The evolution of information technology has brought us new networks that began with the rise of personal computers and gained quick popularity with the World Wide Web making them a tool for communication that has changed the way we live with others and revolutionized life on planet Earth.
These new communications and information tools have been able to disrupt the power of the old information networks and will soon reshape economic organization which will become more apparent over the next decade. Today this process of economic transformation progresses with new technologies that are changing the fabric of the internet and how it works.
Web 3.0, which references a “new†web for which a major component is the blockchain, will soon turn the world on its head with the many changes it will bring to almost every facet of our collective societies. The defining characteristics of this advancement are its ability to decentralize the economies of the world and allow global information networks to take a larger hand in running operations.
The distributed internet technology being put into place little by little allows computer networks to maintain a collective database of value ownership and exchanges using internet protocols. This database is public, and accessible on one digital ledger not controlled by any singular entity, government, or corporation. The most recognizable example of this phenomenon now is the blockchain where all transactions are recorded to include the date, time, and participants with transactional amounts recorded each with every exchange of information.
Sophisticated mathematical principals put “miners†(who run the infrastructure maintaining these ledgers) to work solving these equations to win a chance at loading information onto the blockchain giving no one source the ability to monopolize. Since the records are also open to everyone, the viability of information is checked and rechecked by those using the blockchain which ensures accuracy and makes this information resistant to tampering.
This technology allows for a new form of decentralized economy as it removes the need for any kind of centralized authority to manage/control the network. Instead, it uses a distributed consensus model managed by many people throughout the world. This shared and encrypted database allows for trustless interactions between peers using new internet protocols. Using this technology, people will set up their own networks to coordinate direct exchanges of assets between peers, which allows us to automate the rules of these transactions.
At the heart of this system is a distributed ledger which records the exchanges of assets (of any type) between peers. This could be anything from cryptocurrencies to property or energy blocks and online gaming materials. These distributed ledgers provide the backbone for token economies where tokens are a quantified units of value being exchanged peer-to-peer on the network. Tokes are generic and fungible in that they can define anything of value and be exchangeable between different specific forms of value.
Traditional money isn’t fully fungible as there are many times one cannot exchange a currency for other types of assets. An example of this would be “likes†on social media, which have value but usually can’t be exchanged for cash. Tokens differ because they are more generic. Existing currencies only define a particular type of monetary value known as “utility.†This is rooted in the logic of the current industrial age economic system. Tokens, because they are generic, can be used to characterize a broader set of values. Social capital, natural capital, or even cultural capital can be defined with tokens.
An example of this would be natural capital, which is the integrity of an ecosystem that allows it to operate and furnish ecosystem services to the population. Traditionally, we only gauge and account for services the ecosystem delivers like food, water, and materials, but we don’t look after the integrity of the ecosystem which allows it to function. The generic nature of tokens will allow value to be placed on the maintenance of the ecosystem as well as the capital.
Tokens, which are digital and programmable, will allow certain rules to be enforced when they are traded giving them the ability to be designed for specific uses. This allows the makers of these tokens the ability to specify how they are traded and the terms for which the trading takes place. An example of this would be when token makers design their coins so that they can’t be exchanged for illegal goods and services and in this way, the token isn’t only used for utility but can also exact social values.
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