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The Ownership Economy Newsletter: The Blockchain Issue (#81)

The Ownership Economy Newsletter: The Blockchain Issue (#81)

What is Blockchain Technology? [A Short Thread]

The easiest way to explain it is by saying that:

Blockchain is a database that is not managed by a single company.

Instead, it's managed by multiple people, making it a peer-to-peer database and thereby, making it decentralized. But why do we need something this complex?

To build trust.

Let's see the following example:

Imagine some friend of yours, traveling around the world, asks you $10. You say, "Yes", and you login to your bank account, and make the transfer. You text your friend saying that you wired him the money and that he'll get it soon.

But, have you seen what happened behind the scenes?

What happened was that you relied on your bank as the mediator of that transaction.

The moment you click "OK", the Bank registers the Amount and Date and places it in their internal register stating:

"You transferred X amount to Y person the day Z"

Wiring money from Person X to Person Y has a cost. What does this cost cover? The mediator's infrastructure costs because anytime you wire money to someone, the Bank has to keep paying for their server costs, human power, money costs, etc. But, wait a minute.

"But, if I handle $5 to my friend, it costs me nothing. Why can't I replicate the same online? Why can't I send it directly to my friend?"

Because most of the time we don't wire money just to our friends, but rather we buy goods and services from random people, too. That's why we need Banks and other middle entities: to build trust in every transaction we make and mediate each one of those transactions. Whether it's to buy stuff on the internet or a life insurance policy.

And this is where Blockchain comes in.

Blockchain was built to serve as a mediator in every transaction we make, or in other words, to build trust. And how? By keeping a record of every transaction organized in "blocks" and all the "blocks" in a "chain". But is it just about wiring money? Not really.

So, what can we do with Blockchain Technology other than wiring money?

Some new use cases are:

NFT marketplaces
Personal identity security
Secure sharing of medical data
Supply chain and logistics monitoring
Anti-money laundering tracking system

Conclusion:

As mentioned above, the Blockchain isn't a server being run by one single company, instead, it runs on multiple PCs of multiple people. These people are distributed across the world. It keeps a record of every transaction, therefore, making it possible to track every transaction, which raises the questions:

How do we know every transaction is real? By keeping every "block" in a "chain" of blocks that are processed and verified, publicly. But who runs the verification? How can we trust it?

Those are great questions. We will address those in the next thread! :)

Source: Bernie

Web 3: An Internet Revolution

A Crypto Series on The Ownership Economy

Now that consumers are spending more time and resources online, the importance of digital assets is likely to increaseconsiderably as consumer spending shifts to virtual worlds.

A global framework like Non-Fungible Tokens (NFTs) provides a stable way of taking the ownership and control of digital assets away from corporations, to the benefit of individuals.

Prediction:

By 2030, we expect Web3 to depress annual offline consumption by $7.3 trillion, boosting direct online expenditures at an annual rate of 28%, from $1.4 trillion today to $12.5 trillion per year.

Buying our Goods from Curated Creators in the Future with Sima Gandhi [Podcast Clip | 6 min]

"I fully believe in ten years, [we] will be following people that we really identify with and just buy a lot of the stuff that they have they've curated for us." Sima Gandhi | Creator Generation

Digital Ownership Could Accelerate The Transition Of Activity From The Physical To The Digital World

We believe Web3 virtual ecosystems will thrive if online human participants can own—as opposed to use or rent — digital assets.

In traditional Web 2.0 business models, end users typically face restrictions on products or services.

They cannot port in-game assets from one game to another, for example, and they risk censorship on the social media platforms that profit from their content.

In contrast, public and decentralized blockchains allow users to store and trade their assets in a legitimate secondary market.

Public Blockchains Enable The Ownership Of Digital Assets

Non-fungible tokens (NFTs) serve as smart contracts that verify the ownership of digital assets on public blockchains. They usurp the power of centralized platforms to house, control, and verify assets.

In 2021, NFTs generated $21 billion in sales as the number of monthly unique buyers soared nearly eight-fold to more than 700,000.

Ethereum Has Been The Chain Of Choice For Smart Contracts Thus Far

Based on public data, Ethereum is the dominant smart contract platform and the blockchain of choice for NFT issuance and transactions.

As fees continue to rise on Ethereum, however, the competition from other layer-1 blockchains and layer-2 scaling technologies is likely to increase.

NFTs Could Shift From Static Collectibles to Dynamic Digital Assets

Currently, collectibles and digital art account for more than 75% of NFT sales on Ethereum.

NFT sales in virtual worlds like The Sandbox and games like Axie Infinity have accounted for less than 25% of cumulative sales on Ethereum.

Based on the evolution of the video gaming market, NFT demand for blockchain-based games and virtual worlds could exceed that for digital collectibles and art, especially as collectibles and art begin to exhibit more utility in various games during the next five to ten years.

Dynamic NFTs Create A New Type of Active Entertainment

The increasing interoperability of NFTs could enable the convergence of collecting, gaming, socializing, and investing.

We Believe NFTs Will Blur The Line Between Consumption And Investment

NFTs offer a liquid marketplace in which consumers can invest in different digital assets and engage in peer-to-peer transactions.

NFT buyers and sellers determine market-clearing prices on blockchains instead of data aggregation platforms, creating new forms of asset monetization.

Blockchain-Based Gaming Can Enable Entertainment And Monetization Simultaneously

Pay-to-Play models require end-users to purchase games at a fixed cost.

Free-to-Play models are replacing Pay-to-Play and unlocking a larger customer base.

Virtual goods and gaming-as-a-service are increasing the revenue upside for game developers.

Because NFTs recognize the ownership of in-game assets, they are enabling Play-and-Earn models.

Games can raise capital and reward users through NFT sales and in-game rewards.

NFT Projects Can Maximize The Returns To Individual Buyers And Sellers

Compared to centralized platforms like Amazon, NFT aggregators like OpenSea charge a fraction of their transaction take rates.

As demand for blockchain-based assets grows, however, the cost to use the blockchain—as measured by gas fees—grows.

Various scaling solutions are in development to help lower the cost of using these blockchains.