In this article, I will explain how I believe we will need 5 consecutive stages to enter a new society. One that is socially intelligent and mass coordinated by people and machines. Big drivers are cloud software, IoT, AI, virtual reality and blockchains. This last one will be at the heart of it because it will unite 3 worlds that have been emerging since the late nineties. The software world, the finance world, and the community world. I’ll describe the 5 consecutive stages as:

As you’ll read further, you’ll see why we’re transitioning from the 2nd stage (Letting the Dots Talk) to the 3rd stage (Making the Dots Smart) now. When I talk about the “dots”, I refer to “every smart asset”. That includes people, computers, chips, smartphones, smart devices, smart watches, smart homes, drones, self-driving cars, smart fridges, industrial robots. No, dogs and cats were proven to have no self-consciousness, so I didn’t include those in the list.

Blockchains will unite 3 worlds that have been emerging since the late nineties. The software world, the finance world, and the community world.

Connecting the Dots

The first phase is what we’ve been doing since the late nineties. We were creating the World Wide Web, connecting personal computers with servers, introducing GPS systems, mobile phones, MP3 players, etc.

The idea of decentralized networks existed back then already because smart people experienced with peer-to-peer networks and BitTorrent.

It isn’t until 2009 that Satoshi Nakamoto came up with his bright paper of Bitcoin, but the idea of virtual currencies existed for some time (e.g. a virtual currency called “Bit Gold” was invented by Nick Szabo already in 1998).

In fact, when e-Commerce was born at the end of the 20th century, it introduced 3 new problem domains along the way: decentralizing software, decentralizing finance and building communities in an online world. Bitcoin was a first step in uniting these 3 domains.

Today we have learned even more. We realized that decentralization is not our end goal and breaking centralized systems is neither. As long as centralized systems are doing what they’re supposed to do, we shouldn't touch them. For Jun Hasegawa, CEO and founder of Omise and OmiseGO, the goal of decentralization is not breaking or splitting centralized governance or systems. It’s more about connecting the dots in a secure and permissionless manner.

Decentralization is not so much about breaking centralized systems. (Jun Hasegawa, Twitter, June 2018)

Decentralization is more about connecting the dots. (Jun Hasegawa, Twitter, June 2018)

So we took our first step in uniting the 3 pillars a long time ago: connecting the dots.

Decentralization is not so much about breaking centralized systems. It’s more about connecting the dots.

Letting the Dots Talk

And as soon as billions of people were “online”, the inevitable followed. Social networks and messing apps became popular and the entire world started to communicate with each other when they were physically not together.

Today we spend half of our day in online communities. We have Facebook, Twitter, Reddit, Youtube, Instagram, Snapchat, Tinder. We have moderators, friends, connections, likes, followers, shares, tweets, karma, gold, stickers, and what else. We set up Telegram groups with strangers and build online relationships because we have some things in common. The entire world feels “connected”, more than ever before.

We’re streaming music and video instead of buying the physical variants in local shops, and gamification is a hot topic nowadays.

In the finance world, it wasn’t quiet either. Credit card companies and hundreds of digital wallet providers were there to give people a way to pay remotely for their goods and services.

We took our second big step. While online software and online finance were growing, we had put our third pillar into the mix: online communities.

Soon there were some new problems because of this emerging business: proving who you are and securing your personal data. Cryptography solutions, eID, multi-factor authentication, fingerprint, and FaceID are solutions that came up to tackle these problems.

Making the Dots Smart

Meanwhile, Nick Szabo and later also Vitalik Buterin found the bright idea to improve cryptocurrencies with smart contracting functionality to allow blockchains to run pieces of code.

S mart property might be created by embedding smart contracts in physical objects.

(Nick Szabo, ‘Smart Contracts: Building Blocks for Digital Markets’, 1996)

We did terrific work already to make dots smart in the last three decades. But I believe the best is yet to come. The possibilities that smart contracts bring are endless. The Ethereum Foundation wants to use smart contracts to move to an approach of blockchain protocols that have built-in programming languages. That means you can write a piece of code, upload it to the blockchain and let it “live” on the blockchain forever. The network that runs the blockchain will run the rules you define in the piece of code you uploaded. Think of what will be possible when you upload a piece of code that runs another piece of code, that again runs another piece of code, etc. Think of what will be possible when you have a Plasma layer 2 solution that enables you to run blockchains on top of blockchains. And scale to billions of smart transactions per second.

As an example, take this road network below in which 3 cars each have to go to their particular destination. The roads are just small enough for one car, so 2 cars cannot pass each other. Car 1 and 2 both have to drive to point B and car 3 has to drive to point A. Assume that each of the 3 cars has knowledge of the roads but not of the other 2 cars. What would happen? All cars will take the fastest route and get stuck at the same point.

Car 1 and 2 both have to drive to point B and car 3 has to drive to point A. Because all cars take the fastest route, they are all stuck at the same point.

Now imagine that the 3 cars are joining a network with smart contracts. The pieces of code in the cars have knowledge of each other car and can communicate a strategy that will favor each car. Car 3 will now take another route that’s a little longer, but it’s free so all cars will now arrive on their destination without problems.

ar 3 takes another route that’s a little bit longer but it’s free. Therefore, car 1 and car 2 can drive to point B without being blocked by car 3.

Making blockchains smart applies not only to the smart objects itself. It also applies to: scaling the networks, regulating the ecosystem, solving environmental issues, bringing the technology to the mainstream audience and making it stable and accepted. This last one, for instance, means that there must be an answer to the price volatility of digital assets. Organizations such as MakerDAO will need to succeed in their solution to allow stable value and fair credit for everyone that’s using the network. Today we’re still in the middle of a transition period, where we think of the offline world as primary. That needs to change. Younger generations will need to perceive digital money as a standard and physical money as old fashioned.

Today we’re still in the middle of a transition period, where we think of the offline world as primary. That needs to change.

Start Moving the Dots

And then we need to press PLAY. In this phase, so many autonomous objects are running on the blockchain, that the network will start its own life and create a Domino-effect. Foundations released control. Networks are decentralized enough so that people all over the world have control. This means it’s not owned anymore by the founding company and 6 big Chinese mining companies. It’s owned by people of communities that are doing their piece: mining, staking, governing and securing the networks. Everyone “has a stake” in the governance and the trustworthiness of the worldwide network. Software, finance, and communities are melting together like chocolate.

A range of new technologies will arise. A guy touches his car and it will drive by itself. An entire community will make sure you can trust that. In the earlier example, imagine billions of cars communicating with each other based on a single truth that’s continuously evolving. A public ledger of cars that represent the network of cars all over the world. There, our gate to a world of self-driving cars has opened. No need for manual drivers anymore, no traffic jam anymore. As long as the network isn’t congested, it will breathe and the cars will move.

The people behind FOAM (Proof of Location) believe that the world’s collective infrastructure will rely much more heavily on spatial information. From stock exchanges to autonomous vehicles and the internet of things.

Everyone “has a stake” in the governance and the trustworthiness of the worldwide network. Software, finance, and communities are melting together like chocolate.

Watching the Big Bang

Many of the current limitations in technology are there because the software part and the finance part do not yet integrate with each other. Today it takes you still 20 clicks or manual actions on Amazon to buy a book. It requires at least half of those actions for the payment and delivery flow. Authenticating yourself, choosing your delivery and invoice address, choosing your payment method, performing 7 security steps on your banking device, confirming your transaction, etc. Now imagine a web where every piece of code has functionality attached to pay for that line of code. Imagine the Internet where every touch on your favorite APP makes sure you paid for it. Imagine a road network where every single move of your car makes sure you paid for it.

Imagine the Internet where every touch on your favorite APP makes sure you paid for it.

And as Fred Wilson of Union Squares Ventures VC mentioned in his latest podcast with Chris Dixon, crypto allows the early the adopters to not only be users but also participate financially. What’s powerful about crypto is that using and investing is the same thing. Wilson said it so beautiful: “You don’t have to be a user to be an investor, and you don’t have to be an investor to be a user, but if you want to be you can be both, and it’s just as easy to be both. Facebook users make Facebook. Twitter users make Twitter. Youtube users make Youtube. It’s just not right that the users who make the product have no participation in the value participation.”

Facebook users make Facebook. It’s just not right that the users who make the product have no participation in the value participation.

As soon as every line of code has a finance part attached to it, and an entire community is supporting it, we will see an exponential effect on what technology can bring to our world. Think of blockchains as molecules and think of smart objects as atoms. By releasing control and letting the smart objects do what they’re supposed to do, we will enable an autonomous network with endless possibilities. Think of examples in IoT, AI, VR, and AR.

Blockchains will act as molecules that are at the basis of a big bang effect. The notions of software and finance combined will have an exponential effect on what technology can bring to our world.

Decentralization is not the end goal, but it’s what we needed for decades to enable both software and finance to mature. Communities are the juice between them and those are growing exponentially nowadays. When the 3 worlds unite, this will create a big bang effect, because the result will be astonishing. As Thomas Greco stated this year at EdCon, decentralization is the means, the end is mass coordination and agreement.

Decentralization is the means, the end is mass coordination and agreement.

When software, finance, and community unite, this will create a big bang effect during the 21st century, because it will result in a new society that’s socially intelligent and mass coordinated by people and machines.

Changing the World

Blockchains are not a computer science problem. Despite the very important role of economic incentivization, they aren’t about money either. Blockchains are about social coordination and machine coordination. Blockchains will change the way people and machines think about how to engage with one another.

I conclude with a statement Vitalik Buterin made at Deconomy this year:

At 10% chance of making something that unleashes a massive paradigm shift on the entire world, is still something that is totally worth educating your life to.

(Vitalik Buterin, Deconomy, April 2018)