It’s Not Corporations That Will Hold the Power in the Future, but Communities or Tokens
The world will radically change and you better start changing your mindset too.
Last week I was having a coffee with several friends, and they tried to convince me that the Bitcoin network was a Ponzi scheme and the blockchain was entirely corrupted by hackers.
I was the only person trying to share my knowledge about the world of crypto. All my friends were rejoicing news, most of them fake, which appear in big letters in the prominent national newspapers.
That was further proof that the world is manipulated by the major corporations that belong to the big banks, which have strong links to governments. Those same governments have close connections to central banks.
Central banks, in themselves, feel threatened by this new technology that is becoming competition.
So, what do institutions and corporations do when they’re threatened? They manipulate fake news and counter-information. In this case, they try to disallow technological innovation that, for the first time, is disrupting the most significant industry in the world-the money industry.
Remember what happened to the auto industry when Tesla started their Giga factories and massive electric vehicle production? That’s it. They came with fake news.
Let’s try to start with simple definitions to understand why communities and tokens will dominate trends and networks.
What is the Bitcoin network?
In 2008 we faced a debt crisis that was known as the Great Recession. Banks collapsed, and the Federal Reserve and the European Central Bank had to bail out financial institutions to stop the burst.
On 31 October 2008, a person or group of people named Satoshi Nakamoto created a 9-page white paper entitled: Bitcoin: A Peer-to-Peer Electronic Cash System.
This document started with this statement:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.- Satoshi Nakamoto.
The story is almost romantic, as no one to this date knows who he, she, or they are. But what happened after this document was posted to a cryptography mailing list in the Internet network is outstanding.
The bitcoin network was created when Nakamoto mined the first block of the chain, known as the genesis block.
Spiked in the coinbase of this block was the text “The Times 03/Jan/2009 Chancellor on the brink of second bailout for banks.”
That was the enigmatic message Nakamoto shared to the world, meaning by that of the instability caused by the fractional-reserve banking system.
Hal Finney was the receiver of the first bitcoin transaction in 2004 and had created the first reusable proof-of-work system. Finney downloaded the bitcoin software and received ten bitcoins on 12 January 2009 from Nakamoto itself.
Other cypherpunk supporters developed other infrastructures that came, ten years later, to give rise to one of the hottest financial markets today.
Research produced by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.- Wikipedia.
What is the blockchain?
Blockchain is the record-keeping technology behind the Bitcoin network. It’s a specific database in the way it stores information. Blockchains store data in blocks that are then chained together.
As new data comes in, it is entered into a new block. Once the block is filled with data, it is chained onto the previous block, making the data chained together in chronological order.- investopedia.com
There are different types of blockchains, but the most common ones are used as a ledger for transactions. Blockchains are immutable, which means that the data is irreversible.
In the specific case of the Bitcoin network, those transactions are permanently recorded and viewable to anyone.
A blockchain has a unique way of structuring the data, unlike a typical database. A blockchain collects information together in blocks.
Blocks have certain storage capacities and, when filled, are chained onto the previously filled block, forming a chain of data known as the “blockchain.”- investopedia.com
Blocks are always stored chronologically and are added to the “end” of the blockchain. After a block is added to the end of the blockchain, unless the majority reach a consensus to do so, it’s almost impossible to change.
That’s why thousands of hackers tried to hack the system for decades and never succeeded.
What is a cryptocurrency?
A cryptocurrency is a digital currency that is secured by cryptography. It’s very difficult, almost impossible to counterfeit or double-spend.
Most cryptocurrencies are decentralized networks based on blockchain technology. Some of the best known are Bitcoin, Ethereum, Ripple XRP, Litecoin, NEO, and IOTA.
Each one of them has its own network protocol. A network protocol is a set of rules determining how data is transmitted between different devices in the same network.
What is a token?
In the Blockchain ecosystem, any asset that is digitally transferable between two people is called a token.- coinhouse.com
Ethereum is the blockchain where almost every token is issued. A token can be a new project, a new protocol for a new cryptocurrency, or another digital asset.
Yet, for such a protocol to work, it takes many nodes replicating the blockchain, miners willing to validate transactions, developers to develop the protocol and create portfolios supporting it (coinhouse.com).
A friend of mine created a protocol called SavingCoin, wherein my hometown in Portugal. Then, he went to Cyprus to present it to investors, but the project didn’t take off, and sixty thousand euros were lost.
Like in any other business, entrepreneurs try their luck; sometimes they win, sometimes they lose.
What is an Alt-coin?
Altcoins are different protocols than Bitcoin.
The crypto world has been boosting with entrepreneurship and innovation. So, naturally, different kinds of coins were invented, some of them sharing the same characteristics as Bitcoin and new approaches.
Some Altcoins use different consensus mechanisms to produce blocks or to validate transactions.
Some of the Altcoins even distinguish themselves from Bitcoin, like the ones that provide smart contracts or low-price volatility.
As time goes by and technology evolves, new needs related to speed and security are required for this protocol type.
For example, Ethereum 2.0 was created to improve the network’s security and scalability.
Ethereum 2.0 (ETH2) is an upgrade to the Ethereum network that aims to improve the network’s security and scalability. This upgrade involves Ethereum shifting their current mining model to a staking model.- coinbase.com
It’s not the corporations that will hold power in the future, but communities or tokens.
We’re entering an age of communities. And I’m going to give you an extreme example- Dogecoin.
Formed initially as a joke, Dogecoin was created by IBM software engineer Billy Markus and Adobe software engineer Jackson Palmer. … Markus had designed Dogecoin’s protocol based on existing cryptocurrencies Luckycoin and Litecoin, which use scrypt technology in their proof-of-work algorithm.- Wikipedia.
Dogecoin reached a market capitalization of $85,314,347,523.
Seeing money as a trust protocol and money starting to be interpreted as a digital network protocol, you will see strange phenomena like Dogecoin, instigated by people like Musk, with a powerful network effect, impacting on prices of some of the most prominent cryptocurrencies.
This extreme example only suggests the power of the network effect.
People like Cathy Wood, Chamath Palihapitiya, or Mark Cuban have that network effect of making real change in people’s mindsets.
We’re entering an age of communities. It’s not corporations that old the power anymore, but communities and tokens. It’s a radical change in how the world works.
This network effect is going to be driven by token economics.
People are starting to realize the power they have to create unique communities around themselves and their businesses.
Tokens drive communities, because they take the right behavior structure.- Raoul Pal in Realvision.com
Final Thoughts
Recently I wrote an article about the gamification of the future economy.
How about the tokenization of economics? We’ll probably hear more of these terms in the future, as innovation occurs in the financial world.
Some states of the USA are already embracing these innovative ways of storing value. Most people don’t believe or understand what’s going on in the crypto world.
However, the change is here. Countries like the USA and Canada, and at a smaller pace the European Union, are trying to embrace the digitization of the entire financial system.
Central banks and governments will try to do their best to stabilize the financial system. It’s their job to do so.
Yet, a new way of looking at money and transactions have taken place. I believe in regulation, and for the stability of the financial industry, we need rules, not anarchy.
But rules made by humans, or code?
By humans, we already know what awaits us: more inequality and the gap between the rich and the poor. And from time to time, a crisis puts us all the poorest, without ground and hope.
Or, on the other hand, a cryptographic code being the simplest way to conclude contracts between two parties to exchange services.
Do we prefer the war between technological deflation and monetary inflation? Or are we all moving closer to a system that can really benefit everyone equally? All human beings in the world will have access to a system, not just the “chosen ones” from rich countries.
If the tokenization of economics wins the marathon, we’re about to witness the complete disruption of the economy as we know it.
New communities will lead the way. Unused tokens will spread the tendencies and go looking for the money.
The justest communities will win, create the best incentives, and make the world a more equal place.
Yet, even in this tokenization of the future economy, we will always need a leap of faith.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.
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