What You Need to Know About Cryptocurrency, NFTs, and the Blockchains That Power Them

What You Need to Know About Cryptocurrency, NFTs, and the Blockchains That Power Them

This is the new frontier in digital widgets.

On May 3, S&P Dow Jones launched its first three cryptocurrency indexes, giving traders hungry for investments in the exciting new cryptocurrency a decoded crypto price model recognized by a respected name in financial services. Now, the ability to buy stock in these companies, despite the lack of regulation and oversight, is moving forward through special-purpose acquisition companies (SPACs) and IPOs.

Without establishing values for different cryptocurrencies, many have their value established by scarcity or demand, which may or may not be accurate measures. The open market allows these currencies to set their own values according to demand instead of being regulated by an organization like the U.S. Treasury that determines the value of the dollar. Market-driven value is a great idea, but can it be measured accurately enough for institutional buy-in? Most businesses and institutional investors are waiting for a predictable, regulated market to emerge in order to justify investing in cryptocurrency blockchain technology. As with any new technology, pioneers and other early adopters have emerged that include businesses and investors that are outliers.

Included in the index are NFTs—non-fungible tokens. NFTs are unique digital widgets that are part of blockchains like Ethereum, Bitcoin, and Devvio, and can be used to identify the owner of a piece of digital art or record any other unique type of data on a blockchain. Cryptocurrency is used to pay for transaction fees and computational services. Users can send Ether, the cryptocurrency used on the Ethereum blockchain, to other users, and developers can write smart contracts that receive, hold, and send Ether. Ether comes into existence by the validation of transactions on the Ethereum platform, through a process called mining.

A blockchain is a digital ledger of transactions that are duplicated across the computers on the blockchain. This distributed database system is decentralized, making hacking, changing, or cheating the system difficult to impossible because the data is duplicated on multiple systems while allowing for a single source of truth that exists on all computers in the blockchain. All transactions are recorded with a cryptographic signature. Bitcoin, Ether, or any measure of exchange based on this system make up fungible assets that can be exchanged as legal tender.

The DevvESG platform is a public blockchain focused on environmental, social, and governance compliance. The Bitcoin and Ether cryptocurrencies use exponential amounts of electricity to power transactions through mega data centers, while the Devvio platform uses “sharding”—a significantly more efficient consensus mechanism to spread out the CPU workload on a blockchain network in a less computation-intensive verification process. Clients create their own DevvX blockchain assets and records in a public blockchain-as-a-service process.

NFTs are a way for anyone with an interest in non-fungible items or services to be part of this growing digital currency system. NFTs are a blockchain implementation that is unique and can apply to any unique item, like a car, house, or artwork. Acquiring an NFT is like buying a domain name. In fact, buying an NFT that is a domain name may replace services on sites such as GoDaddy and Google. Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets. Goods that are similar but not interchangeable—think cars and houses—are non-fungible. Although cryptocurrencies are generally considered fungible assets, some blockchain assets are unique and not interchangeable (e.g., NFTs).

Buying Ethereum cryptocurrency, for instance, allows you to make a purchase of an NFT on the online exchanges OpenSea or Rarible. All cryptocurrencies are the equivalent of a dollar amount that can be exchanged back to dollars or bought with dollars at a predetermined exchange rate. It is yours to buy and sell and may someday be worth more than you paid for it.

The distinct construction of each NFT is an ideal vehicle to digitally represent physical assets like real estate and artwork. Because they are implemented on blockchains, NFTs can also be used to remove intermediaries and connect artists with audiences, or for identity management. NFTs can remove intermediaries, simplify transactions, and create new markets.

Any digital object can become an NFT, as long as it’s been “minted,” or put on the blockchain as a token. They’re like trading cards, if the card was digital and pointed to the URL of a JPEG. Additionally, because these tokens are represented on a blockchain that, when purchased, can often be exchanged for some amount of cryptocurrency, the tokens can be scaled to massive transaction volumes, similar to current monetary transactions occurring, worldwide.

We will see nearly all of today’s normally offline machines, from home appliances like ovens, vacuums, and refrigerators to all types of transport, become part of the Internet of Things economy, interacting with autonomous servers and decentralized applications, and advancing new digital realms like blockchain and digital assets to power a myriad of new technologies for the 21st century.

The social web, or Web 2.0, has been in place since 2005 and has resulted in a more interactive experience thanks to technologies such as JavaScript, HTML5, and CSS3, which enable YouTube, Facebook, Wikipedia, and other sites to be interactive on a scale that continues to grow, globally. Interactive content for both social networks and user-generated productions can be shared between different platforms and applications, including cryptocurrencies.

Web 3.0 is the next stage of web evolution that makes the internet more intelligent through AI and smart programs that assist users. Interfacing with systems, people, and home devices through automation enables the intelligent creation of tailored content directly to every internet consumer.

Web 3.0 unifies ideas regarding cryptocurrencies, giving average investors high potential returns. As worldwide adoption of Web 2.0 expanded markets for services that allowed us to communicate with friends in a personalized fashion, to the tune of billions of users, the winners were the Googles and Facebooks of the world. The collected data that is used to optimize ads and drive stock prices up for these companies is being driven by computer science leaders who are having the unintended consequences of influencing politics and affording governments vast amounts of data to increase their power as well. Web 3.0 gives average users more autonomy and less censorship. The decentralized nodes or shards that form the new cryptocurrency networks will create economic activity that won’t be tied to government-based stock markets. Economies will be transformed across countries to a more personalized transaction model, affording people more power over their transactions.

In the late 1980s, personal computers were tied to centralized mainframe systems and few people saw the coming decentralized world of all computers having their own hard drives as the wave of the future. By 2010, by way of the new Web 2.0, cloud computing centralized our data, once again, on servers instead of mainframes. Here we go again—as Web 3.0 puts data back in users’ systems and connects us all with the ever-growing cloud of data centers that isn’t going away, and that will connect us all in one global data set. Parallel processing occurs across a blockchain that is networked together to form clusters on the chain that verify, share, and perform complex tasks without the requirement for large, power-hungry data centers. Serial or sequential processing completes one task at a time using a single processor, using far more power to complete a task than parallel processing.

Virtualizing data storage takes us away from individual servers and PCs, and took us into a world of duplicated data that appeared on many systems, around the world, eliminating single points of failure regardless of regional disasters, attacks, or disruptions in services. Expanding social media’s billions of users to include transactional activity such as cryptocurrencies may take us to a global economy that will expand our world to truly include everyone, making us all better world citizens. That is just one small part of the promise of cryptocurrency and blockchain.

Throughout his career, Keith Gunther has held management positions at VERITAS/Symantec software as well as 3M, Fujifilm, Xerox and ARC.

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