[Note: below is the Preface to Great Chain of Numbers]
With the help of many members of the community, I have written this short book for beginners, entrepreneurs and risk-takers who – having heard of a bitcoin or cryptocurrency, but knowing little about it – want to understand how algorithms can constrain governance and transfer value in a consensus-driven, voluntary manner.
Trustless asset management tools built on top of a cryptoledger such as Bitcoin or Ripple (which are tamper-proof) could not only reduce fees and redundancies in the developed world but also empower those in the developing world who are more easily marginalized as they lack political capital (guanxi).1 Cryptoledgers could also help governments and non-governmental institutions keep track of internal assets and reduce the barriers to financial services, leveling the playing field and allowing individuals from all walks of life to actually codify and manage scarce goods and value that they currently own in a more secure manner.
From securely automating parts of the financial industry (e.g., back-offices) to lowering transaction costs of international trade, this new type of mathematical tool – cryptoledgers – can be applied to many new segments and markets, some more obvious than others. For instance, in January 2014 I was interviewed by Donald McIntyre who asked me why I was interested in cryptocurrencies and smart contracts.2 I explained that there are additional use-cases for using cryptoledgers to track property titles and contractual agreements that could be utilized not only in the developed world but also in developing countries like China.
While there are a number of analogies comparing the significance of these tools with historical equivalents – from railroad infrastructure, to operating system platforms – at their core decentralized applications like Bitcoin and its progeny have the potential to impact virtually any industry that is integrated with the internet. And the insights from experts, entrepreneurs, investors and developers below illustrate many of the other uses that cryptoprotocols can provide and gives readers a foundation to build from and to explore.
There will likely be challenges and hurdles along the way, from embarking on educational outreach beyond early-adopters to carefully studying and complying with all the legal and jurisdictional issues of a particular instrument.
Yet there are also likely financial rewards for reducing the fees involved in remittances or providing more secure and robust mobile payments. For instance, according to Gartner, “mobile payments will top $720 billion a year by 2017, up from $235 billion last year .”3 Finding a way to build an application that provides value in this niche is just one area of disruptive potential that a decentralized or distributed cryptoledger can attempt to do without exposure to counterparty risks.
Finally, this manuscript is not an exegesis on the economic foundation or utility of cryptocurrencies. While economists were consulted, this guide is an attempt to show the potential of changing how interactions and value can be transferred and managed in a manner that could not be technologically or mathematically done until this past decade.
This is an exciting journey and one that I believe will outlive and outlast the hype and hyperbole of both its largest ideological proponents and opponents. In time some of the visions and claims may ultimately be vaporware, yet several have the potential to impact commerce the same way that the internet did 20 years ago and the PC did 35 years ago. Let me help provide you with the knowledge that was distilled and shared with me over the course of my own educational process.
San Francisco, March 2013
- Guanxi (关系) is a confluence of connections and relationships. While “knowing” the right person is always helpful in any country, the cultural and economic influence of guanxi is magnified in China. Even with the proper funding and proper forms, if you do not have guanxi with the right officials or bosses (laoban), your project may never get off the ground. [↩]
- Tim Swanson Talks About China, Bitcoin, And Smart Contracts from Newfination [↩]
- Can PayPal Beat Apple, Google, Amazon And Icahn In The Wallet Wars? from Forbes [↩]