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Where Are Blockchain and Web3 Taking Us? — Part 2: Delving Deeper into Blockchain

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Where Are Blockchain and Web3 Taking Us? — Part 2: Delving Deeper into Blockchain

This is the second in a four-part series on blockchain’s many facets, including being the primary pillar of the emerging Web3.

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Part 1: First There Was Blockchain  |  Part 3: Web3 Emerging  |  Part 4: The Web3 and Blockchain FAQ

To get a sound understanding of blockchain, you should be aware of some of the nagging issues and criticisms. For example, blockchain has no governance. It could really use the guidance of a small representative group of industry visionaries to help it chart a course, but that might lead to a more centralized orientation. You should also familiarize yourself with the related tools and technologies and what they do. NFTs, in particular, work hand in hand with blockchain and add protection for those who create.

 

Getting NFTs

 

It has been effectively open season on digital content on the internet from the get-go. DRM technology didn’t solve the problem. Will the non-fungible token (NFT) make inroads? Its long-term success or lack thereof will largely be dependent on the success of blockchain. Make no mistake, blockchain is here to stay. It’s too useful a tool to leave behind. But Web3’s premise — that blockchain-based servers might someday run the internet — is by no means certain. (Come back for Part 3 which explores Web3.)

 

What are NFTs? “NFTs facilitate non-fraudulent trade for digital asset producers and consumers or collectors,” said Eric Frazier, senior solutions manager, Supermicro.

 

An NFT is a digital asset authentication system located on a blockchain that gives the holder proof of ownership of digital creations. It does this via metadata that make each NFT unique. Plus, no two people can own the same NFT, which also can’t be changed or destroyed.

 

Applications include digital artwork, but an NFT (sometimes called a "nifty") can be used for a wide variety of uses in music, gaming, entertainment, popular culture items (such as sports merchandise), virtual real estate, prevention of counterfeit products, domain name provenance and others. Down the road, NFTs may have a significant effect on software licensing, intellectual property rights and copyright. Land registry, birth and death certificates, and many other types of records are also potential future beneficiaries of NFTs.

 

If you’re wondering whether NFTs can be traded for cryptocurrency, they can be. What they are not is interchangeable. You may have an NFT for a piece of art that was sold as multiple copies by its owner. But each of those NFTs has unique meta data, so they may not be exchanged one for the other.

 

Smart Contracts Execute

 

A smart contract is blockchain-based, self-executing contract containing code that runs automatically when predetermined conditions are met as set out in an agreement or transaction. So, a hypothetical example might be: on January 15, transfer X value of cryptocurrency in payment for a specific NFT owned by a specific person. Smart contracts are autonomous, trustless, traceable, transparent and irreversible. Key hallmarks of the Smart Contract are that they exclude intermediaries and third parties like lawyers and notaries. And they usually use simple language, require fewer steps and involve less paperwork.

 

Blockchain Power Consumption

 

Some blockchains gobble up electricity and are heavy users of compute and storage resources. But blockchains are not all created equally. Bitcoin is known to be resource in hungry, while “Filecoin’s needs are materially less,” said to Michael Fair, chief revenue officer and longtime channel expert, PiKNiK.

 

It’s also possible to make changes to some blockchains to make them less power hungry. For example, Ethereum switched from the Proof-of-Work (PoW) to the Proof-of-Stake (PoS) algorithm a few months ago, which reduced power consumption by over 99%. However, Ethereum is less decentralized as a result because it is now 80% hosted on AWS. (See the discussion on Understanding Decentralized in Part 1.)

 

“With the algorithm switch from PoW to PoS, Ethereum’s decentralization took a big hit because the majority of transactions and validations are running on Amazon’s cloud” said Jörg Roskowetz, director of blockchain technology, AMD. “From my point of view, hybrid systems like Lightning on the Bitcoin network will keep all the parameters improving — scalability, latency and power-consumption challenges. This will likely take years to be developed and improved.

 

Can Web3 Remain Decentralized?

 

Is the blockchain movement viable going forward? There are those who are skeptical: For example, Scott Nover writing in Quartz and Moxie Marlinspike. Both stories were published almost a year ago in January 2022, well before the change at Ethereum.

 

Nover writes: “Even if blockchains are decentralized, the Web3 services that interact with them are controlled by a very small number of privately held companies. In fact, the industry emerging to support the decentralized web is highly consolidated, potentially undermining the promise of Web3.”

 

These are real concerns. But it’s not like the expectation was that Web3 would exist in a world free of potentially undermining factors, including the consolidation of Web3 blockchain companies as well as some interaction with Web 2.0 companies. If Web3 succeeds, it will need to support a good user experience and be resilient enough to develop additional ways of shielding tself from centralizing influences. It’s not going to exist in a vacuum.

 

 

Other Stories in this Series:

Part 1: First There Was Blockchain

Part 2: Delving Deeper into Blockchain

Part 3: Web3 Emerging

Part 4: The Web3 and Blockchain FAQ

 

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Where Are Blockchain and Web3 Taking Us? — Part 1: First There Was Blockchain

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Where Are Blockchain and Web3 Taking Us? — Part 1: First There Was Blockchain

This is the first story in a four-part series on blockchain’s many facets, including being the primary pillar of the emerging Web3. 

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 |  Part 2: Delving Deeper into Blockchain  |  Part 3: Web3 Emerging  |  Part 4: The Web3 and Blockchain FAQ

There has been a lot of buzz about blockchain over the past five years, and yet seemingly not much movement. Long, long ago I concluded that the amount of truth to the reported value of a new technology was inversely proportional to the level of din its hype made. But as with so much else about blockchain, it defies conventional wisdom. Blockchain is a bigger deal than is generally realized.

 

Basic Blockchain Definition and Introduction

 

(Source: Wikipedia): Blockchain is a peer-to-peer (P2P) or publicly decentralized ledger (shared distributed database) that consists of blocks of data bound together with cryptography. Each block contains a cryptographic hash of the previous block, a time stamp and a transaction date. Because each block contains information from the previous block, they effectively form a chain – hence the name blockchain.

 

Blockchain transactions resist being altered once they are recorded because the data in any given block cannot be altered retroactively without altering all subsequent blocks that duplicate that data. As a P2P publicly distributed ledger, nodes collectively adhere to a consensus algorithm protocol to add and validate new transaction blocks.

 

“A blockchain is a system of recording information in a way that makes it difficult or impossible to change, cheat or hack the system,” said Eric Frazier, senior solutions manager, Supermicro. “It is a digital ledger that is duplicated and distributed to a network of multiple nodes on the blockchain.”

 

Michael Fair, PiKNiK’s chief revenue officer and longtime channel expert added, “In the blockchain, data is immutable. It’s actually sealed within the network, which is monitored by the blockchain 24 x 7 x 365 days a year.”

 

Blockchain was created in 2008 under the apparent pseudonym, Satoshi Nakamoto. Its original use was to provide a public distributed ledger for the bitcoin cryptocurrency also created by the same entity. But the true promise of blockchain goes way beyond cryptocurrency. The downside is that blockchain operations are computationally intensive and tend to use lots of power. This issue will be covered in more detail later in the series.

 

Understanding “Decentralized”

 

The term decentralized is probably the most important tenet of Web3 and it is at least partially delivered by blockchain. The word has a specific set of meanings, although it’s become something of a buzzword, which tends to blur its meaning.

 

Gavin Wood is an Ethereum Cofounder, Polkadot founder and the person who coined the term Web3 in 2014. Based on comments made by Wood in a January 2022 YouTube video by CNBC International, as well as other sources, decentralized means that no one company’s servers exclusively own a crucial part of the internet. There are two related meanings for decentralized that get confused sometimes:

 

1. In its most basic form, decentralized is about keeping data safe from monopolization by using blockchain and other technologies to make data and content independent. Data in a blockchain is copied to servers all over the world, which cannot change that information unilaterally. There’s no one place that this data exists and that protects it. Blockchain makes it immutable.

 

2. Decentralized also means what Wood called “political decentralization,” wherein “no one will have the power to turn off content,” the way top execs could (in theory) at companies like Google, Facebook, Amazon, Microsoft and Twitter. Decentralization could potentially kick these and other companies out of the “Your Data” business. A key phrase that relates to this meaning of the term is highly consolidated. How many companies have Google, Amazon, Microsoft, and Facebook purchased over the past couple of decades? Google purchased YouTube. Facebook bought Instagram. Microsoft nabbed LinkedIn. But that’s just the tip of the iceberg. Where once there were many companies, now there are a few, very large companies exerting control over the internet. That’s what highly consolidated refers to. It’s term that’s often used to describe the opposite of decentralized.

 

Blockchain Uses

 

Since 2019 or so, new ideas for blockchain applications have arrived fast and furiously. And while many are plausible theories, others have been actively produced. If your company’s sector of the marketplace happens to be one of the areas that blockchain has been identified with, chances are good that blockchain is at least on your company’s radar.

 

Many organizations are looking to blockchain to rejuvenate their product pipelines. The future of blockchain will very likely be determined by technocrats and developers who harness it to chase profits. In other words, thousands of enterprises are developing blockchain products and services to their own needs, and if they succeed, many others will likely follow.

 

Beyond supporting cryptocurrency, three early uses of blockchain have been:

  • Financial services
  • Government use of blockchain for voting
  • Helping to keep track of supply chains. There’s a synergy in the way they work that makes blockchain and supply chain ideal for one another.

Blockchain has quickly spread to several areas of financial services like tokenizing assets and fiat currencies, P2P lending backed by assets, decentralized finance (DeFi) and self-enforcing smart contracts to name a few.

 

Blockchain voting could help put a stop to the corruption surrounding elections. Countries like Sierra Leone and Russia were early to it. But several other countries have tried it – including the U.S.

 

In healthcare, a handful of companies are attempting to revolutionize e-records by developing them on blockchain-based decentralized ledgers instead of stored away in some company’s database. The medical community is looking at it to store DNA information.

 

Storage systems are an early and important blockchain application. Companies like PiKNiK offer decentralized blockchain storage on a BTB basis.

 

Other Stories in this Series:

Part 1: First There Was Blockchain

Part 2: Delving Deeper into Blockchain

Part 3: Web3 Emerging

Part 4: The Web3 and Blockchain FAQ

 

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Perspective: Don’t Back into Performance-Intensive Computing

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Perspective: Don’t Back into Performance-Intensive Computing

To compete in the marketplace, enterprises are increasingly employing performance-intensive tools and applications like machine learning, artificial intelligence, data-driven insights and automation to differentiate their products and services. In doing so, they may be unintentionally backing into performance-intensive computing because these technologies are computationally and/or data intensive.

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To compete in the marketplace, enterprises are increasingly employing performance-intensive tools and applications like machine learning, artificial intelligence, data-driven insights and decision-support analytics, technical computing, big data, modeling and simulation, cryptocurrency and other blockchain applications, automation and high-performance computing to differentiate their products and services.

 

In doing so, they may be unintentionally backing into performance-intensive computing because these technologies are computationally and/or data intensive. Without thinking through the compute performance you need as measured against your most demanding workloads – now and at least two years from now – you’re setting yourself up for failure or unnecessary expense. When it comes to performance-intensive computing: plan, don’t dabble.

 

There are questions you should ask before jumping in, too. In the cloud or on-premises? There are pluses and minuses to each. Is your data highly distributed? If so, you’ll need network services that won’t become a bottleneck. There’s a long list of environmental and technology needs that are required to make performance-intensive computing pay off. Among them is making it possible to scale. And, of course, planning and building out your environment in advance of your need is vastly preferable to stumbling into it.

 

The requirement that sometimes gets short shrift is organizational. Ultimately, this is about revealing data with which your company can make strategic decisions. There’s no longer anything mundane about enterprise technology and especially the data it manages. It has become so important that virtually every department in your company affects and is affected by it. If you double down on computational performance, the C-suite needs to be fully represented in how you use that power, not just the approval process. Leaving top leadership, marketing, finance, tax, design, manufacturing, HR or IT out of the picture would be a mistake. And those are just sample company building blocks. You also need measurable, meaningful metrics that will help your people determine the ROI of your efforts. Even so, it’s people who make the leap of faith that turns data into ideas.

 

Finally, if you don’t already have the expertise on staff to learn the ins and outs of this endeavor, hire or contract or enter into a consulting arrangement with smart people who clearly have the chops to do this right. You don’t want to be the company with a rocket ship that no one can fly.

 

So, don’t back into performance-intensive computing. But don’t back out of it either. Being able to take full advantage of your data at scale can play an important role in ensuring the viability of your company going forward.

 

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