Anyone can buy a token if it’s for sale in the open market. One doesn’t have a broker to list it. As a result of this, token communities have the ability to align incentives to third parties. For example, a marketing boutique can use the token for a deal flow that would allow third parties to buy the token to participate in the business. Crypto tokens have two great superpowers. One, with the automated financial stuff and two, the ability to align third parties in a stronger and more reliable and more scalable way and in a more rapid way than traditional methods such as loyalty programmes, and affiliate programmes.
NFTs – Non-fungible tokens
NFTs are the first truly mass-market application of blockchain.
What is an NFT? It’s a non-fungible token. A fungible token is like any other currency. A non-fungible token on the other hand has a unique snowflake, and it may represent one’s own with a piece of crypto art, which has really exploded lately. It may represent one’s ownership of digital collectables, such as a video game item. Citing another example, Berckmans said, the ownership of a blockchain-based domain name registration does not work quite the same way as the regular domain system. Instead, one will receive a non-fungible token that represents one’s inviolate property, right of that domain name. Then one can proceed to sell or lend and as the token represents the property rights.
Another thing that can be done with Ethereum is DEFI which stands for decentralised finance. This represents all kinds of financial systems. Anything that Wall Street does, have any level of sophistication, can and will be done on a theory. Berckmans shared another example of stable coins. The word coin is a synonym for tokens, so we might think of them as stable tokens. Stable just like for a US Dollar or British Pound indicates that the value does not go up and down like a roller coaster. Like Bitcoins, value does, typically with the volatility.
How do crypto apps work?
To start with, one needs a crypto wallet – a space of their own to store property, whether it’s US dollars or NFT tokens on the blockchain. A crypt wallet Berckmans recommended was MetaMask – an industry-standard trusted wallet. This enables the setting up of a crypto wallet and moves the money around digitally to directly purchase.
How blockchains help an organisation and what does blockchain and crypto mean for communication?
One direct implication is, a greater proportion of professional work economic activity will occur with relatively peer to peer connections because crypto reduces transaction costs – acceleration of globalisation. Crypto is inherently global. What does it mean for your organization’s way of doing business? It means one can expect global banks to jump into crypto because they have the most to lose. One can also expect governments to jump into crypto to capture benefits in the share. An increasing amount of professional work can also be expected to occur in the open or a more open fashion because Ethereum enables lightweight organisations to have closer relationships with each other. Over a three-to-ten-year time period, Berckmans says, we can expect generally reduced fees and more useful services for anything related to financial services.
One, make your own token. Second, make your own NFTs. And three, try to do business with financial intermediaries that are already using blockchains. It will reduce the fees, increase transparency and help move faster. Another big opportunity is that a lot of people who got into crypto early have got great returns and there’s a long tail of millions of crypto wallet owners. People can do business with these people who prefer blockchain. Berckmans also busted few common myths like blockchain being not environmentally friendly. The fact is Bitcoin is not environmentally but modern blockchain such as Ethereum are environmentally friendly.
Berckmans closed the session with three main points:
- Some blockchains such as Ethereum are app platforms. Bitcoin is not and will never be an app platform.
- Creating a token may be useful to your own token, your organization’s own token may be useful to align incentives for third parties.
- NFTs are the first truly mass-market application of Ethereum. Most NFTs these days are related to crypto, but one can have any kind of NFT’s to do many things such as owning a domain name, and NFTs can be relatively easily embedded into any existing products that could be something cool to check out for your business.
(Session coverage by Julia Joseph, AvianWE)