Part 1: Blockchain, Web3, NFT and Metaverse walk in a bar...
Demystifying the new digital age.
Happy Monday! 👋
By now, you’ve likely heard at least one or all of the above terms. And if you’re anything like me, you’re intrigued, but also a smidge confused. While I am financially motivated to develop a deep understanding of all of these topics, I am also truly fascinated about the potential of these technologies and the impact that they have for humankind.
Given the incredible substance that these topics contain, I’ll be doing my first 2 part series. In part 1, I’ll focus on demystifying these terms, taking a deep virtual dive into the different technologies and how they all tie together. In part 2, I’ll do a deep dive into some of the most exciting companies, themes and technologies in each of the different categories, specifically within sports, fitness & wellness.
So, what did happen after they walked into the bar?
Well, it’s complicated, but it doesn’t have to be. In this article, let’s stay in Wonderland and I’ll show you how deep the rabbit hole goes as I demystify the new digital age.
Let’s get to it!
Enjoy!
Myles
How it all Works
Before we jump in, let’s do some housekeeping and just go ahead and demystify these mythical terms right up front. Then we can have some fun taking deeper dives into each.
Blockchain: A decentralized digital ledger that you can store information on (such as financial transactions). Instead of having one central command center such as a tech company or a federal government, no single entity controls or owns the blockchain. The key element of blockchain technology is that it is truly decentralized, meaning that the power lies within the network of computers on the blockchain vs one entity. The most common application of this technology in real life is with cryptocurrencies such as Bitcoin and Ethereum.
Web 3.0: This is nothing more than a made up buzzword used to define what many believe is the future of the internet. Theoretically, this future is the culmination of all of the latest and greatest technologies and decades of key learnings being used to create a truly decentralized internet. Blockchain technology is a key crux of this movement.
NFTs: This stands for Non-Fungible Tokens. Non-fungible means that there is more or less no way of creating a false replica of a specific asset. Very literally, token is defined as: “A thing serving as a visible or tangible representation of fact, quality, feeling etc”. Put those two together and you have a digital asset that cannot be replicated, which is guaranteed by the NFT being stored on the blockchain. Examples of NFTs include art work and commemorative tickets. They are typically created by companies that are built around a community that tend to increase the value of the NFTs. As the community grows, so does awareness of the NFTs, which then translates to increased demand and value.
Metaverse: The most common misconception about the Metaverse is that Meta (formerly Facebook) owns the Metaverse. Playing off the decentralized internet concept of Web 3.0, no single entity owns the Metaverse. Because Meta owns Oculus, which is a virtual reality (VR) headset, many people mistakenly think that the Metaverse can only be accessed via Meta. None of this is true. The Metaverse is nothing more than a theoretical idea of a virtual World. One that many people would prefer to be truly decentralized and accessed via infinite portals (i.e. phone, computer, VR headset, AR contact lens).
If there is one common theme throughout each of these, it’s decentralization. Whereas Web 2.0 was the birth and proliferation of centralized platforms such as Facebook, Google and Twitter, there is a monumental, unstoppable secular shift taking hold that will completely break down the walls of the internet. As I peeled back the layer of the onion to really understand why this tidal wave of decentralization is happening, I found no singular answer. However, how this all started is crystal clear: The Creation of the Blockchain.
Blockchain: The Beginning
When I first learned about blockchain, it was back in 2013 timeframe. I was drinking beers at Bakersfield on Mass Ave. when a friend tried to convince me that I should buy Bitcoin. He told me that it was going to eventually change the way the world transacts. I was intrigued, but very skeptical. I dug deeper to try and really understand what that meant. What I was able to gather was that Bitcoin was different because of the blockchain technology that it was built on. However, I was still unable to understand what the actual utility of Bitcoin was. There was no “store value” and no guarantee behind the currency like “the full faith and credit of the USA”.
To me, it seemed like nothing more than an elaborate pyramid scheme that was not going to end well. For the record, it very well could still end up being just that, but I don’t think it’s likely at this stage in the game. With nearly a decade of rearview perspective, it all makes perfect sense to me now. Cryptocurrency is nothing more than “technology purists” leveraging new tech to take us back to a truly decentralized internet. They were trying to level the playing field and solve massive problems that most people still don’t realize are happening today right in front of their eyes. Time and time again over the course of history, centralized power gets abused or exploited. Spread that power out, and you blunt an ages old problem: Too much power in one place.
At the time at this bar in 2013, I missed the forest for the trees. I was looking at what problem cryptocurrency was solving and not what problem blockchain was solving. I missed that blockchain was a massive movement and technological validation that has now kicked off an unstoppable secular shift being felt throughout the globe: Web 3.0: The decentralization of the internet.
Web 3.0: How We Got Here
If you were like me and grew up in the 90s, you were fortunate enough to throw in a VHS tape, hit the rewind button, wait a few minutes, hit play and watch bad ass movies like this:
At the time that the movie Hackers was released in 1995, this was the beginning of what has now been coined Web 1.0. Ironically, this was also the time that we began moving from a decentralized web, to a more centralized web environment. It’s almost like the movie was trying to tell us something. Here’s a simple look at the evolution of the web.
In the 1970s, the internet was created amidst the height of the Cold War. The US government was using it first as a central computer controlling our nukes. In fear that a cyber attack of the central controlling computer could prevent them from counter attacking the USSR, the US had to make a change. In anticipation of a cyber attack, they created a decentralized computer network system across the country that would allow the defense system to be operational while under siege. Being birthed from war is not the most dovish creation of the internet, but so be it.
In the late 80s/early 90s, the World Wide Web was created by Tim Berners-Lee. Not yet mainstream, the adoption and utilization of the web was still fringe. It wasn’t until 1995 when Web 1.0 was born that the internet began going mainstream. Web browsers such as Netscape, AOL and Internet Explorer were born around this time, which allowed people with a computer to explore the web. There were some important characteristics of Web 1.0:
Decentralized: The internet was powered by a series of individual computers. Literally, this meant that random people across the world had computers running in their offices/homes that they never shut down in order to power the internet. Now, the internet is powered by an intricate underwater cable system that stretches the globe. Many of the world’s largest companies such as Facebook, Google, Microsoft and Amazon have funded these networks.
Open-Source: Anyone was able to build on top of the internet. Without it being open-sourced, companies like Facebook and Google never would have been born.
Read-Only: There were very few content creators (about 1-3% of total browsers), which meant that the web was essentially read only.
As more and more people began to adopt this new technology and personal computers began to proliferate, the game changed. Around 2005 was the birth of Web 2.0. For the first time ever, user-created content began to emerge as new networks such as Facebook, Youtube and Myspace were created. Because of the rapid adoption of the web, this led to many eyeballs staring at a singular location for long periods of time. Which in turn led to tons of money to be made by capitalizing on these captivated audiences. Capitalism!
Ultimately, we have continued down a path of more centralized platforms controlled by single entities, a far cry from where the decentralized web began decades ago. As smartphones entered the scene, this problem was exacerbated as the consumption ecosystems became even more closed.
These closed, opaque consumption ecosystems of Web 2.0 have quickly created the problems that Web 3.0 hopes to fix. These problems consist of:
Censorship: This has been a hot political topic over the course of the past 5 years, mainly around Twitter and Facebook censoring information that they feel is wrong. Placing the power of information control into a single entities hands ultimately leads to human biases trickling in.
Surveillance: Everyone has had that moment where a private conversation leads to an ad showing up regarding the content you just discussed. Creepy.
Advertisements: I’d have to admit, they’ve gotten really good, but at what cost? Privacy is a huge concern in respect to how well we are now advertised to.
Data Hacks & Loss: Whenever you store valuable data in a single location, it’s a ticking time bomb. Unfortunately, the problem appears to be getting worst every year, as 2021 was another record breaking year for data breaches. Not good.
In addition to the above, there appear to be insane synergies between decentralization, artificial intelligence and machine learning that could be its own deep dive piece. For a brief education, watch this video from IBM. The tl;dr version is that because the quality of data is so important for machine learning models, specifically models that feed artificial intelligence, leveraging truly authentic data on the blockchain will result in better models at incredible processing speeds. The applications here are truly remarkable and span many industries and use cases.
The move to Web 3.0 is definitely well underway, which this image from the Internet of Blockchain Foundation highlights below:
With the history of how we got here, what’s next? From my research, one thing is clear:
Web 3.0 is going to significantly change the world order. Whereas today we have few very powerful companies that have amassed unbelievable control of the internet via The People’s data, this power will be relinquished. For the first time since the internet was born, our digital identifies as consumers will not be owned by entities, and as a result, will begin to expand exponentially.
NFTs: Validation
One of the most popular examples of the expansion of Web 3.0 to new applications of blockchain technology are NFTs. While they have served as the butt of many jokes, considered by many as worthless with zero utility, they are serving as a key accelerator at the intersection of Web 3.0, Blockchain and the Metaverse. Applications such as Opensea are now opening (pun!) the door for consumers to begin building their digital identities beyond avatars and digital wallets. Similar to art collectors clamoring over Picassos, NFT collectors are spending big money and flexing their digital collections. Take the example below:
It’s still hard to wrap my head around this, but the above NFT image set the record for the most expensive NFT in history, selling for $91.8M. There are countless other examples of NFTs selling for millions of dollars, including Cryptopunks from Larva Labs. At the time of this writing, most would consider this an absolute waste of money. Just like me at that bar in 2013, you’re likely analytically processing what the utility is, and how someone could ever see such value in a digital image. And just like me, you’d be missing the forest for the trees.
Leveraging blockchain technology to store the digital assets in a trusted, non-fungible manner has opened up a new way of exchanging and collecting value. Specifically, collecting value in a digital world. Furthermore, NFTs transacted on the blockchain are powering the next step in the building of our digital identities beyond social media.
For as long as humans have been in existence, we’ve been wired to have a strong desire to want to be liked. This stems from an internal survival mechanism where the brain knows that you have a better chance of survival when you are part of a community. So many of our daily actions revolve around this simple instinct. Over the course of the past few decades, this very same survival instinct has driven the importance of our digital identities.
Seeing the Twitter checkbox next to the name of someone immediately registers in your mind as, “this person is important and therefore I want to engage with them”. See an Instagram image with 10s of thousands of likes, and you immediately think that this person is an influencer and you have a stronger instinctual desire to engage. Retweets, followers, views, profile pictures, content and the likes all currently serve as the digital identity scorecard, but this is changing rapidly thanks to NFTs. Not only is it enabling individuals to easily exchange and collect value, it’s allowing brands to create more value for their customers. Existing brand communities are being strengthened, and new NFT projects are creating new communities that can be cult-like.
Log into Twitter these days and you’ll find a sea of NFT profile pictures flooding your feed. Twitter now allows you to connect your digital wallet to your profile so that you can use your NFTs and digital assets as a part of your digital identity (your profile image). Not only can you enhance your digital identity, but you can easily communicate and engage with the NFT communities that you have invested in.
As NFTs continue to pick up steam, I see the connection of digital wallets to different applications becoming more prevalent moving forward, eventually making its way into physical goods. Currently, the main application of NFTs has centered around digital collectibles such as art, but the application of NFT use cases continues to grow.
As I am writing this piece, I take a brief pause to gaze around my home office and let the mind wander. I see where this is all going. I see a room full of physical goods that will eventually be sold with a virtual record on the blockchain. As I put on my VR headset or my AR lens, the physical goods that I own in our physical world instantaneously transforms to my property within the digital world: The Metaverse.
Metaverse: The Amalgamation
“If you assume any rate of improvement at all, games will eventually be indistinguishable from reality. We’re most likely in a simulation.” -Elon Musk
Some of the smartest people in the world estimate that there’s about a 50-50 chance that our world as we see it is nothing more than a computer simulation. If that’s true, this simulation’s key pawns (humans) are embarking on building a simulation within a simulation. Let that sink in for a moment.🤯
Now that we’ve established how deep this rabbit hole could go, let’s get back to somewhat reality. I intentionally left The Metaverse for last, because this is where I see everything merging together. Using blockchain technology and Web 3.0 protocols, the infrastructure of the Metaverse will be built. Within the Metaverse, NFTs and their communities will increase in both utility and value.
Because the Metaverse is literally built around one of the most monetarily valuable of the 5 human senses, capital will flow aggressively. Where eye balls go, so does the money. This is critical for both adoption and innovation which is what makes the world go ‘round.
It’s interesting to note that even with all of the recent excitement around the Metaverse, most of the fundamental elements have existed for some time. I remember putting on my first VR headset at Block Party (RIP) in Indianapolis in the late 90s/early 00s. Fast forward to today and Fortnite has virtual experiences such as concerts, you can use Oculus to view a digital version of your own home, and you can already buy and sell virtual goods in World of Warcraft. Nothing new right? Yes and no. I think of these existing technologies and experiences similar to the way Web 2.0 currently is architected: In silos. However, with blockchain and Web 3.0 protocols, the Metaverse has the potential to become a virtual and augmented world architected in a decentralized manner that changes the way we live our daily lives. The key word being: Potential.
In the late 90s when Web 1.0 took hold, my parents could not wrap their heads around why I would want to spend so much time on AIM talking to friends that lived literally around the corner from me. There were several reasons, but the main draw was that it broke down existing barriers of communication. At 8pm on a school night, the most people I could talk to on the phone was two max if one of us joined another friend in. On AIM, I could simultaneously be talking to as many friends as I want from all over the world. This was a game changer, but the older generation didn’t understand why we didn’t just, “pick up the phone and call someone”.
During a recent conversation with someone near and dear to me, I attempted to sell them on the Metaverse and the incredible potential that it has to change the way we live. I was pierced with skeptical eyes and a very similar response to the one that my parents gave me as I typed away talking to my friends on my computer back in the late 90s. The conversation went something like this:
Friend: “Why would you want to do a workout in the Metaverse when you could just do a row on the Ergatta or go run outside?”.
Me: “If I can enter the Metaverse and run anywhere in the world with a friend that lives in Australia, why wouldn’t I want to do that?”
Similar to the late 90s with Web 1.0, the Metaverse will once again break down existing barriers to communication created from Web 1.0 and Web 2.0.
I completely understand why people remain skeptical, and many times confused, around the Metaverse concept. Similar to cryptocurrencies and NFTs, critics point to commonly asked questions: “What’s the utility? What problem(s) does the Metaverse solve?”. I’ll be the first to admit that there’s an enormous amount of fluff around the concept currently. Even the companies such as Meta and Microsoft that are investing to build the Metaverse can’t necessarily agree on exactly what it should be. The Metaverse is flooded with far out, high fidelity video prototypes that feel straight out of a Sci-Fi movie. Watch the product announcement from October when Meta announced their pivot to the Metaverse, and you’ll see a plethora of examples.
While no single company or entity can agree on what the Metaverse should be, I view all of this as necessary processes of innovation. Similar to when building a minimum viable product, you find problems, prototype solutions, get feedback from the market, fail fast, pivot your product and do it all over again. There will be thousands of companies doing just that over the next decade to try and find new product market fit within the Metaverse. And similar to the tech boom and bust of 2000, there will be many casualties along the way. But, using decades of key technological learnings, an entirely new Metaverse infrastructure will be constructed, once again breaking down previous barriers of communication that we never really noticed were there.
This is the beauty of disruptive technology: It changes the way we live because we never knew we needed to live a new way.