1/ A thread on why blockchains are important for anyone thinking about building web based products. 🧵— Viksit Gaur (@viksit) October 19, 2021
1/ A thread on why blockchains are important for anyone thinking about building web based products. 🧵
2/ In 2009, @Bitcoin's blockchain technology successfully solved a fundamental problem in finance — the ability to transfer a digital asset between two peers anywhere in the world in a trusted manner, but without intermediaries like banks.
3/ Why is this problem important to solve? Because a solution to it allows the internet itself to be used to transfer money between people, as opposed to via banks and financial payment networks like SWIFT or ACH. Think email vs a USPS owned "E-Letters" service.
4/ It makes financial transactions more accessible to the unbanked, more transparent for auditors, more secure, and also more efficient — ultimately showing us what a replacement of our 1960s era financial rails can look like.
5/ (It also has potential for misuse but that's a thread for another day.)
6/ As Bitcoin grew, so did the demand for doing common financial transactions (like issuing loans) on its blockchain.
7/ However, its single focus as an alternative payments network meant that this was not easily possible — the code needed to facilitate these would have to be written off the blockchain network, removing the very guarantees of trust and security that one would want to use it for.
8/ The @ethereum project was started in 2013 to evolve blockchain technology in a way that would allow any arbitrary financial primitive to be built on top of it, and solve the problem described above.
9/ Ethereum (and a slew of other blockchain projects) offer the ability to run any kind of code on top of them — not just finance — opening up all kinds of applications historically not possible on Bitcoin.
10/ Moreover, by also being open source, community focused, and open access, they allow anyone to build on top of them, compounding the rate of innovation.
Composability is to software as compounding interest is to finance.— Chris Dixon (@cdixon) October 14, 2021
11/ "I think the big difference between Ethereum and Bitcoin is that Bitcoin is a platform where the value of the ecosystem comes from the value of the currency, but in Ethereum the value of the currency comes from the value of the ecosystem." - @VitalikButerin
12/ So why are blockchains important for someone thinking about building products on the internet? A simple analogy is that they do for our current payments infrastructure what email did for physical letters — makes it obsolete.
13/ As the latest in a line of fundamental innovations that supercharge people's interactions with each other, blockchains are going to have second order effects that we can't even imagine yet.
14/ For instance, In 1995, this newsweek article about the Internet couldn't even imagine the concept of "Cyberbusinesses" and attributed talk of the "obsolescence of physical stores" as part of "fawning techno-burble". https://www.newsweek.com/clifford-stoll-why-web-wont-be-nirvana-185306
15/ Years later, the author, Cliff Stoll, wrote to The Next Web saying "Of my many mistakes, flubs, and howlers, few have been as public as my 1995 howler".
16/ Most importantly, blockchain based decentralized networks (also termed "web3"), offer new ways to re-imagine the internet without the control of large technology companies, banks and governments.
17/ They have come a long way from being only about speculative crypto currencies, and it is near impossible to truly fathom what can be built using them in the future.
18/ In the next thread, we'll dive deeper into the fundamental primitives of web3, and a framework for how they have the potential to transform the current version of the internet (termed web2) for the better.