Cryptoassets and the Next-Generation Web: Accessing Value

CRYPTOASSETS AND THE NEXT-GENERATION WEB

ACCESSING THE VALUE OF THE WEB

We now have the means not just of spreading information over the Internet, but also of exchanging assets peer to peer. But so what? Why should anyone care, especially when shopping online with your credit card is so convenient? Well, Trustless Decentralised Ledger Technology (TDLT) could potentially allow us to generate wealth from digital resources with far greater efficiency. It is often said that cryptocurrencies are money from nothing, but to suggest this is to display ignorance of the value inherent in digital resources. Now, I am no professional investor so don’t take this as expert advice, but I do know that if anyone intends to invest in a cryptocurrency they should first know how it extracts value from a digital resource. Actually, I don’t think the term cryptocurrency is all that useful as it is too narrow a definition, ‘Cryptoasset’ is a more well-rounded term.

(Image from wikimedia commons)

The good, the bad, and the ugly

If TDLT is the operating system (albeit one spread across a network) then those ‘coins’ and ‘tokens’ you may have heard of, such as Steem, Ethereum or Ripple, are like apps built on top of it, each one allegedly intended to generate value from some digital resource. Some of those apps will enable us to effectively unlock the value that was hitherto largely inaccessible or too inefficiently managed. There are, for example, attempts to streamline the exchange of money. We also have things like Ethereum or Eos, which are attempting to bring about decentralised computation. Other possibilities could be Uber-like car-sharing only without a platform provider taking its cut, or some way of ending vote-rigging in electoral systems. The apps that successfully streamline our ability to extract value from digital resources, or discover hitherto untapped potential, could be to TDLT what Google, Amazon and Facebook are to the Web.

Then there are those apps that are well-meaning attempts at extracting value but which fail for some reason. This could be because they tried to decentralise something that does not need to be decentralised, or because they released tokens without really understanding when this should be done and when not. Or maybe a superior competitor came along? These apps would be the equivalent of Nokia’s N-Gage or other products and services that have passed into obscurity. That is not to say that there is no profit-making potential here. There could be, if you catch the hype wave early and get out at the right time. But with high risk comes high danger as well as reward so this is not recommended for investments you can’t afford to lose.

Finally, we have those apps that never intended to provide a viable product to begin with, and are instead cynical attempts to profit from people’s gullibility or greed. In other words, scams. There are, for example, tokens operating on the ‘greater fool’ theory, which means you buy it only because you are betting that there is an even more gullible person out there somewhere who will buy it from you for a higher price. The potential downside to such a gamble is that people might wake up to the fact that no value other than that which can be extracted from human gullibility backs up this token, leaving you with an asset that is not worth a damn. While money could be made here by people with no scruples whatsoever, scams like this do the reputation of cryptoassets no good and I am thoroughly against them.

Best or worst thing ever?

Time and again I hear headlines asking whether something like Bitcoin is a sure way to riches or just some kind of scam. This makes it seem like TDLT is either going to make you very rich, or will leave you penniless. I don’t doubt that certain cryptoassets could make you rich and equally you probably would be left penniless if you invested money you cannot afford to loose backing the wrong horse. I would make a comparison to the Web, because doubtlessly substantial money was lost when the dot com bubble burst. Nevertheless the Web is still alive and well and that should not surprise anyone, because it always had great potential. TDLT is another transformative technological capability and we have only just begun to see what it can accomplish.

REFERENCES

“Cryptoassets” by Chris Burniske and Jack Tatar

“Cryptocurrency: The Future Of Money?” By Paul Vigna and Micheal J Casey

“Hidden Secrets Of Money” by Mike Maloney