Ethereal Summit SF is packed. VCs, CEOs, developers, bankers… they are all here. There is a gold rush on.
So why is everyone so excited??
At it’s core, blockchain is an exchange technology. When you buy bread, your dollars are the technology that allows the baker to approve the exchange. You get something useful (bread), and he gets something that has a broader use (money).
Blockchain is totally transparent. If the banker wants to check if your dollar is counterfeit, in today’s world he has no options. In blockchain, we can look back at the entire history of any token, tracing every moment that it has changed hands all the way back to the moment the coin was minted. And we can guarantee that it was legally minted. This allows us to give anyone the foundational element of capitalism: absolute proof of title.
At the same time, blockchain is inherently anonymous. The coins that you hold are stored in a “wallet”, and while you will have to prove that you own it to unlock those funds, you don’t need to show your face / ID / SSN to prove that you own it. The separation of identity from ownership is a tool that opens entirely new dimensions. This is worth at least one post in itself, so you’ll have to take my word here, but I should also point out that it is possible to relink identity and ownership when necessary.
Anything with value can be indexed into the blockchain. The obvious first step was simply money – ‘member Bitcoin? But think of everything in your life that has value. All that physical stuff can potentially be indexed to the blockchain. But even more powerfully, think of everything that you own or consume digitally. Your Steam collection, your iTunes purchases, your Hearthstone collection, your social media posts. Even something as discrete as the spare computer cycles in your smart watch. This can all be indexed back to the blockchain, a.k.a. these things can all be turned into active and potentially liquid economies.
Ok ok so that’s the blockchain hype, but why is everyone so stoked on Ethereum?
Ethereum is blockchain with smarts baked in. If you want to buy bread with Bitcoin, you’ll do a one time, direct transfer of a token from your wallet to your baker’s wallet. Ethereum protocol has smart contracts that can be used to create conditional purchase agreements. You could buy bread from the baker based on the price of wheat – deposit a fixed sum into the contract and the baker will withdraw the cost of that day’s wheat from that contract. True, it’s abstract, but it opens up a new, atomic level of efficiency that has never ever been possible.
So why should we care about this new atomic level of efficiency?
Gutenberg’s press allowed information to be created and spread at an full order of magnitude faster than replication by hand writing. It was followed by a multiplication of culture and wealth and led to the first major gain in human standard of living since the invention of money.
Machine based manufacturing allowed commodities to be turned into products a full order of magnitude more quickly than hand performed translation (machine loom vs hand spinning). Again, it opened up a major explosion of wealth and culture and (generally) led to an increase in human standard of living.
Blockchain with smart contracts unlock a similar order of magnitude of efficiency gain for money, and allows us to index any information in the universe.
Yes, there is a lot of hype in this space right now. It’s really difficult to grasp a lot of the concepts involved – it’s a totally intersectional technology and requires deep understanding of many previously unrelated fields. It’s possible that (just like any new technological field) some companies are riding the wave without creating any true value. But the market will weed them out quickly (and you can protect yourself with a bit of reading and some trusted advice).
What will survive is the completely transformational change we’re about to experience. Everything can now be a commodity. Anyone can gain access to the market, and everyone is enforceably equal. New commodities mean new economies, and economies new and old will take on a velocity even Keynes wouldn’t be able to comprehend.
And I’m excited because I see the potential to create solutions for our new generation of problems, to be a part of the force that will create a yet higher standard of human living.