On October 31st 2008, a white paper was published by an obscure character named Satoshi Nakamoto. Curiously, this paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” came to dominate media headlines and popular consciousness a decade later. The excitement surrounding Bitcoin, and its underlying technology Blockchain, became eerily similar to the Gold Rush of 1849. In similar fashion to the gold rush of yesteryear, the hype took on a life of its own and with it provided a great distraction from the real opportunities in the emergent ecosystem that arose to support the influx of interested parties.
“Nearly every bubble begins with a grain of truth. It is only when the truth becomes distorted through human narrative that the danger is made manifest.” – Behavioral Economist Daniel Crosby PhD.
The human condition is deeply intertwined with stories of booms and busts. These events of speculative manias have suckered in some of history’s most intelligent minds such as Sir Isaac Newton’s disastrous experience with the South Sea Bubble of 1720. But what emerges after the exhaustion of speculative energy is of equal importance. This is especially true with respect to the most recent speculative fever surrounding Bitcoin, cryptocurrencies, NFT’s and the technology that underlies them all: blockchain.
I have spent the past several years working with institutions and universities to help cut through the hype and focus on the long term prospects of the next stage of the technology revolution. There is a larger story taking place around you. The headlines have focused popular attention on speculation in “cryptocurrencies” and NFT’s, but those are just two actors in a much bigger storyline. What we are really talking about is the next step in a multi-decade evolution of technology. Whereas the creation of the transistor & integrated circuit increased computing power, and the internet ushered in a new era of computer usage, ushers in a new format to distribute information securely without a centralized trusted party. In short, Blockchain is revolutionizing the data ecosystem with applications well beyond cryptocurrency and NFT’s.
Blockchain is not some emergent phenomenon that came out of nowhere, it is instead simply the next phase of the much larger arc of computing evolution. The Massachusetts Institute of Technology succinctly described the primary phases of the computing evolution in the following graph with the primary themes of each decade. According to MIT, the 2020’s is the decade of Blockchain integration.
All technology-inspired advances result in gold-rush thinking in their earliest stages, as people scramble to leverage what’s new to gain an advantage. History, however, shows us that “rush” thinking is typically followed by a “bust” reality. We seem doomed to repeat these cycles over and over; Dot-com’s in the late 1990s, home computers and biotechnology in the ‘80s, computer time-sharing in the ‘60s, transistor electronics in the ‘50s, television in the ‘40s, radio in the ‘20s, automobiles in the early 20th century, and railroads in the 1840s, all began with a rush and ran head first into the reality wall.
Blockchain is no different. But the rush for perceived digital-gold has created lingering confusion that must be addressed. Popular consciousness has mis-interpreted blockchain as “currencies” due to the understandable misnomer of the digital assets after the creation of Bitcoin. Bitcoin was in fact a proof-of-concept project attempting to serve a financial function. It was very much a digital method to exchange value that relied on cryptographic tools, namely the public and private key, to function. This new digital asset was quickly labeled appropriately as a crypto-currency. However, many of the projects that followed Bitcoin were also built on blockchain technology but were intended as altogether different types of applications, i.e. not intended to be currencies. This concept was overlooked when labeling these other digital assets as “cryptocurrencies”, in the same vein as Bitcoin. The ubiquitous use of the word “currency” to describe a vast spectrum of digital applications has caused mass public confusion since. If not a currency, then what is blockchain? Blockchain is a new methodology that allows data to be distributed across a multitude of computers while maintaining data integrity. This process offers a wide array of efficiencies such as high fault tolerances, elimination of data concentration risks, and a framework to establish trust in a trust-less system without a centralized authority or institution to serve as intermediary. This is by no means a risk-free system, but does unlock a new wave of potential applications for enhanced safety and operational efficiencies. Not the least of which is serving as the underlying architecture for a new internet (Web 3.0), a new virtual frontier (metaverse), and a revolutionary component for digital commerce (NFT).
Are the Metaverse, Web 3.0, and NFT’s not just another hyped up digital speculative bubble? No. Despite NFT’s entering popular consciousness as digital images of apes, the underlying technology that enables NFT’s is quite revolutionary and will have far reaching and very mundane applications. NFT’s allow for digital scarcity and authenticity. It is not unreasonable to expect drivers’ licenses, titles, and passports to be NFT’s on wholly owned government blockchains in the future.
This technology of blockchain and NFT’s enable a more reliable and efficient architecture to build out a more comprehensive digital economy. This work is already well underway and has the potential to equal and surpass the current physical-based economy. These are not innovations that should be ignored or taken lightly. Just as most individuals, businesses and governments shifted from almost no interaction with computers in the late 1980’s to almost ubiquitous interactions with websites, electronic payments, and communication today, so too will be our experience with blockchain, NFT’s, Web 3.0 and the metaverse.
I am excited at the opportunity this brings and view the potential for economic value to be in its infancy.
SHAUN M. ROWLES
Shaun Rowles is a Nashville based Institutional Consultant & Portfolio Manager for one of the world’s largest Wealth Management companies. Mr. Rowles is author of “Money Revolution: Fintech Disruption from Bullion to Bitcoin” and routinely guest lectures for a number of universities, most notably Vanderbilt University Owen School of Management in Macroeconomics and Ringling College of Art & Design in the Business of Art on NFT’s and the Metaverse.
