Opinion: Why blockchain companies will be the future unicorns

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When fictional entrepreneur Richard Hendricks from HBO’s Silicon Valley was prompted to elaborate on one thing he would build given unlimited time and resources, his answer not only made many tech geeks sit up, it practically sparked countless Reddit discussions about its possibility in the real world.

We could build a completely decentralized version of our current internet, with no firewalls, no tolls, no government regulation, and no spying. Information will be free in every sense of the word.

What’s wrong with the current state?

One of the reasons why the current internet is not perfect is that there is no transparency and accountability in how private user information is collected, stored, and used. Pixels and cookies created by Facebook and Google are tracking user browsing habits, and most internet users are paranoid about governments’ mass surveillance. The power to control the internet and all its data is centralized and controlled by few powerful individuals, governments, and corporations.

For example, users can access every feature of Facebook and consume its content without paying a single cent, but we are trading our personal information for that access. Our personal data, along with our behavior and preferences, are then repackaged and sold to advertisers worldwide.

The possession of market information has also proved to be a key ingredient for success, especially for peer-to-peer marketplace platforms. Over the last 10 years, we have seen the rise of marketplaces and they have demonstrated how valuable information can be and how possessing data can open huge revenue potential.

The likes of Airbnb and Fiverr seek to provide a convenient infrastructure to connect value creators and consumers. And the value of the network depends largely on how the intermediary, that is the company, facilitates and curates quality value transactions, especially in industries and markets where information is asymmetrical. A high-functioning marketplace has the ability to withhold information and leverage on that information asymmetry. Conversely, a marketplace is deemed a failure when users can bypass the platform and freely obtain information about the market to interact with other users.

When these platforms are able to achieve product-market fit, more and more users will join the network, increasing the value of the network. While it is possible for users to generate income from participating in the network, the ability to leverage on information asymmetry will distribute most of the wealth generated by the network to the network owner and not its participants.

Introducing the Ethereum network

But while the vision of having a decentralized internet and markets can seem idealistic to some, we might not be far from that reality. Check out blockchain technology and the Ethereum network.

Ethereum is a decentralized public blockchain network that runs smart contracts, which are self-operating programs that can facilitate and enforce an exchange of value automatically when certain conditions are met.

Think of Ethereum like the App Store. It allows developers to build decentralized apps (or “dapps” for short) on the network. However, instead of using fiat money, tokens are used on the Ethereum network to exchange for goods and services. On top of that, the use of tokens adds a new dimension to the network—it gives ownership to its participants.

Value for all users

The Golem Project, also known as the Airbnb for computing power, is one of the many companies building on the Ethereum network. Golem Network Tokens (GNT) must be exchanged with fiat money, bitcoins, or ether (universal currency of the Ethereum network), in order for users to participate on the network. One GNT is worth about US$0.48 today.

When there are sufficient users renting out idle computing power on their personal computers to the Golem Network, a “crowdsourced supercomputer” is created. Users who rent out their computing power receive GNTs from users who make use of this supercomputer.

When product-market fit is achieved and positive network effects kick in, users making good use of the supercomputer for their projects (like film-makers rendering 4K videos or scientists running simulations for their experiments) will attract even more users to rent out their computers to the cloud in exchange for GNTs. Users of the supercomputer benefit from gaining access to a powerful cloud computing solution at a relatively low cost, and renters benefit by gaining an income stream for unused computing power on their personal devices. All participants of the network receive positive “network participation value.”

What about the developers of dapps?

Future of blockchain: Utopian or dystopian?