The World Keeps Spinning: What’s next for Crypto?
Disruption is a process, not an event.
Sites like CoinMarketCap [inadvertently] gamified the crypto experience and brought many of us into a frenzy. The numbers, charts, colors, and delusions of fortune quickly clouded our logic and led to an unsustainable exuberant market. What we will now see is a shift towards real world utility and disruption of many industries. The days of speculating on tokens based on “what looks cheap” will be replaced with true fundamentals.
I feel there are a number of potential industries ripe for disruption but in this post I will talk about the three I feel have the most potential:
Cloud Computing- Dfinity
Security Tokens
Gaming
“Momentum will come back to the market with REAL Fundamentals”
Cloud Computing: Dfinity
An industry that I have been most fascinated with has been Cloud Computing. Simply put, Cloud Computing is the delivery of computing services. With the Cloud, a user is able to purchase instances as needed, in order to more efficiently run their infrastructure and ultimately lower overhead. Companies like RedHat, IBM, Microsoft, and Amazon have been growing tremendously over the last few years. The days of running your own service or renting rack space from Data Centers is over. In a short time, Cloud Computing has become an incredible phenomenon used by most people each day. Companies like Go-Daddy and Netflix host all their products on AWS. It’s pretty ironic that Amazon is Netflix’s largest competitor and yet Netflix runs their system off of AWS.
Despite the strengths, there are many limitations with traditional cloud computing. Mainly reliability, security, costs, migration, privacy, performance and a lack of standards.
In comes Dfinity.
I first read of Dfinity in 2017 and I became very interested in its potential. Dfinity puts an emphasis on simplifying the traditional stack. They take the view that when you’re building a business system the user should only be focusing on what the system does, not how it does it. Ultimately giving one the ability to do everything directly in the web browser.
A project of this magnitude would need to run very efficient to have any chance of gaining market share and trust.
Dfinity has some very interesting value adds. On-chain governance is a system for managing and implementing changes to cryptocurrency blockchains. In this type of governance, rules for instituting changes are encoded into the blockchain protocol. Developers propose changes through code updates and each node votes on whether to accept or reject the proposed change. This is a must when scaling out to large scale business systems. The Web Assembly VM is also crucial as it gives the developer the option to seamlessly write in any language and compile to one universal language, WASM. And of course the inherent security of blockchain technology solves many of the issues with security and privacy.
Threshold Relay is another breakthrough technology created by Dfinity. In short it secures a network for significantly cheaper. Ultimately reducing costs in traditional cloud hosting which will pass down to the user. The massive reduction in overhead can potentially give way to new businesses and ideas that otherwise may not have come to existence. The Internet has given rise to a whole slew of new business models that up until a few decades ago was unimaginable, such as E-Commerce and Social Media.
Dfinity has many hurdles to overcome such as the immensely competitive cloud computing space, the ability to nail down sharding, and of course gaining users/traction. They have been doing some very interesting work with open source projects such as HyperLedger- Ursa. They have a beyond impressive team and if done correctly can greatly reshape how we view the Cloud.
Uber distributed the work load of Thousands of Taxi Cabs to Tens of Thousands of Uber Drivers. The Internet Computer has the potential to distribute the work load of Thousands of Data Centers to Millions of People. -AP
Security Tokens
Security Token Offe… I mean Digital Security Offerings, or whatever they will go by in a few months.
A security token is not a very unique concept. It takes its queues directly from the ICO craze, except now these tokens adhere to rules set forth by the SEC. So, in other words they are Traditional Stock Offerings, in a tokenized format.
The benefit of tokenizing securities is that it brings greater transparency to the markets, settlements would happen instantly, stock manipulation such as naked shorting would cease, more investment options and classes of ownership (ex: non-equity tokens, such as Open Finance and Tzero Tokens, that return you 10% of gross income).
When the Dow Jones Industrial Average formed in 1896 it consisted of 12 companies. Many of which are now defunct. But in that group was General Electric and American Sugar, now known as Domino Foods. The reason I bring up this history is that there were incredibly influential companies that made the DJIA what it is today. My single biggest concern is the ability to incentivize TRULY innovating companies to launch a Security Token Offering as opposed to the traditional IPO. There is much greater liquidity and financial incentives to go the historically traditional route. And that’s why you have companies such as Lyft, Uber, Spotify, still raising through conventional means.
One advantage I see for a Security Token Offering is that the costs of issuing the security are far cheaper. No more dealing with investment banks if you just need an Ethereum smart contract. I can see this potentially turning into a ‘Stick it da Man-esque’ revolution for a lot of the younger startups coming out. It’s important that the Security Token folk keep some form of individual identity, to further distinguish.
There are many players in this space, T-Zero, Harbor, Open Finance, Issuance, Polymath, Spice VC, Circle, Swarm, Trust Token, etc., that are laying an incredible foundation on Ethereum. Its important they continue working together this early on as the infrastructure is being laid out. It’s great to see them all working toward set Standards in the industry.
While I no doubt feel that Security Tokens have the potential to change the landscape of Traditional Capital Markets, it’s still in its infancy and has some very tough regulatory and competitive hurdles ahead.
Blockchain Gaming/NFT’s
Games have been around forever. Everyone does it, whether its on X-Box, a game of chess, kicking a ball around, or playing peek-boo with your kid. It’s as old as any form of communication. But what can blockchain do for gaming?
I recently found myself tinkering around with Non-Fungible Tokens (NFT’s) such as Crypto-Kitties, Zombie Battleground, MLB Crypto Baseball and I’ve been having a lot of fun with them. I store them on my meta-mask wallet, send them to friends, and trade with them. I now am able to use game characters that I own and fight a battle with them. I’m actually able to hold my game character that I worked for and upgrade them, trade them, use them to compete in a tournament. The ability to own a provably rare digital collectible will appeal to many gamers. What a great way to bridge that gap between non-crypto users and give them a better & unique alternative to traditional gaming.
To take it even further, I see potential in gamifying Fandom. A way for one to win digital awards, NFT upgrades, etc. by proving loyalty to a team. For instance, attending several MLB Baseball games can award points that one can later redeem for a provably rare digital collectible/badge. We are already seeing the first iterations of this with the game MLB Crypto Baseball where they partnered with the Los Angeles Dodgers earlier in the year to give away the first ever digital bobblehead.
Ethereum has some incredible projects building out the gaming and NFT space such as Loom Network, Funfair, OpenSea, Plasma Bears, Crypto-Kitties, Crypto Zombies, and MLB Cryptobaseball. These projects boast the largest user growth in the ecosystem. Wouldn’t surprise me when the next killer Dapp comes from gaming.
That’s all for me
Thanks for reading and leave a comment or a few claps.
Onward and Upward!
Acknowledgements
I have had the pleasure of having great debates/conversations with my friends Jaime, Nick, Peter, Marc, Ben, Harry, Dean, Greg, Thomas, and James over the last few years and a great source of inspiration for the post.
There’s some incredible in-depth papers from a16zcrypto, Dfinity, and Loom Network that I would recommend as well.
You can follow me on twitter @cloudedlogic & @dfinityscan and if you would like to meet in person I will be co-hosting monthly meetups with the meetup group Crypto Beyond Currency in NYC as well as DFINITY NYC.
