Carbono Insights #99 | The case of use cases
If you are immersed in crypto, you know that we are at a stage where there are multiple ways to approach blockchain technology infrastructure. Once dominated by monolithic Layer 1 chains, the industry now embraces solutions like rollups, appchains, and modular frameworks driven by speed, cost-efficiency, and adaptability demands. Developers have an increasingly broad offer of solutions to help them build and launch bespoke blockchains.
These are just different ways of offering the same product: blockspace. But what is blockspace? Why would anybody want some?
Blockchains are distributed databases secured by decentralized networks of participants like miners and validators. Blockspace is the capacity these databases have to store data. It’s the space where users can record transactions, such as payments or smart contract interactions, trusting that their operations are secure and censorship-resistant. We have a plethora of that now, and it continues to increase in size and variety. Blockspace comes in many different shapes and sizes: fast/slow, expensive/cheap, decentralized/centralized… You can choose across a broad spectrum of possibilities.
The supply of blockspace is massive. But what about the demand? What are the use cases that justify this infrastructure-building fever? That should be the challenge now. This newsletter issue focuses on six examples of use cases currently in the news, each in a different maturation stage.
Runes: Gambling, Investing or Both
In sync with Bitcoin’s halving, the Runes protocol was launched to the world. Runes are a new way of minting fungible tokens on the Bitcoin blockchain. Ethereum pioneered this with its ERC-20 protocol back in the day. Bitcoin had lagged for years, remaining faithful to its ethos of being a single-purpose blockchain. This philosophy was notoriously broken in early 2023 by the Ordinal theory. Runes now comes to certify the death of this approach with a protocol that was born, as expressed by its creator, to import the memecoin frenzy to Bitcoin.
Runes represent the crypto community’s unwavering thirst for different, apparently contradictory purposes: the often cannibalistic and destructive impulse to gamble on one hand and the impulse to transact globally and permissionlessly. ERC-20 enabled a spring of use cases that enabled the appearance of DeFi, DAOs, and all the instruments that crypto has come up with to transform how humans interact digitally. Runes are Bitcoin’s attempt at bringing that use case to the most populated and wealthiest blockchain there is.
TradFi, the incumbent in the adoption race
Institutional adoption is the second most popular use case in crypto, gaining momentum in 2024. Gambling and degening have been how crypto-native users stress-tested and taught DeFi how to offer efficient and secure digital financial services. Traditional financial institutions are already aware of crypto’s advantages, and only two things stand in the way of adoption: one is unclear regulation, as illustrated by the doubts surrounding the approval of Ethereum ETFs. The other is speed. Despite all the bragging by developers working on infrastructure, crypto still needs to be orders of magnitued faster before it can meet the needs of traditional finance.
Global Identity: A Mighty Adventure with Mighty Obstacles
Legal personal identification is an issue ideally suited for the advantages offered by crypto. Globally, nearly 1 billion people need an official ID, hindering their participation in the political sphere and access to the financial system. Even in developed countries where IDs are prevalent, they suffer from a lack of interoperability. They are often a jumble of disparate documents like driving licenses, passports, and social security cards, each with its own set of data and limitations. A global, trustworthy, interoperable ID that respects the owner’s privacy is something that crypto is technically capable of.
Sam Altman, CEO of OpenAI, is the type of visionary willing to tackle a problem of this magnitude, and Worldcoin is his weapon of choice. Altman aims to create secure, interoperable, privacy-preserving digital IDs that people can use to engage digitally with any service, be it private or public. While Sam’s vision is compelling, Worldcoin has encountered significant legal and ethical challenges on a global scale. Governments are wary of the company’s handling of people’s data, and its methods of acquiring new users, often involving bribing people with crypto in underdeveloped countries, raise ethical concerns. Also, using shiny sci-fi-looking orbs to scan people’s retinas doesn’t help build trust.
Recently, Worldcoin launched World Chain, a blockchain designed to prioritize blockspace for actual humans rather than the armies of bots that populate other major blockchains. Described as “built, owned, and governed by all of humanity,” World Chain enables permissionless and global crypto transactions, promising exciting possibilities and unsettling implications.
Decentralized Physical Infrastrucure. The Uberization of technological resources
Thanks to its upcoming airdrop, IO.net has consistently made the headlines lately. IOnet is a Solana-based DePin protocol that enables people to rent the processing power of their GPUs, which is one of the most coveted resources for running AI models. IOnet is the last of a long list of examples that have captured the imagination of investors looking for the overlap between two of the most exciting opportunities: AI and crypto.
AI requires a substantial amount of technological resources: computing power, storage, internet connection… Resources that are only within the reach of gigantic corporations.
Unless they compete against a whole network of incentivized individuals. That’s where crypto makes sense.
Grass aims to decentralize data obtention, Bittensor decentralizes AI models, Helium decentralizes bandwidth, Akash decentralizes server storage, and Hivemapper decentralizes world maps. These projects represent how crypto can contribute to a fairer distribution of physical and technical resources.
They are undoubtedly thrilling, but at the moment, only crypto insiders are aware and interested of these projects. Try asking any AI expert about IOnet, and you’ll see the nothingness behind their eyes.
Adidas x STEPN, and the re-emergence of another horrible buzzword, “phygital.”
NFTs have long been the trailblazers of crypto adoption, captivating audiences with their unique blend of digital ownership and scarcity. While they may have recently taken a backseat in the crypto conversation, if the ongoing bull run persists, they could soon find themselves back in the spotlight. Brands are eagerly eyeing the potential of NFTs, envisioning them as powerful tools for engaging customers as digital collectibles, fuel for loyalty programs, and keys to new digital services.
One recent example of NFT adoption comes from Adidas, the sportswear giant, and Stepn, a move-to-earn fitness app. The two brands have joined forces to launch the Stepn x Adidas Genesis Sneakers collection, a way to merge virtual and physical rewards. These Solana-based NFT sneakers will be integrated into Stepn’s fitness-focused game, allowing users to earn rewards while staying active in the real world.
“Phygital” is back on the menu, ladies and gentlemen. Crypto has a unique ability to add superpowers to physical objects and, vice-versa, connect tangible objects with digital products and experiences.
However, Adidas is a pioneering crypto brand. Other giants like Sotheby’s or Christie’s, Reddit, and Starbucks, belong to the first generation of major brands with colonies in Web 3. We will still have to wait for the second.
Web 2 and Web 3 look at each other from afar
ByteDance, the company behind TikTok, and Sui, a blockchain Layer 1 focused on achieving record transaction speed and built by former Facebook engineers using Facebook tools (the efficient Move programming language) and leveraging Facaebook’s connections to Silicon Valley, have announced a partnership. Bear with me while I share this piece of corporate PR writing with you, which is shared in Sui’s official blog.
BytePlus, ByteDance technology solutions subsidiary takes its first foray into empowering companies and services on blockchain with Sui. BytePlus will work with Mysten Labs to adapt its recommendation solutions and augmented reality products, among other services, to Sui. BytePlus Empowering Web3 with Sui, Eyeing Gaming and SocialFi
Subsidiaries seeking synergies empowering common strategic goals. What the hell does that even mean?
The emptiness of the announcement represents the stage of the collaboration between Web 2 and Web 3. Behind the scenes, there’s definitely a considerable overlap between Web 2 and Web 3 developers and users. However, the centralized nature of Web 2 corporations clashes with the iconoclast spirit of decentralization of Web 3. There are many cultural bridges to build.
