The internet is evolving, a new wave is rising. Are you joining web3, anon?
I’ve been in and out of crypto for over 6 years now. I’ve watched it go from sub $1,000 Bitcoin to the ATH of $69,000 and back again. I saw the introduction of Ethereum to DeFi summer, NFTs and most recently a Bitcoin ETF approval. I even operated Ethereum mining rigs on GPU-laden computers.
One of the main reasons I cannot leave the crypto space is because of the immense world-changing potential I see there, and see happening in front of my very eyes.
It truly is the next version of the internet.
Let me explain.
The first internet that launched, now called web1, refers to an internet of static webpages called up through simple directories. It was basically a read-only version of the internet, for most users.
The second internet, called web2, refers to the era of blogging, Facebook and social media in general. The web2 internet is read and write. Not just consume, but create. Web2 has been quite exciting and gave rise to technological behemoths such as Google, Facebook and Amazon. I experienced web2 as I got into university. That was when I first created a Facebook account! As we know, web2 companies like Facebook benefit from the user activity and data, and make money from selling ad-space. These companies benefited from their users activity and creativity, and kept the profits all to themselves.
Web3 is a shift in the right direction. It’s about democratization. It’s about personalization. It’s about privacy. It’s about sovereignty.
Web3 is read, write and own.
It offers ownership of the companies of the internet and of the content you produce. Web3 is about decentralization, putting the power back into the hands of the people.
This is why this is one of the greatest wealth generation events in our lifetimes and of our ancestors before us. With the speed of the internet, the virality of social media and the stackable, modular nature of code, we now have innovations that move at a breathtaking pace.
The first innovation of web3
The first innovation of web3 is what we’ve been hearing most about — Bitcoin. But beneath the product/ application that is Bitcoin, is the innovation of blockchain technology.
Bitcoin is an innovation in money. It replaces the Federal Reserve and the US Dollar. This is why the US government (and other governments) are fighting it.
Through the ability to print money whenever they want, the US Government and Federal Reserve create monetary inflation, which is also called the “hidden tax”. They steal the wealth created by the people who have to work for their money. As they print more money, the amount of dollars in circulation goes up while the gods and services are still the same. This is why prices are going up so drastically these days.
The innovation Bitcoin brings is that we can have a store of value who’s supply is controlled mathematically and not dictated by any third party. It’s open and transparent, and not dictated by the whims of a select group of people. It puts the technology and control of money back into the hands of the people, as it should be.
Bitcoin achieves this through a technological innovation, called blockchain technology. This a new way of constructing databases and connecting computers to create a “super-database” or even a “super-computer”.
Blockchain technology gives certain properties to these super-computers. Properties such as immutability, ownership, pseudonymity, public access, etc. Designing different blockchains for different purposes and with different properties is how we got over 2,000 cryptocurrencies today, and continue getting more.
Look, I’m definitely oversimplifying the genius that is bitcoin here.
But as Satoshi Nakamoto, the pseudonomyous creator of Bitcoin, once said:
“If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry.”
Seriously, it is a world-changing invention that truly puts power back into the hands of the people and away from government.
Blockchains are individual (digital) economies
Because blockchains allow us to transact directly with each other, we can have an economy without the dabbling of third parties who have used the tool of money in the past to suppress human livelihood and progress.
Well, that’s not exactly true. In current finance, we need the banks as intermediaries for our transactions. There are multiple stages and involve people and thus friction and cost. There is lack of standardization and we preferential treatment for certain individuals.
In web3, the blockchain is the third party. Because it is written in code, and is run by multiple “nodes”, you can get equal access and treatment from the system. Everybody must pay a fee for the settlement of the transaction, called the gas fee or transaction fee, which depends how busy the network is at the time you send a transaction.
Now that Bitcoin has provided the basic layer on which we can transact with each other, and a place to store the fruits of our labors, i.e. a “sound money”, there has begun a proliferation of other applications that can run on this network, alongside it or independently of it.
Each network, or blockchain, can be thought of as its own economy. Just like how Bitcoin works, these different blockchains work on the same basic underlying principle, but have innovated in various ways. This gives them different functionality and thus suit different purposes well.
For example, we have Ethereum which is more of a general all-purpose internet “super-computer”. You can ask it to do certain calculations (also called transactions), and you pay for usage through Ether tokens (denominated ETH). You can build apps for it (called decentralized Apps or dApps) much like you would build apps for a phone.
We have blockchains like Filecoin and Arweave which provide storage features — like a harddrive.
We have Solana, which allows for high throughput of fast transactions at really cheap costs — to create the space for high-frequency trading, like a Nasdaq.
Some projects are allowing users to rent out their hard-drive space on their computers for decentrailzed storage, much like you would rent out a spare room for Airbnb.
Others would let you rent out your internet bandwidth, or your processing power.
Centralised infrastructure providers like Amazon Web Services are being disrupted in real time by their decentralized blockchain equivalents, who will inevitably provide larger access to resources and cheaper costs and with greater redundancy.
It’s starting with the Financial system
The entire financial system is now being replicated in web3 form.
In the web2 world, sending money across the world involves many third parties and a significant amount of fees. Also you can expect a 3-day wait time, if you’re lucky.
In web3, you can send money across the world, 24/7, with minimal fees and nobody else knowing or questioning you about it.
Bitcoin is the money for web3, it moves in the way we internet natives expect things to move online. Though its user experience is still catching up to the ease of web2.
It’s only a matter of time. For example, you can send and receive crypto through Telegram (a Whatsapp-like app) which has a built in crypto wallet!
Legitimacy — The institutions are here
After a long battle, the corrupt financial system has yielded to the better technology that is Bitcoin and are forced to allow the institutions to create ETFs.
And while I am not a fan of ETFs, as they go against the principle of holding your own money, it still is a significant win.
It shows that the institutions recognize the safety of the Bitcoin blockchain, and the soundness of the technology as an investment vehicle for their clients.
You wouldn’t put Billions of dollars into something if you believed it could get hacked the next day. It’s taken them a long time to decide to allow this, so they’ve really done the research into Bitcoin and its ability to weather the storm.
This means we have billions of dollars in demand coming into Bitcoin now and on a regular basis going forward.
As you know, most people have money they put towards retirement and savings, which go off every month. So we can expect that a portion of that worlds savings will be diverted into Bitcoin on a monthly basis forever more.
Over time, the portion of money that people will put toward bitcoin will increase as they see it surviving and growing in price, giving them confidence in its ability to be an inflation-hedge.
Infinity / 21 million
Did you know that there’s only going to be 21 million Bitcoin coins created (mined) ever?
This is part of the ingenious design of the system. A hard, fixed supply of money.
As more dollars get traded for Bitcoin, or in the example above, more dollars flow into the pool of bitcoin, each Bitcoin becomes worth more dollars.
If we think of dollars as water and bitcoin as balloons it might make more sense. We will only ever have 21 million balloons. That’s what the bitcoin network is. But each balloon can hold an infinite amount of water — i..e it can hold more dollars, or another way to think about it is the price of Bitcoin can always go higher.
For example, the current price of Bitcoin is, lets say $40,000. The market cap of Bitcoin, is the number of Bitcoin times its price, which is about $800 Billion.
Compare this to gold, who’s market cap is $13.6 Trillion.
The price (of anything) is set by supply and demand.
As more dollars flow into the network, i.e. more people buy gold, the value of the gold (per unit) will go up. But, if you add more gold to the network, the dollar value per gold goes down, since there’s more gold to divide the dollars among.
Now, when it comes to Bitcoin, there will only ever be 21 million. So there wont be the possibility of adding more Bitcoin to the network.
However, that wont occur until 2140 or so, when the last Bitcoin ever will be mined.
You see, we only have about 19.6 million bitcoin currently in existence. Bitcoin are created, or “mined” as the computers run the bitcoin software that keeps the network running.
The network was designed in such a way that it rewards the miners — the people who run the computers who run the bitcoin software to keep this system running.
As more miners run the bitcoin software, the network becomes more secure but harder to earn a reward. People trust Bitcoin more and buy more. The price goes up and the miner rewards go up. More people want to mine. The cycle repeats.
By the way, as people use the bitcoin network for transactions, the transaction fee that is paid is sent to the miners as well.
So miners earn in two ways — block rewards (for running the bitcoin software) and transaction fees. Block rewards are the bitcoin that’s rewarded to a miner when they successfully add a block to the bitcoin blockchain.
When the bitcoin network first started, you were rewarded with 50 bitcoin for finding a block, and you could run the software on your laptop. Nowadays, you need specialist equipment that costs thousands of dollars and the block reward is down to 6.25 Bitcoin, but only for a few more months.
Also, only 1 computer wins the block reward, which comes down to luck and processing power in solving a puzzle. Most people will struggle to “mine a block” because of how competitive the network is. Now, most miners will join a mining pool where the contribute their processing power together to increase chances of earning rewards and then splitting them proportionally.
The bitcoin reward halves every 4 years, until eventually by 2040 there wont be any bitcoin rewards for blocks and miners will have to earn solely from transactions fees. The idea is that by then, more people would be using the network and thus transaction fees would be much higher and be able to compensate for lack of block rewards.
Well, the next halving is about 3 months away. And with it, marks a move upwards as the amount of bitcoin coming into circulation halves.
Lets say a billion dollars comes in every month from the ETF to buy bitcoin. Currently, about 27,000 Bitcoin are mined every month. However, in 3 months that’s going to change to 13,500 every month. Yet the amount of dollars coming in for it will probably be even higher than today.
What’s going to happen, you think?
As the crypto degens (short for degenerates) like to say. “Price. Go. Up.”
Get in early
This is why you need to get in early, and you need to get in now. This is not a space that’s going away any time soon.
It’s the future.
And while its too late to start a web2 Amazon, since that spot is taken, there is still the Amazon of web3 that is yet to come.
And not just the next Amazon. The next TikTok, Instagram, Shopify, Goldman Sachs, Microsoft, etc. Truly billion dollar companies.
And also, new kinds of companies that haven’t existed before since we never had blockchain technology.
Some people will build these companies, and many people will invest in then, and a lot of people will make money from it.
Why not you?
All it takes is some time to get up to speed.
Think of it this way, in a year from now 12 months would have passed whether you learnt about crypto or didn’t.
But if you did learn about crypto, you most likely would be wealthier and most definitely would be more knowledgeable about an important, growing field.
To use a surfing analogy, you either wait for the wave of the future to arrive and overwhelm you, or you jump and paddle into it, catch it early before it breaks and then ride it out past the suckers that weren’t fast enough.
During the last bull market, when Bitcoin hit $69,000, people messaged me saying they wish they had bought it when I told them about it many years prior.
Today, it’s below that price at ~$41,500. Sure, fluctuations of $10,000 even $20,000 seem scary today. But they will seem small when Bitcoin is 10 or 100x its price today.
In 5 years from now, you will wish you had bought more. In 50 years, your grandkids will ask why you didn’t keep some for them.
Crypto is only going to become a bigger part of the world.
The question is, will it become a bigger part of yours?
Hey, Karmsheel here. Did you like this piece and want to learn more about crypto, entrepreneurship and web3?
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