What's next after cloud computing?
Trevor E Hilder
In 2013, we stated that the cloud was the most significant advance in computing since the advent of the desktop personal computer. We put our money where our mouth is, by becoming an Amazon Web Servers Technology Partner and migrating all our clients’ hosting to Amazon Web Services (AWS). I also personally invested in shares in Amazon, having recognised the significance of Amazon Web Services about two years before the “experts” on Wall Street.
Time moves on, and cloud computing has become “the new normal”, with AWS and Microsoft Azure dominating the market for public cloud, Google coming a distant third and everyone else struggling to register any share of the market.
Distributed Ledger Technology
In early 2016, I started scanning the horizon to see what would become the next big thing in ICT. In February, I heard about Ethereum and started to research it. I had heard of Bitcoin years before, but thought it was idiotic (I still think that!). But Ethereum looked much more interesting. Both platforms use a blockchain to keep track of events. They are both examples of what is broadly known as Distributed Ledger Technology (DLT).
Broadly, this means that, instead of separate organisations keeping accounts in their own ledgers, then expending vast efforts to reconcile their different versions of an event, they use a shared ledger which records an agreed version as close as possible to the event taking place. The shared ledger could be private to the parties but what makes DLT more interesting is that it can be public and recorded by a network of peer computers, such that nobody controls the network and it therefore cannot be turned off.
Crypto-Currency: A New Form of Money
So why would anybody want to participate in running such a network? The answer is that these public networks include their own digital currency and the operators of the nodes that validate the blockchain get rewarded in that currency. Effectively, the validator of a block of transactions on the network gets rewarded by the issue into existence of currency which appears in their bank account (itself hosted on the network). Validators are known as miners, and Bitcoin miners get paid in bitcoin (BTC), while Ethereum miners get paid in ether (ETH).
This might sound odd, but it is really not much different to the way that US dollars, Pounds Sterling, Euros, and other “normal” currencies come into existence when a licensed bank makes a loan to somebody. Furthermore, there are currency exchanges where BTC, ETH and other crypto-currencies can be exchanged for “normal” money.
Unlike Bitcoin, Ethereum makes it very easy to write what are known as Smart Contracts. This makes it possible to define legally binding agreements in computer code, which are then guaranteed to execute, in response to suitably defined events. A classic case of this would be the drawing up of somebody’s last will and testament. When the death of that person gets registered, subject to the digital signatures of the trustees of the will, the funds would be automatically disbursed to the beneficiaries. Anybody who has been the trustee of a will would immediately see the advantage of this, although some members of the legal profession might perceive it as a threat to their livelihood!
The Ethereum blockchain has a standard contract for defining a token, known as the ERC20 contract. This makes it very easy to create your own token, which could represent anything from a loyalty card point, a share in an enterprise, to yet another new form of money.
Every new computing platform needs a “killer app” which encourages people to start using it, and therefore gets it established. For the IBM PC, the killer app was the Lotus 1-2-3 spreadsheet, which was released in 1983.
It could be argued that there is still no such app for Bitcoin, but for Ethereum, this is definitely the Initial Coin Offering or ICO. This is a method of raising funds, generally for technology startups, using a coin issued on a public blockchain, as an alternative to venture capital funding, and a subsequent Initial Public Offering or IPO.
Even though the development of Ethereum was funded by an ICO on the Bitcoin blockchain in 2014, most ICOs, since the launch of the Ethereum public blockchain in the summer of 2015, use the ERC20 contract on the Ethereum network. In the first six months of 2017, ICOs raised about $1.3 billion of funding, at a time when conventional venture capital is also pouring into the DLT field.
ICO Mania and How to Prosper Through it
In April 2016, the price of Ether, the “fuel” for the Ethereum network, was about US$10. But since the end of February 2017, it has risen spectacularly. As of 26th August, it is about US$330. Like other crypto-currencies and crypto-tokens, this price is very volatile, but anybody who bought some Ether a year ago, has seen a profit of over 3,000%.
This looks like the kind of mania associated with the .com boom and bust from 1995 to 2000. I would estimate that DLT has arrived at about the year 1993 in the evolution of the World Wide Web, which was only invented in 1989, but DLT is evolving much faster and will have even more impact.
The current mania is fuelled by a number of factors:
- Interest of major corporations in the DLT field. The Enterprise Ethereum Alliance is an important sign of this.
- Trading by speculators and amateurs, particularly in China, Japan & South Korea.
- Loss of faith in conventional fiat currencies as a store of value.
- ICOs, which currently are occurring at the rate of at least five a day.
It takes a cool head, knowledge of history and analytical skills to understand where the value really resides in this field.
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