We’re asking thought leaders, business people and creatives to talk about 2022 and give us catalyzing ideas for making St. Pete a better place to live. What should our city look like? What are their hopes, their plans, their problem-solving ideas? This is Catalyze 2022.
Blockchain inspires curiosity, confusion and even fear. It changes some well entrenched societal ground rules, and that can be uncomfortable. But as with many disruptive technologies, blockchain offers an incredible opportunity, especially for our region. That’s why my big goal for 2022 is – to get our community comfortable with blockchain, and to answer questions about what it means for the future (“what it means for us on an economic, psychological and societal level.”)
In the coming years, the “next big things”’ will be blockchain based. Tampa Bay is ideally positioned to attract the people and organizations that will build that future. Thus, it’s imperative that each stakeholder in our community, from the politicians to the educators, understand their role in setting us up for success in a blockchain infused world.
So let’s Catalyze 2022 starting right now with the first in a series of blockchain basics. These thinking points are meant to strengthen your grasp of the concepts, terms and technology of blockchain. My hope is you will move first to comfort, then to fluency and finally to activation so together we can position Tampa Bay to innovate and lead the world into this new frontier.
1: Blockchain is the next evolution of the database.
A blockchain is a shared database of transactions. As a transaction happens, it is added to a block and validated. Every few minutes, the latest block full of data is added to the “chain” of previous blocks. The chain forms a complete, searchable history of all transactions, and anyone who wants a copy of the blockchain can have one. The more people validating blocks and storing copies of the blockchain the better. That’s what makes it “next generation.” The shared, chain format delivers transparency, security and immutability across unconnected groups so no one group can manipulate the data.
2. Why is transparent, secure, immutable data important to unconnected groups?
- Because it eliminates the need for trust, and trusted third parties, in some situations. Trusted third parties like banks control a lot of things like sending money internationally or making loans. Many of these types of services can now be accomplished using peer-to-peer mechanisms that leverage the trustworthiness of the blockchain. This drastically increases global financial efficiency and keeps third party revenues (bank fees) in the hands of the individual.
- Blockchain also provides a game-changing digital utility in the form of non-governmental proof of ownership, as well as allowing for digital rarity. It does this by providing a unique identifier permanently recorded on a blockchain. These are NFTs, and we’ll have more on them in coming articles.
3: Cryptocurrencies are not currencies, mostly.
Cryptocurrency is unfortunate and inaccurate branding. A more accurate term might be cryptoassets. Except for a very few projects, cryptocurriences are not intended to replace dollars or be a transactional currency. They are more like stocks used to raise capital to support a project or company. The tokens (the units that led us to assume and assimilate the word “currency’) in turn absorb the value of that project or company to increase in price, like a stock. For example, I’m active in a project called Handshake which leverages blockchain to upgrade how domain names are resolved. Buying the project’s HNS tokens (cryptocurrency) allows me to initiate new domains or buy existing ones. As the project has success, each HNS increases in value. I’ll never be able to buy a Slurpee from 7-11 with HNS, or 99% of other cryptocurrencies, nor would their creators expect that.
Think of a cryptocurrency like you would a stock. Examine the project behind it to understand its utility. A share of Tesla and a share of Oscar Mayer are two very different things, and cryptocurrencies should be considered individually as well.
There are some cryptocurrencies that have a purpose to store and transmit value. Bitcoin, the OG cryptocurrency, is actually one of the closest to a transactional currency. It’s purpose is to store value, like a modern gold that can be zipped across the planet in a matter of seconds.
What I hope you’ll take away from the above:
- The purpose of Bitcoin is to store value, like gold.
- Most other crypto has an underlying project or utility that has nothing to do with replacing the dollar.
- The “purpose” of some of the most popular cryptocurrencies is simply to be a meme. Like next generation Beanie Babies, Doge and Shiba Inu are coins that are collected for collecting’s sake. Whether they burn bright and then fade away or find a permanent collector base remains to be seen, but they are completely different breeds of project than Ethereum, Cardano or the like. Lumping them into one bucket has led to a lot of confusion and skepticism about cryptocurrencies.
3: Government-backed cryptocurrencies defeat much of the purpose of cryptocurrencies.
Governments are not fans of Bitcoin, et al, for very good reasons. Bitcoin transactions happen outside of government control. That makes it harder to tax, regulate, impose monetary policy on or seize. As a result, we see governments moving to introduce their own blockchain-based currencies. These currencies are still centralized and subject to all the governmental stuff that decentralized cryptocurrency does away with.
Why it’s important:
- Governments, banks and financial advisors are negatively impacted by cryptocurrency. In the short term, it disrupts what they’ve done for as long as they can remember. It makes their professional lives harder and they may degenerate it accordingly. Thus it’s critical to think for yourself. A core tenant of cryptocurrency living is: do your own research.
- A consequence of playing in a place of decentralized and permanent transactions is that there is no customer service to right a wrong. You’re on your own. It’s the whole “with great freedom comes great responsibility” thing.
- The more you understand about the use cases for blockchain, cryptocurrencies, NFTs etc., the more you’ll be able to choose where to dig into the new and where to stick with the old. Until blockchain reaches its cruising altitude there will undoubtedly be some turbulence. So again: do your own research, and harness the power of blockchain safely.
I’ll be back with three more thinking points soon. If you’d like me to address any specific blockchain topics, please send them to us at firstname.lastname@example.org.
Joe Hamilton is Publisher of the St. Pete Catalyst.