Last week saw a major rupture in the reputation of crypto. FTX, an exchange that allowed users to trade digital currencies for assets or fiat money, went bust.
The fallout has been deafening. Since news first broke the company’s enigmatic founder, Sam Bankman-Fried, saw his enormous fortune (thought to be $15.6bn) evaporate. Now creditors are circling and there could be as many as one million people to pay back.While this story has dominated conversations around Web3 in recent days, there’s a danger that some might malign the technology itself, rather than placing accountability for the collapse at the feet of those in charge of the exchange.
Many will enjoy the spectacle of a breathtaking failure in Web3. And maybe there are a few crypto-bros out there who could do with a dose of reality (or knocking down a jpeg or two). But blockchain – the technology that makes all these companies, currencies and assets possible – is imperative to the future of business.Of course, you’ve heard of it. The most famous of these decentralised databases was created in 2009 to store Bitcoin information, manage transactions and keep tabs on who owns what.
The boring old blockchain has been outshined as a buzzword lately as the terminology has expanded to things like ‘dapps’, ‘and ‘DeFi’ (more on those later). But as blockchain become less sexy, it’s become more useful.
On the merge
The biggest criticism of blockchain has been the technology’s disastrous environmental impact. It’s estimated that the one that houses Ethereum, another digital currency, was using about the same amount of power as Holland each year. But last month developers completed an enormous eight-year overhaul, which was branded ‘the merge’.
The Ethereum blockchain is now verifying transactions in a way that is less likely to melt the planet, with the non-profit associated with it announcing that the blockchain would now be 99 per cent more energy efficient (as multiple miners won’t have to compete at the same time to operate the blockchain). Instead, one operator will be chosen at random to carry out the work based on how many tokens they have staked. It also means that those who earn a living by mining the currency using hulking hardware were suddenly out of a job.
Fixing the internet
The mythology of Web3 is about turning away from the tyranny of organisations that are centralised and organised by a small group of people. There are holes in this argument. Specifically, the internet is already decentralised – it’s a global network of servers that link together and through which people can absorb information, communicate or work.
But some blockchain innovators view the current internet as a vile perversion of what it ought to be. Tron is a start-up, the central mission of which is to ‘heal the internet’. It plans to do this by making the functions of blockchain technology more available, and simple to use.
The idea is to unseat the handful of digital behemoths – Google, Amazon, Facebook – that monopolise our attention and get rich by using your data. Tron’s open source platform offers a new infrastructure through which anyone will be able to trade, run smart contracts that allow users to build decentralised apps (dapps) or decentralised finance services (DeFi).
There is a principle behind blockchain that transcends the technology itself. On the face of it, a public database that stores irrefutable information doesn’t have as much appeal as, say, a VR device that can beam you into the metaverse. But it might prove to be the invention that outlasts – and outpunches – all others in its significance.
Matt Hay is a consumer trends expert and the founder and CEO of Bulbshare
This article was amended on 16th November