Some of our most cherished memories usually involve thinking back to our childhood. Atari will always have a special place in my heart. Any of you old enough to remember playing on one will never forget the first time you played Galaga, Space Invaders, Asteroids, or Donkey Kong. Same goes for writing code, playing games, or logging in to a BBS on that Commodore 64 with a dial-up modem. It was all so new and exciting.
These companies were among the very first innovators of a new technology targeting the mass market, only to be left in the dust within a matter of years. Why? Let me tell you a dirty secret: The first mover to try to get widespread adoption of a new technology frequently loses the war for long-term market share.
That leads me to BlackBerry. I first got one around 2005 for work when the “CrackBerry” phenomenon was taking off. It was a love/hate relationship. Having mobile messaging capabilities in this tiny device was amazing, but it meant you could never truly get away from work. Large enterprises started gobbling up the devices and smaller businesses soon followed. BlackBerry’s parent company, Research in Motion, was the undisputed king.
Unfortunately for BlackBerry, history was going to repeat itself over the coming years. Companies like Apple and Google got in their war rooms and thought strategically about what a truly smart phone should be. E-mail, messaging, a basic camera, and applications such as BrickBreaker were clearly 1.0 features. The smart phone was going to evolve way beyond anything BlackBerry had been able to imagine. iPhone and Android devices have dethroned the once dominant king of hand held smart devices and left the first mover in shambles. And they did it by building much richer features and applications on top of what was ultimately a simple way for Bob and Alice to message one another.
That brings me to Bitcoin. We should always be grateful to Satoshi and Yuji Ijiri for inventing triple-entry accounting and making Bitcoin the first widespread adoption of the technology. The problem with Bitcoin is becoming obvious: Bitcoin can only account for itself, nothing more. Alice being able to send 1 BTC to Bob without needing a bank or broker to facilitate the transaction was revolutionary when it first came out. Today, there is nothing special about it. Any half decent cryptoasset should be able to accomplish this. Bitcoin has so far failed build applications and solutions to other problems.
Making matters worse, Bitcoin transfers are slow and expensive compared to many other cryptoassets. The mining process is using enormous amounts of energy to verify transactions and secure the network. And here’s the kicker: You do not need miners for a simple currency that does nothing more than account for itself. IOTA has shown that users can validate transactions without the need to pay miners, thus eliminating the conflict of interest between the two. IOTA has the user do a proof of work to validate 2 other transactions, without monetary network fees, and then the user’s transaction can be validated. IOTA derives it’s value from its ability to execute, account for, and exchange value and data sets for transactions in IoT, also known as Industry 4.0 or the M2M economy. That will involve endless amounts of micro transactions. And this leads to an important conclusion: Miners are ONLY needed if they provide an idle resource that users cannot provide themselves.
This is not to say miners are obsolete. There are countless examples of them being needed to execute conditional transactions. Ethereum is the most obvious example of a platform that utilizes miners to facilitate smart contracts in web 3.0. No one is going to give you the idle processing power you need to solve a problem for free, so a token like Golem is a valid example of how miners are still needed. The same can be said for Filecoin, which will offer users a decentralized storage network. Projects like Modum and Ambrosus are focused on supply chain integrity for food and medicine. And one of the more ambitious projects in all of crypto, Ocean Protocol, wants to create a marketplace for all kinds of data including AI, IoT, financial, mobile, and more. The important thing to remember here is that these projects are doing more than accounting for 1 unit of a token to be sent from Alice to Bob. These projects are building much richer features on top of the basic Bitcoin design. They will be used to solve problems in governance, identity management, voting, online ticketing, and financial settlement including everything from securities to property. Not to mention countless other ways DLT will solve problems we have yet to imagine. When you really grasp how much these projects are doing in addition to accounting for themselves, you realize just how boring Bitcoin really is in today’s world of cryptoassets. And that leads to another conclusion: Any cryptocurrency that is only able to facilitate an accounting entry of itself will be obsolete. You’re going to have to solve another problem to stay relevant.
In 2009, Satoshi unleashed Bitcoin. It solved a massive problem that has plagued mankind for thousands of years: the need to have another party facilitate the transfer of something between 2 people. Bitcoin is ultimately the inspiration for every cryptocurrency we will ever know. However, since Bitcoin first started, it has not evolved to solve any additional problem beyond that. No smart contracts, no ledger for IoT in the machine economy, no data exchange to learn from. Bitcoin does one thing and one thing only: it accounts for itself. That is a very one dimensional solution to a multi-dimensional set of problems the world is facing. Unless the Bitcoin community wakes up soon, their BlackBerry moment might be right around the corner.