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Executive Summary
Crypto continues to advance at a breathtaking speed. While many projects and ideas in this space will fail, there are plenty that are showing early promise by reinventing how we live, work, and transact. Let’s countdown, recap, and project the three biggest events to happen in 2021 in crypto.
#3 - DAOs (or Decentralized Autonomous Organizations) are a glimpse on how a group of people can run a project/company where the org chart is essentially flat and meritocracy reigns.
#2 - Incentivizing community and proof of work to accomplish an ambitious vision. Projects are creating hardware devices that provide normal everyday consumers value, and on top of that, allow them to participate in the future and any success of the company/project.
#1 - NFTs (or non-fungible tokens) have been scoffed at by many as a scam. But NFTs represent a digital, unalterable ledger of who owns an asset, and currently, many of those assets are digital only (ie pictures, jpegs). What few understand is that real world asset ownership and transfer of assets could also be disrupted by this same technology sooner than you think.
Trend #3 - The Rise of DAOs
What is a DAO? Quite simply, it’s an organization where any / all decisions about the organization or its project are put up for a vote by all of its members. It values transparency and democracy in its decision making, and promotes proof of work to help distinguish current and rising superstars in the organization or project.
One of the more famous DAOs of 2021 was the Constitution DAO. It was an organization and project whose goal was to pool together assets in order to purchase a copy of the Constitution that was going to auction in November. Decisions on how they would bid, what would happen to the Constitution if they won, and how fractional ownership would work were all decided via votes (straight votes and share weighted votes). The bid ultimately failed, as they were outbid at the last minute, but the ambitious nature of the project brought many people into the buzz.
I think DAOs in some form could be the future of work as we know it. The strongest argument FOR this is DAOs could provide work flexibility (doing a few tasks for a few different DAOs / projects you’re passionate about) and work on your schedule. The strongest argument AGAINST this is DAOs in their current form may be too democratic to take on ambitious goals. In other words, many of the best companies today are what they are due to a visionary being at the helm (Steve Jobs, etc.), whom if they put their bold vision up for a vote, it likely would have lost.
Trend #2 - Incentivizing Work
The biggest problem was many projects in crypto were largely based on financial or theoretical use cases. Protocols and companies are forming that are incentivizing community and proof of work that help them drive adoption. This isn’t your ‘multi level marketing’ / ‘Mary Kay’ type of model. In my opinion, this is the next evolution in viral growth models that companies like TikTok most recently have employed. What do I mean by viral growth via user incentives? For example, TikTok users were incentivized to create videos and were rewarded with views and ultimately payments for ads shown for those videos. Yet, the user experience was all about frictionless creation.
One example of a project is the Helium project, which I’ll do a deeper dive in a later post. The long and short of the Helium protocol’s effort is to provide data for Internet of Things (‘IoT’) devices and sensors. What’s the problem today? In order to get data from sensors, companies need to pay for a unique contract to get constant data from their sensors, which also limits them to how their sensors are built. Think utility companies’ sensors, such as ones on your water meter. What Helium incentives is buying Helium miners that ultimately send out signals that only IoT devices can communicate with. A companies’ sensors ultimately now do NOT need a special, private network, as they can leverage the signals put out by Helium miners, then pay that Helium miner via the blockchain for the data their sensors use.
Companies / protocols are leveraging new incentive models where they distribute their tokens/coins (think company shares) to the users who are advancing their mission and increasing value. Another way to think about this today is loyalty rewards programs. Where current loyalty/rewards programs fail is that you don’t get to participate increase in value of the company to which you are likely promoting to gain rewards.
Biggest Trend of 2021 - NFTs
What is an NFT? A non-fungible token is a unique and non-interchangeable unit of data stored on a digital ledger. NFTs can be associated with easily-reproducible items such as photos, videos, 3D models, audio, and other types of digital files as unique items. NFTs use blockchain technology to provide a public proof of ownership.
Why they are valuable? They provide a single source of truth / record where ownership lies. Remember, the blockchain is an open ledger which the network shares to verify ownership and transaction. Now think of a piece of art today. There is only one original, yet many copies are created. The original has all kinds of paperwork that verifies the owner and what it is. But those physical documents can be lost and there are convoluted central authorities that verify paperwork. This can all be automated by NFTs, which can simplify the transfer of assets, as well as enable you as the owner, sell shares in that asset (similar to ConstitutionDAO).
While today’s primary and original use case for NFTs were original digital pieces of art and their digital verifiable ownership, such as CryptoPunks and Bored Ape Yacht Club. A key player in this space is OpenSea, which is the marketplace for NFTs. I believe it’s only a matter of time these digital sources of truth come for physical assets. Think about all of the paperwork for purchasing an asset of decent value to someone, such as a car, house, or land. This all adds significant costs and time to the transaction. You get the idea. But NFTs could also create a new revenue stream for music artists as well. Think about selling the original music file of your digital single, of which only one copy of the master file will ever exist.
https://twitter.com/benedictevans/status/1470092770131984390?t=7E_jqkSvPWzR9ucxf-ZJmg&s=19
Interesting Ideas This Week
In honor of recently having my second child, this thread below was timely.