Why i believe in ‘Crypto’
When i showed a slide from my recent Pitch-Deck to an Advisor from New York yesterday she only had one comment: “can you remove ‘NFT’ from this slide?”. It’s hard to believe in crypto these days, especially if you are into the deeper roots of it and believe in the transformational potential of the crypto-revolution. But let me explain.
I studied psychology and from there you can learn, that whenever people show harsh reactions or disapprove something a lot, it’s worth looking a bit closer. Because usually its a good indication of something deeper, that is going on or being touched. If you look at people that criticize the “crypto hype” at the moment you can get a feeling for what i am talking about. People are really hating it. The Atlantic described this anger and some of the potential causes in a good article recently.
So maybe we should start into this by being a bit alerted, not because of the scams and the fraudsters and the laser-eyes, but rather because of something bigger, that might go on behind all this.
It’s called the Web3, the decentralized Web. And it is a good idea to look at this new phenomenon for a second from a very dumb end-user perspective. What does “Web3” mean, how do i start using it? Well, usually you would install a “wallet” first, Meta-Mask is the most popular at the moment. Inside this wallet you would create an account, but here things are starting to get a bit different from what you know so far. The ‘account’ that you will create consists out of a so called “key-pair”, a public and a private key — both are related in a fascinating mathematical manner which was invented back in the 70ths of the last century. It’s at the core of most security architectures and applications in the web, whether its homebanking, secure web-connections or remote management of a power plant. And now you have it, too — maybe as a little widget in your browser, ready to interact.
In the decentralized web the idea is that you can log into a web-service with this key-pair and your wallet without any further secure interaction with that web-service, namely they will not store or even see your private key (or password) at all. No security questions, no fallback “can we have your phone-number please?” Which is pretty cool because a hacker will not be able to steel your password or anything else from that website anymore and you gain a lot more control over your credentials than ever before.
But your key-pair does not exists on it’s own, it’s also published (only the public key) as a node on a so called Blockchain. A blockchain is a decentralized computational layer over thousands of computers from different owners that stores a list of transcactions and makes them public to everyone. So if you issue a transaction with your key-pair this Blockchain will store it and everyone will be able to see it, it’s a public ledger (btw signing into a website is not such a transaction, no one will see this except the website owner).
This is the new cryptographic layer, that constitutes the “Web3”, the third version of the Web. And i really believe that it has a lot of transformational potential in it, because it allows for a much more decentralized infrastructure with secured transactions and strong nodes (e.g.: you with your new wallet) that can interact privacy-friendly with others or services. The indirect effect of this is often called “cutting out the middlemen”, in case of crypto-applications usually states, banks and institutions are meant, but it could also be the Facebooks, Googles and other big platforms or media companies for instance, that currently own and manage your account, your data and your transactions.
Ah, and then there is even something more on top of it that makes it fascinating. Coins. And Tokens. A coin is something interchangeable, like a dollar-note, just in a fully digital form. Of course bitcoins are the most famous ones at the moment, but Ethereum and other alternative coins are sharply on the rise. Coins are digital currencies of course, and the exist in many flavors and principles. A group developed a Climate Coin for example that tries to model in the reduction on carbon emissions, there is a group of coins that try to be stable in relation to some real currencies and there are even projects that aim at a new level of stability beyond the dollar and the euro by linking the values of the coin much more to it’s buying power and other effects that shape the everyday value of a currency.
Nearly nothing of all this works great so far, stable coins are not always stable, identities and assets are being stolen because users fail in securing their new identities, regulators are kicking in and starting to worry and of course a lot of bad-actors and quick money-makers are attracted. Just like it was the case when Web1 emerged and people had to get rescued from porn-dialers and other fraudulent websites which made their owners rich quickly.
Ok, but why am i fascinated and “believe” in it, even expect an even deeper transformational effect that could come along with “Crypto”?
It has to do with the general pattern of the digital revolution and where it is driving us at the moment. There is almost no doubt anymore around the globe, that the digital transformation is huge and cannot be stopped anymore. But it’s interesting if you have a closer look and try to identify some patterns across industries and areas where it does reshape things so much that we find ourselves staring at smartphone-screens in the subway, everyone.
And there is a pattern. It has to do with the nature of the digital sphere, some would call it the “meta-verse” even these days. Think of a car for example. You can stand in front of it, drive it, feel it, enjoy acceleration or some cool features of it. And then there is this thing called a “digital shadow”. A copy of your car in the cloud basically, fed by sensors that measure all kinds of aspects of the car, it’s mechanics, the sensors, the driving behavior, the surrounding. To that point you would say: ok, stupid shadow does not see more than what i can see, maybe except the exact rotation speed of the motor or difference in oil-pressure after a long drive. But guess it also has knowledge about other cars of his kind, their sensor data, it can read it’s own production logs and even consume error reports from crashed cars around the world. And it can see a gas-station much earlier than you, it can read your calendar, measure your emotion with sensors in the seat combined with your todays driving behavior — and did you forget that you allowed it to connect to your phone and your calendar and your mail-account, because it’s so cute to hear the “babe when will you come home tonight” message aloud?
So digital shadows are getting pretty smart and quickly they know more about the car than any person that stands in front of it ever could. And then the next digital pattern kicks in — zero transaction cost. Imagine in the past when the mechanic wanted to check the oil-level of your car. You had to drive to the garage, the guy opened the front cover, tried to find the oil level meter, took it out, checked the level, cleaned his hands. Quite some action, maybe just to find out that everything is ok. Now imagine the same procedure with a digital sensor inside the car that measures the level constantly, uploads it every 10 seconds via a cellular uplink — and on the receiving side there is an algorithm that will organize an oil check only if really necessary. As this process is not only less dirty but also drastically cheaper and more efficient it will soon replace its analog predecessor. And so will every process that can get digitized by any means sooner or later, and i mean every. If your blood pressure can get measured remotely, it will. If it is possible to grow seed and plants with drones and ai instead of a farmer on a truck, it will. If drivers for trains, cars and planes can get replaced by cloud-algorithms, it will happen.
This is the reason for the extreme disruptive power of the digital revolution, and i see no reason why it should not affect every single sector in business, and nearly every aspect of our lives.
And it is also pretty cool, isn’t it? My blood pressure management got much better and had a more intense effect on my daily life when i started to do it on my own. My doctor also started to embrace the measurements that i brought into his office because they reflected better my real condition — and my device was better than the one on his desk.
But now back to “crypto”, how is it related to all of this? Well, it maybe is just the next step, a new way to organize and represent things and our lifes digitally. And let them interact more native with a digital coin (there are even economists that say the monetary system might be replaced by a more data-driven economy in general). Or let my health data be represented as a non fungible token on a chain, so that the insurance can check on it and pay my bonus without receiving a questionable document via the fax-machine.
And the trading part can make things better, too. That’s one of the reasons why artists around the world are so excited about the potential of NFTs. It just allows them to offer their artwork in a new way, also under a new commercial model, which could make the “you earned 0.0001 cent from spotify” a nightmare from the past for them.
And it could also help to solve a couple of bigger problems that we are facing right now, things like climate change and plastic pollution for instance. Think of a digital way to connect your cup of coffee to the coffee farmer in indonesia, who just uploaded a farming certificate with his smartphone to prove the circumstances of production or harvesting of the beans. And you are able to honor his or her work by transferring some digital value over the net (without having to trust some trade-fair organizations as middle-men). Or think of a solar-producer in the Sahara that is able to prove the green energy that he is producing by a crypto-token that is generated right out of his equipment — which gives you the chance to buy your electricity for a premium that goes straight into his pockets. Or imagine a cow sharing their fitness-tracker data with you on the yogurt. This is not just fancy marketing-shit, experts for energy production agree that we need some kind of digital system that works around the globe, is capable of micro-transactions, machine readable, has trust built in and can also work like a currency. Why not “Crypto”?
Yes sure, at the moment the bigger amount of that clean energy would be wasted because crypto is eating it all up i hear you saying. You are right, but not very much longer. The first chains of a new style did pretty much get rid of the energy problem and the major ones are following soon, especially Ethereum. If digital technology has proven one thing in the past it is that it can remove computational burden much quicker than us humans can imagine.
So i have some hope that Crypto will stay for good in the long term. Especially if we embrace it and shape it. Make it a force of a better life for all of us, more power to the nodes (farmers, citizens, creators etc.), fairer distribution of wealth, less dirty hands and a greener planet.