The Death of Internet 2.0 and the Coming Upgrade to Web3
At the end of January, I had the chance to travel down to Miami for a weekend hackathon that was being held in connection with the annual North American Bitcoin Conference. While the abstract technological aspect of bitcoin blockchain technologies is challenging, the more pressing concern is how do we begin to adopt and implement this new technology into our everyday social, political, and economic cultures? Luckily, the bitcoin hackathon is a great arena for determining which ideas and use cases have traction.
With some time to process the event, I want to relay my first hand experience about bitcoin hackathon, the product I worked on, but also the other teams in attendance and my overall takeaways about where we are in bitcoin’s growth and the state of blockchain in general.
In short, the Ad revenue model of Internet 2.0 is dying a fast death. Bitcoin and Ethereum are working to make that model obsolete. You don’t have to look far to see that LinkedIn and Twitter are already declining, and the benefits of transparency, durability, speed, and scale that comes with decentralization are only going to hasten the decline.
Internet 2.0 works like this. Every website with traffic on the planet is monetized by selling access to users, both in the form of attention, and to user data.
Decentralized protocols have an advantage both on the software, hardware, and peopleware aspects of the currency, and blockchain technologies in general. Since I have a copy of the blockchain downloaded onto my computer, and everyone else on the network has a copy downloaded, risk is spread more broadly. A malfunction or hostile takedown of one server won’t disable the entire network.
Amazon, Google, Facebook etc. however, scale their hosting by spreading out the cost and maintenance among several centrally maintained and monitored server farms.
Who Hosts in A Decentralized System? Everyone!
But if a company isn’t paying the upfront cost of hosting, then what are the incentives for individuals running their own nodes to support the network?
Back at the hackathon, one team presented a variation of the tontine scheme that pays users in bitcoins to seed content files for internet hosting.
Originally devised in the 17th century, a tontine pays out an annuity to subscribed members. At first everyone pays a sum and throws it into a pool. As years go by and more of the original members pass the individual share in the annuity increases because there are less people to pay. The shares increase each cycle as subscribers fall off until the last survivor enjoys the whole income.
The last survivor in this case are the servers that fully seed and transfer a file to another server thus creating a new business model to propagating bitcoin transactions using old methods.
No Middleman Marketing
Another nail in the coffin for the ad based revenue model is the ability for small and medium sized businesses to reward users directly with bitcoin bounties and treasures.
If I run a pizza shop and I want to attract new customers, I’m currently paying for Google or Facebook ads or heaven forbid print ads in the local newspaper. Using bitcoin P2P payments, I can set up a bluetooth beacon at the Point of Sale with a small bitcoin reward for the finder. Welcome to the world of bitcoin bounties.
A new user is acquired for exactly what it was paid for without the hassle of a middle man. Also the user data is more transparent to the pizza shop giving a clearer insight into engagement with the local pizza customer base.
Facebook currently takes in $3.5 billion mostly in ad revenue.
What becomes more important in this context is how business owners, designers, and creative agencies gamify and socialize the product so that Tinder, Uber, or Instacart meets Candy Crush. Hello to addictive living. Must get free pizza!
Can we ask for more dismemberment of the Ad based Internet Revenue model? Yes, yes we can.
A Blockchain on Every Device
Bitcoin and decentralized consensus are now embedding themselves into circuit boards and devices, both for personal computing on your smartphone or laptop, but also on the growing industrial internet of things. 21 computers has a mining ready board that can handle node to node micro payments. The beauty of this approach is that the device pays for its traffic by passively mining incredibly small amounts of bitcoin.
My original concept for the hackathon was a product called Bitdrip. Running with the notion that in the future all embeddable devices will be able to pay for their own individual internet traffic, why not extend this system into the smart home. Bitdrip is a smart faucet that both measures residential water consumption and runs a bitcoin protocol that incentives users to reduce water consumption through bitcoin subsidies. For users who consume less than their average amount, a corresponding amount of bitcoin is paid to the user thus incentivizing behavioral change.
While I initially only included a sensor to calculate water flow, this could be expanded to include contaminant sensors to tell the resident if the water coming from their faucet is safe to drink. Think Flint, Michigan :(
Even though the bitdrip team never materialized, I was able to join a fun group comprised of 5 people from Mexico, Miami, and D.C. Our project was to build a transparent betting pool that gives away a percentage of each pot to a charity of each player’s choice.
The game is called Lucky Duck and it works like this. You, along with other players, throw any amount of bitcoin into the pot along with selecting a charity of your choice. Every 2–20 minutes as a new block is hashed on the bitcoin blockchain, a verified random player is selected, taking the pot. The more bitcoin you put into the pot, the higher your chances of winning are. The best part of this lottery system is that it is completely transparent. You see who wins and what charities are receiving money.
When companies like Fan Duel, and Draft Kings are making billions of dollars on quasi-legal gambling sites, a transparent blockchain system is a massive upgrade. While gambling addiction is a real thing, and I’ve struggled with it before in my Texas Hold ’em days, at least if you lose it still feels good to give. Unfortunately, Lucky Duck didn’t place in the top five, but more importantly our entire team had a fun and enriching experience which made the entire event worth it.
The Casual Coin Economy
What happens when you give not just a monetary incentive, but also a social imperative? The best thing about bitcoin is without a 3rd party, more options for commerce and trade are created.
What if we used empathy and abundance as opposed to hostility and scarcity? That is the idea behind Bounti, an app for users to put up a price for having someone complete a task. For example, mow my lawn for 20 dollars, pick up my dry cleaning for me, or maybe even take my sick friend’s dog for a walk, or collect some fresh flowers and deliver them to a friend?
With Bounti, you set a pin on a map, provide a title and description of the task, and set a price. Fulfillers of the bounti can then complete the task and verify that it was completed with a photo and digital signature. Funds are then transferred near instantaneously via the bitcoin payment protocol.
Much was being said this year about big banks getting in on the blockchain phenomenon. Bank of America has even go so far as to file 20 blockchain patents. Unfortunately, this strategy IMHO won’t play out so well. This demonstrates a lack of fundamental understanding of a decentralized system. According to bitcoin super tech evangelist Andreas Antonopoulos, these banks want to take away the most exciting features of bitcoin to protect their interests.
The ecosystems that become the most used and loved will be the most open, most transparent, most modular, and most stable. A centralized bank just can’t exist in this new context.
Finally, while this was a bitcoin focused hackathon, I can’t help but to think of Ethereum and how these two ecosystems continue to coalesce and grow around each other.
After this hackathon I am more convinced that Bitcoin will become the most popular and used cyrpto-currency globally for human to human exchanges. However, as we begin to see the rise of industrial internet of things, decentralized apps, and decentralized autonomous corporations, Ethereum will be the gas that really runs Web3.
P.S. If you want to read a more professional take on the event, here’s a link to Coindesk in which the article features a prominent picture of me in my standard “breathing-over-your- shoulder” posture.
P.P.S Jump to youtube for the Miami Bitcoin Hackathon video recap.