From Gutenberg to Blockchain, Part 4
Abraham George Macro Musings
It has been about 50 years since the original internet protocols were created. Since then, a lot of life-transforming applications have been built.
I covered much ground on Web 1.0 and Web 2.0. So, what is Web 3.0 going to do? It is going to be very disruptive. It is not only going to be a completely different technological architecture, but also a completely different approach to solving complex problems.
The technology takes the fundamental protocols and open specifications of Web 1.0 and combines it with the financial incentives that rewarded the second generation of the internet.
The technology that is being built now should last for the next two or three decades. Now is a great opportunity for savvy investors to get in on the ground floor. A lot of work in this space will happen in India and China too. So smart investors look out for these investment opportunities too. We are in the early stages of this technology and a tsunami of changes and disruptions lie ahead of us.
It is not about investing in the next Google, Amazon, Netflix or Facebook. While they will be equally involved as they have the reserves and power for more R&D, buyouts and partnerships.
This technology is going to be often decentralized, open to scrutiny and very much community driven. They will very rarely be controlled by a single entity and even if one entity is in charge these are going to be foundations that guide the project’s technical direction and R&D spending.
Web 3.0 should take us back to the Internet’s original mission and it should take power away from the Googles and Facebooks of the world. Blockchain will be a distributed, decentralized, permissionless, immutable and highly secure internet technology. While many are now waking up to the benefits of blockchain, very few truly understand what it fundamentally is. This is how I understand it.
A blockchain is simply a chain of blocks of information — hence the name. These blocks of information can be about any transactions and may contain date, time, purchase price, purchaser, etc. So why or in what way is blockchain superior to existing record and transaction management systems (ledgers)?
Until now, digital data has been stored in centralized ledgers on servers owned and operated by a third-party company (e.g. banking records) or a government agency (e.g. tax records). Such a centralized system is a tempting target for hackers, cyber criminals and malicious state actors.
A blockchain is extremely difficult (‘computationally infeasible’) to hack or manipulate because the data is encrypted and distributed through a network of computers not a single, central location. To tamper with or destroy the data, you need to corrupt or falsify all the copies of the data on majority of the network nodes.
And here’s the kicker, while banks can block your account or freeze your funds if they deem you undesirable or suspicious (at their absolute discretion of course) or at the behest of a government authority leaving the ordinary citizen at their complete mercy, blockchain in its truest form is ‘censorship-resistant’. No nation-state, corporation, or third party has the power to control who can transact or store their wealth on the network. The fact that Bitcoin consumes a lot of electricity to power the network is not a bug, it is its integral feature. If any state actors wish to mount an attack, they better expend energy equivalent to several countries annual consumption making it extremely slim.
Since Gutenberg, many things disrupted our civilization, mostly improving it for the better. But there is nothing like blockchain that will definitely revolutionize our lives for the next many decades to come. It has taken us 570 years from Johannes Gutenberg’s printing press to Satoshi Nakamoto’s blockchain.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.