Proof of X economy into the Metaverse
We, humans, have been bartering since the beginning of time & civilization. In fact, the history of bartering dates all the way back to 6000 BC. One of the first records of bartering, started by Mesopotamia tribes which was later adopted by Phoenicians. Phoenicians bartered goods to those located in various other cities across oceans. Eventually, the use of money replaced the bartering system which started with valuable gold & silver coins as means of exchange for products & services of value.
Along with the introduction of paper money, the gold currency standard was also created. The gold standard is a monetary system where a country’s currency or paper money has a value directly backed by gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. From 1944 to 1971, the Bretton Woods agreement fixed the value of 35 United States dollars to one troy ounce of gold. Other currencies were calibrated with the U.S. dollar at fixed rates. The U.S. promised to redeem dollars with gold transferred to other national banks. Trade imbalances were corrected by gold reserve exchanges or by loans from the International Monetary Fund (IMF). After 1971, during the Nixon administration, the US dollar is no longer backed with gold & eventually became fiat currency. A fiat currency’s value is underpinned by the strength of the government that issues it, not its worth in gold or silver. The proof-of-value eventually became a proof of science & technological advances, economic power & military might etc. We have essentially moved from a decentralized bartering system to a centralized monetary system backed by governments & central banks ,being tasked with the role of proof-of-value in the fiat or digital currencies that we hold.
In 2009, a white paper on peer-to-peer digital transaction using concept of mathematics, cryptography & implemented using cloud was published by “Satoshi Nakamoto”. The paper was titled “Bitcoin: A Peer-to-Peer Electronic Cash System”, describing a digital cryptocurrency with equations & logic in creating, mining & distribution of the “new” currency independent of a centralized system or software. Though not backed by gold, it is based on a distributed ledger concept backed by “proof-of-work”. Using a technically finite resource such as computing power (which is indirectly tied to other resources such as energy) to determine who can read & write to this distributed digital ledger, it encourages participants or “miners” in the blockchain to invests in more & more sophisticated hardware with ever higher computing power to execute “proof-of-work” algorithms in return of mining bitcoins. It even has a built-in “halving” concept to make sure that computing power advancement based on technological advancements over time does not create sudden higher payouts. Fast forward to today (2021), other than Bitcoin, the first cryptocurrency, there are about more than 6,000 other cryptocurrencies with an estimated market capitalization of 2,29 Trillion USD dollars (at the time of writing). You can checkout the real-time market cap at https://coin360.com/ . The trust protocol in cryptocurrencies enables participants who may not necessarily trust each other can engage with each other with confidence that a distributed network will verify and authenticate data shared between them. It won’t be long before we see blockchains being implemented across multiple industries including finance, healthcare, education, logistics, real estate and countless others. Even though, Bitcoin (BTC) has almost 50% of the total market capitalization, the energy resource consumption of “mining” hardware used in it’s proof-of-work is considered not environmentally friendly. For example, the annual energy consumption of the Bitcoin network is 145.21 TWh same as the energy consumption of Ukraine or comparable to the carbon footprint of the whole of Israel https://digiconomist.net/bitcoin-energy-consumption/ . Thus more & more emerging cryptocurrency technologies are introduced to the market to sort of alleviate some of the shortcomings of Bitcoin & also to address other applications besides being just digital money. Powering the distributed ledger technologies or blockchains of these other cryptocurrencies are “proof-of-work”, similar to what is used in Bitcoin to proof-of-stake (BNB, ETH ), “proof-of-capacity” (Chia) & “proof-of-location” (HNT) etc. as part of the consensus mechanism or “mining” process.
Despite the controversies & clampdowns by governments & central banks, interests in cryptocurrencies & the application of the distributed ledger technology driving it , is at an all time high. Other than a “store of value” or digital money , cryptocurrency technology is used in executing smart contracts, digitization of certificates, land titles etc. to the internet-of-things. Autonomous cars or drones can execute mini-transactions to purchase energy from a charging station to packages equipped with IoT chips, purchasing services from autonomous robots to move from warehouses to consumer’s homes. Some of the services & businesses like Amazon Go “cashier-less” shops are already adopting IoT & blockchain technologies.
Distributed Ledger Technology(DLT) enables peer-to-peer IoT devices transactions & decentralization, creating a new economy by itself. Trade & economy can happen between objects or “things” & infrastructures without any human interaction! With the on-going pandemic & the need for social distancing, the reality is , such contactless services & transactions can augment our everyday lives. Furthermore, the economics can be scaled up exponentially with just additional coding & no longer limited to population growth.
One of the many new concepts driven by cryptocurrencies is NFT. A NFT or “non-fungible token” is data added to a file that creates a unique signature. Assets that only appear in the internet such as a video file, digital art or event 3D digital designs etc. can encrypted & immutable. In February 2021, the Nyan Cat meme sold for $600,000. Twitter’s founder Jack Dorsey auctioned off his first Tweet for $2.5m as an NFT. Another possible application is to prevent the spread of “fake news” where each tweet, social media posting or picture will contain a unique signature that can be traced to the original source of the posting. This would at least discourage people from blatantly forwarding & posting material without much thought on the consequences. Also, programmers, artists & anyone creating digital content can easily monetizes their work as well. The issues of “Deep Fake” can also be address as we can easily determine whether a video stream is from AI or from actual hardware.
Proof of X economy
We are just scratching the surface of the potential of a Proof of X economy. As we try to go back to business & manage the pandemic caused by covid-19, we will need to address more proof-of-X issues. From creating trust among consumers & business owners on who is fully vaccinated & who is not , to allowing & reducing risks in travels & sharing of data anonymously among nations such that economies are able to survive & thrive in a post pandemic era & promote sustainability initiatives. Other use cases to balance resources usages such as billing of energy, water, clean air, computing power, etc. tied to a sustainable crypto similar to carbon credits concepts but more grainier fine tuning to the zero carbon calculation concepts etc. With IoT, AI & Data, everything & anything can be monitored & co-related, balancing the cause & effect to achieve equilibrium & a sustainable earth.
The Metaverse & the 5th Industrial Revolution
Recently, there is growing interest in the “Metaverse” concept with even large tech companies like Facebook (Now called “Meta”) , concentrating their focus & major investments in it. What is the metaverse? It’s a combination of multiple elements of technology, including virtual reality, augmented reality and video where users “live” within a digital universe. Not unlike what is depicted in sci-fi movies such as “Ready Player One”, where you can jump into a virtual world & play as a “Hero” battling monsters & earning points & treasures that can be exchanged for NFT’s or cryptocurrencies. The integration of cryptos & NFT’s enables the proof-of-value within the Metaverse & the reality, creating limitless potential for monetization. With the “Great Resignation” & jobs losses happening due to the pandemic, people can seek work in the “Metaverse” , creating & consuming content & trading digital assets in the metaverse. The lines of the “meta” & the physical worlds are further blurred.
The global gaming industry is worth about USD 173.7 billion in 2020, and it is expected to reach a value of USD 314.40 billion by 2026, registering a CAGR of 9.64% over 2021–2026. Due to nationwide lockdown, and with people staying at home, some turn to game platforms to pass the time. These platforms are attracting millions of new visitors & users in online traffic. Video gaming trends have experienced a massive surge in players and revenue recently which augurs well for the future of the Metaverse. As more & more activities are further digitalized & moved to the internet & hypernet , will the metaverse eventually be the new way of life, work & play?
At the moment, no one knows the the final form of the metaverse will be (or whether it will be in many forms or metaverses). One application domain in the industrial IoT space is the concept of “Digital Twins”, a digital representation of a physical machine or factories or cities. Sensors collects data around a physical system & used data to model the environment of a machine , generating a precise & accurate version of it’s “twin” in the metaverse. Be it in physical dimensions, behavior & physics, this “digital twin” can be used in simulations to predict parameters that will induce failures in the machine (without actually damaging the actual machine) or environments that will give the best OEE (overall equipment efficiency) , energy savings & highest output (without building modifying physical versions of it!).
Other applications includes modeling & simulating to predict floods from the “digital twins” of cities, roads, rivers, dams etc. by tweaking data inputs of weather stations & satellite images to modeling of supply chain shortages & impacts on order fulfilments. Overall, we are still at the infancy of utilizing such concepts & technologies, but eventually more organizations & start-ups will be able to gain traction into the metaverse. What will your version of the metaverse look like?