How The World’s Biggest Computer Can Work For You

by Mar 14, 2023Articles

Articles

The most important concept to understand in crypto is the blockchain.

This is the foundation on which the whole system is built.

In last week’s Vanguard, Tom spelt out exactly why this technology is so useful.

As he said, it’s a secure and efficient way to establish trust between strangers.

“It’s a way to automate trust”.

Picture it like a game of Chinese whispers.

A message is passed from person to person, and usually, that information degrades as it goes around the table.

But if that message is broadcast to the group.

And if the information is then written down in a ledger that everyone can access but no one can edit or change, then you have the basis for complete trust in that group.

They can continue the conversation indefinitely, safe in the knowledge that there is agreement on what was said and who said it.

The world’s biggest computer

That’s the basic idea of the blockchain. It’s a ledger that keeps a complete incorruptible record of communication between strangers.

But it is more than just any message system.

The key thing is what we put in those messages.

Satoshi Nakamoto saw blockchain as a way to exchange digital money.

His White Paper for Bitcoin imagines a kind of “internet money” that would allow anyone with a digital wallet to exchange money back and forth across the globe.

It proved to be a very popular idea.

And as more and more people joined the new internet, crypto developers began to think about what else we could exchange using blockchain.

The big lightbulb moment came when Vitalik Buterin recognised that this wasn’t just about exchanging money.

It was about exchanging any valuable information that could be written as a code or simple instruction.

The instruction could be a payment: Send 0.5 ETH to this address.

Or it could be a bet: Send 1 ETH to this address if Arsenal win the Premier League.

Or it could be a rental contract, a vote, a futures contracts….or a series of thousands of instructions that allow you to run a stock exchange or a social media platform.

In the crypto world, these programs are called “smart contracts.”

And this idea proved very popular too.

Vitalik saw the possibility of a vast computer network spread out across the globe, running automatic instructions and contracts without human interference.

This global computer would have a memory: each node contained a memory of the entire history of transactions on the system.

It would have a computing language.

And this language could be used to execute all sorts of programs that humans used to do.

A $63 billion Financial System

Today, Ethereum is a thriving global network.

It is a vast global computer that is being programmed every day to do all sorts of work that used to require human intermediaries.

At first, it wasn’t a very good computer. It was slow and used up a lot of energy.

But as Vitalik and the Ethereum foundation have upgraded and developed the network, it has found a way to:

  • Reduce its energy usage by 99.95%
  • Handle 15-20 transactions per second (still slow but this will continue to improve 100X with new upgrades)
  • Support a thriving new $63 billion Decentralised Financial (DeFi) System

And that development continues…

When you think of the potential of blockchain, think of a global computer that is working automatically for us.

This is a computer that will soon support a whole new economy that will grow faster than any other economy in the world.

It is a huge computational engine that runs on gas (called Ether).

And layer after layer of new systems are being added to make it more efficient, more useful.

It’s a beast.

We haven’t seen a computing system of this scale since Google started building and buying up data centers across the world to support the fast developing internet in the early noughties.

The Key Takeaway

There is no way of telling what this computer will support.

In the Vanguard, we’ve pointed to the potential to disrupt any industry that relies on human intermediaries: lawyers, bankers, brokers.

But remember that Google’s version of the internet created search engines, Google Maps, YouTube, Facebook in a few short crazy years…

So we need to be open minded about what the blockchain will support.

Soon it might gauge the credibility of news or scientific articles.

A failing country might decide to move its financial and political system on to the Ethereum network while it gets itself back on its feet.

Maybe Ethereum, charged by developments in artificial intelligence, will start to write programs of its own.

We are still very early in this story, and those invested now stand a chance of benefiting from the greatest project that will be built in the next decade.

We’ll keep you updated on the latest upgrades and developments here in the Vanguard.

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