Is Crypto Like The Early Internet?
16 January 2024
Welcome, and thank you for being part of the MyZucoins community! Let's get into an interesting piece of crypto, finance, or tech news to stay ahead.
Jack Niewold's essay provides an enlightening comparison between the early days of the internet and the current state of cryptocurrency.
His insights are backed by his father's experiences as a computer science pioneer during the internet's infancy.
This comparison offers a glimpse into the potential trajectory of cryptocurrency by reflecting on the internet's evolution.
In the 1970s and 1980s, the internet was a mix of isolated networks, each serving specific sectors like corporations, banks, and educational institutions.
This scenario is reminiscent of today's public ledger technologies like blockchain and Splitchain.
Both the early internet and blockchain share key characteristics: openness, resilience, decentralization, and permissionless access.
This means they were (or are) accessible to everyone, robust against individual failures, not controlled by a single entity, and open for anyone to join.
Niewold highlights an often-overlooked fact: the significant role of the US government in the development of the internet.
This point challenges the common perception in the crypto world, where government involvement is frequently minimized or disregarded.
It's a reminder that governmental and institutional contributions can be crucial and beneficial in technological advancements if utilized well.
The history of internet protocols, particularly the now common network communication protocol known as TCP/IP, sheds light on possible future trends in crypto.
Initially, the internet saw a plethora of protocols competing for dominance.
Over time, TCP/IP (and another called UDP), emerged as the most common standard, much like how certain ledger protocols might eventually dominate the crypto space.
This historical parallel raises questions about where value will accumulate in the crypto ecosystem.
In the internet ecosystem, different kinds of businesses managed to build successful cashflows at each part of the software stack.
- On the infrastructure level: Cisco, Juniper Networks, 3Com, Alcatel, Ericsson, etc
- Tools for protocols: Sun Microsystems, Oracle, NVIDIA, Taiwan Semiconductor (TSMC), Apple, Microsoft, etc
- Apps built on top: Facebook, Google Search, Gmail, YouTube, Amazon, Twitter (now X), Tiktok, Microsoft 365, etc
The Dot-com bubble's burst can be used as a historical comparison for potential shake-ups in the crypto market.
This period of 'creative destruction' was essential for weeding out speculative ventures and paving the way for truly innovative and valuable projects.
The crypto industry has gone through several similar cycles at a rapid pace, leading to consolidation, maturation and then back to experimentation.
Niewold also discusses the time factor in technology evolution.
His father's view of today's crypto entrepreneurs as relatively young suggests a longer period of development and growth for blockchain technologies.
This perspective emphasizes the importance of patience and a long-term view in understanding and participating in the crypto sector.
Many hard problems need to be solved in the crypto industry, just as there were (and continue to be) improvements made to numerous areas of the internet.
The role of iconic figures like Mark Andreessen—a pioneer of the early internet and now a significant crypto investor, symbolizes the link between these two tech revolutions.
Andreessen's involvement, through his venture firm A16Z, reflects the growing recognition and interest in crypto among experienced tech leaders.
This support suggests that the crypto world might follow a similar transformative path as the internet.
Understanding the history and evolution of the internet can provide valuable insights into the challenges, dynamics, and potential future of the cryptocurrency world. Read more here.
How Is Splitchain Solving Industry Challenges To Help Expand Crypto Uses?
The analysis of Jack Niewold's "Is Crypto Like the Early Internet?" offers insightful parallels between the developmental trajectories of the internet and cryptocurrency, and it's here where the potential of Splitchain, particularly using its native Zucoin token.
Splitchain is positioning itself to address several key issues in the cryptocurrency market, drawing lessons from the evolution of the internet and the traditional blockchain industry.
Scalability And Efficiency
A core challenge in the cryptocurrency space, much like the early internet, is scalability.
Traditional blockchains, while groundbreaking, have encountered limitations in handling increased transaction volumes, leading to slower processing times and higher fees.
Splitchain addresses this by detaching from the conventional block-based structure, moving away from the current structure of blockchains themselves.
Both Splitchain and blockchain are kinds of public ledger technologies, but as regular readers will know, Splitchain takes a very, very different approach.
Splitchain allows for more transactions to be processed in parallel, enhancing scalability and efficiency, much like the transition from dial-up to broadband internet.
Some newer blockchains, like Solana and Sei, also do this, but they do so using a proof-of-stake (PoS) model, where a smaller group of validators process transactions, provided they put up some coins for collateral.
Ethereum switched to this model as well, back in September 2022.
Historically, this has led to centralization concerns, due to the higher barrier to entry and the concentrated group of network nodes processing transactions.
Splitchain, due to its policy of no in-built transaction fees and lower network requirements, means more people will be able to participate in the network when its software is open-sourced.
The more people participating means more decentralization, echoing the principles of the internet.
Decentralization And Security
As we touched on above, the ethos of the early internet was decentralization – a feature that is also foundational to cryptocurrency.
However, as blockchains grow in size, they can become more centralized, as fewer entities can afford to run full nodes.
Blockchains get heavier and slower as more people use them.
Splitchain counters this trend by maintaining a decentralized system without compromising on security, a balance that mirrors the internet's growth while retaining its core principles.
The Splitchain network's primary purpose is to cache data that peers have already processed.
Also, the network typically caches just the last two transactions a user does on the public ledger.
This is done so that after a wallet app is closed or a person loses their internet connection, others whom they've transacted with can still verify those original transactions.
Compare this with blockchains, which keep a history of every transaction ever done, on the public ledger itself.
Blockchain wallets also send all tasks to the validator node network for processing, to be added to the next "block".
Blockchain wallets don't process much themselves.
This reduces decentralization and increases the odds of centralized censorship.
Inclusivity And Accessibility
Just as the internet evolved to become more user-friendly and accessible, Zucoin aims to make cryptocurrency transactions more inclusive.
By improving transaction speeds and reducing costs, Zucoin makes it feasible for a broader audience to participate in the crypto economy.
The Zucoin wallet app simplifies interactions with the Splitchain network.
The wallet is also built as a Progressive Web App (PWA), which offers most of the features of a native system app, but allows it to be openly distributed on the web and not placed on app stores—an extremely important factor for self-managed digital assets.
Democratization of access is reminiscent of the internet's journey from a niche technology to a global phenomenon.
Remember that during the Dot-com bubble, many mainstream media outlets as well as prominent leaders called much of the internet a scam, for example:
- Paul Krugman: Nobel Prize-winning economist Paul Krugman famously wrote in 1998, "By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's."
- Clifford Stoll: In a 1995 Newsweek article, astronomer and author Clifford Stoll was highly critical of the internet, questioning its potential and utility.
- Ken Olsen: The founder of Digital Equipment Corporation (DEC), Ken Olsen, reportedly said in 1977, "There is no reason for any individual to have a computer in his home." While this isn't directly about the internet, it reflects a skepticism toward new technologies such as the digital revolution and personal computing, which are foundational to the internet.
- Bob Metcalfe: The inventor of Ethernet, Bob Metcalfe, predicted in 1995 that the internet would collapse catastrophically in 1996. (These scaling issues were since solved by the industry with improved protocols.)
- Bill Gates: Though not a critic of the internet itself, Bill Gates initially underestimated the importance of the internet, focusing Microsoft more on desktop software. He later shifted the company's focus significantly toward the internet.
It's important to differentiate between those who were outright dismissive of the internet and those who were merely skeptical or slow to recognize its potential.
Also, many of these individuals later changed their views as the internet evolved and its impact became more apparent.
It's the classic early-adopter vs mature technology cycle.
Adapting To A Changing Market
The early internet was marked by rapid evolution and adaptation, a characteristic necessary for survival in the tech world.
Splitchain's systems are designed with flexibility in mind. It's a solution that is not only relevant for today's market but also poised to evolve with future demands and challenges.
We'll have more on this in the future, so make sure to subscribe to this newsletter if you haven't already.
Positioning For Future Growth
Niewold's article suggests that we are potentially in the 'creative destruction' phase of cryptocurrency, where the market is poised for consolidation, maturity and afterward, a new crop of solutions that could get attention.
Splitchain, with its ground-up design and efficient architecture, is working to position itself as a viable solution to issues present in the crypto industry, much like the companies that emerged successfully post the Dot-com bubble.
It's a system designed to be easy to use and modify for future evolutions within the industry.
Splitchain also focuses on regulatory compliance—a key factor for adoption in enterprise and government organizations, having completed investigations and audits by Austrac and ASIC—two of Australia's major regulators.
Splitchain, as utilized by the Zucoin wallet app, is not merely adapting to the current market—it's been on a long-term path to actively shape the future of the cryptocurrency space.
Drawing parallels from the internet's history, its goals are to address scalability, decentralization, accessibility, and adaptability challenges, using completely different solutions to those offered by traditional blockchains.
If you liked this newsletter, please forward it to someone who might like it too.
What did you think of this newsletter? Reply to send us feedback on what you liked or want to see featured more. There’s more coming, so stay tuned.
—
All the best,
—Rob
MyZucoins
Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.