The sole purpose for some, a useful tool for many and a carrier of value for everyone.
But where does this value come from? And what makes money… money?
To truly understand what makes something a currency, we must go back in time and witness the birth of the first money, to recount a history that spans millennia and might as well be considered a footprint to the evolution of mankind.
The first value transferred from an object to another marked the birth of the first coin — It was a coin minted in Sumer, ancient Mesopotamia and it represented the value of grains stored in the temple granaries. And this type of lending value to metals lasted for over 1500 years, until the end of the Bronze Age. But with the advent of the new weapons and piracy, a major flaw was discovered — there was no place truly safe where you can store value, so the coin had to carry it intrinsically.
So people started minting coins from rare, noble metals, such as gold and silver. By using intricate stamping and weighting to prevent counterfeiting, a complex system based on copper, silver and gold spread across Eurasia and lasted for thousands of years, until the first paper banknotes were invented.
Fast forward to 2019. We now have fiat paper (or plastic) money, scriptural bank accounts, metal coins, associated payment tools (card, mobile apps etc) and last but not least, cryptocurrencies.
Being used for so many hundreds of years to coins being minted by the state and having a seemingly “intrinsic” value, we sometimes forget that there is no such thing, only the value that we, as societies and individuals bestow upon the physical carrier of value.
By being first row witnesses to the blockchain revolution, we are reminded this simple, yet strikingly powerful truth — that there is no real intrinsic value in the strings of bits that make up Bitcoin (although resources are used to mine it). Yet, neither is in the paper used to print dollars.
The only difference is that in the case of dollars, there is a powerful state institution backing up its value, which is one of the reasons why Bitcoin, solely resting on the sentiment of the community, experienced extreme volatility, along with the plethora of coins that followed in its wake.
But this is all about to change, as a new generation of coins is slowly getting to the top of the crypto world — utility tokens, coins backed by “real-world” economy and value added to the lives of the users.
Yet somehow, we overlooked the fundamental bedrock on which the entire blockchain technology resides.
At the end of the day, even if you take communities away, even if all crypto markets would go down, there is one thing without which no cryptocurrency can exist.
And that thing is computing power. Without hashing power (which is just a particular type of computation), no trustless network could exist. But this is just the tip of the iceberg. Could anyone imagine living in the 21st century without computing power? Without laptops, without mobile phones, without apps, smart TVs, IoT devices and all the other wonders of technology?
As a civilization, we are defined by computing power. It is a path that we cannot abandon anymore, as it is truly embedded in our being.
So why not make computing power the one and true currency for the 21st century?
It is common knowledge that the top 3 traits that something must have to be a currency are Scarcity, Liquidity and Fungibility. But this is just the top of the list, the Austrian school of economics listing 10 properties (!!!) that could make something a veritable currency.
So let’s see how the facts stack up for computing power.
Scarcity. Any currency needs to be scarce; otherwise, it’s not possible to hold value and could lead to counterfeiting. Imagine assigning a value to grains of sand. Not a bright image, isn’t it? Computing power (for short, computing), is not freely available. While ubiquitously permeating our daily life, it is not free, nor could it ever be, as it involves energy and IT hardware. Nor can it counterfeited — it’s either computing or it doesn’t. There is no middle ground.
Liquidity. Liquidity expresses the assurance that no matter where you go or what you try to buy, there will always be someone accepting your currency because they also need it, and that there always be enough to buy on the market. Currently, there are roughly 4 smart devices for every human on this planet. There are billions of PCs, laptops, smartphones, servers, and the list goes on. If anything, the supply and demand for computing will only increase, as humans yearn for more connectivity, more knowledge of the world and more intelligence. Computing power will never be out of fashion.
Fungibility. For a perfect currency, any two units of it must be exactly the same. In the past, this could have been a problem for computing power, as there were many programming languages, data structure, hardware configurations etc. This has changed with the apparition of the container technology. We can look ahead at a future in which any program could be run on any given configuration, regardless of OS or hardware specs, especially if we are talking about distributed apps (DAPPS). As such, computing power could be seen as a set of perfectly fungible and atomic resources that could support any process or application.
Portability. Carrying the holder of value from point A to point B was historically an issue when we were talking about heavy gold coins in a pouch while crossing a dark forest :) However, nowadays, distributed ledgers can keep track of computing processes using specialised consensus algorithms. “Carrying” the proof of offering your computing power to someone could be done automatically by the network, without any worry that the use of your resources could go unrewarded, and even more, without any worries that anyone can tamper with the records.
Durability. Building upon the previous point, distributed records are notoriously hard, if not impossible to destroy. Such is the beauty of the distributed ledgers. Regardless if a node leaves the network, or if it tries to maliciously forge the records, the network will maintain the order through a measure of internal resistance called the Byzantine Fault Tolerance. As such, records of computing power usage on blockchain are very durable.
Divisibility. Cutting down coins to a chip was never an easy task. But for digital, distributed records, the task couldn’t be easier. Just set the parameters to accept 9 decimals and you can easily have a billionth of something. But sometimes, you don’t even need that, as in the case of computing power. The processes that usually run in a computer use millions or more operations per second. Defining the scale is all it takes not to ever need sub-units.
Malleability. The opposite of divisibility, malleability is a measure of being able to combine small pieces into a large one for practical use. Needless to say, sending 1 token of computing power or 1000 of them hardly makes any difference. As for the computing power itself, we have a name for the structured sum — a working, practical application, bringing real economic value for its user.
Recognizability. In the old days, coins were minted in order to make them recognizable and to transfer the trust from the emitter to the user. The metal itself was horrible at this task, as experts were needed to evaluate the purity. On a blockchain, a transaction is a transaction. Any wallet from the network would immediately “recognize” the token and it’s value.
Transferability. In the complex economy that we live in, money changing hands was always a tricky business. Not the case for a decentralized market of computing power. You have an excess of it, I have a need. I deploy my app on your resources and I pay for the service. And all the data of our transaction is stored on the blockchain, with the entire world as our witness. Never been easier.
Security. The advent of cryptography brought new standards in security. Blockchain as a medium of transferring and storing funds is perhaps the safest medium there is. It is true, some may argue that the value of the funds fluctuates a lot, depending on how the token is tethered to real-world value or not. Others will point to (centralized) exchanges getting hacked. Or even to the looming threat of the quantum computers, able to attack any encryption. But the truth is that in terms of security, blockchain technology is one of the safest ways of transferring value. And that value can easily be computing power.
Besides the above-mentioned traits, there is another important factor to be taken into consideration — nowadays, computing power is notoriously underused, on average 40–60% of the resources in a data centre being idle at any given time. A global market of computing power would lead not only to the birth of computing as a currency but also to a radically more efficient allocation of computing resources, leading to cheaper IT services (for everything — hosting services, running apps etc).
This will also create a more ecologically-friendly computing-based economy, as any KWh of energy used by a computing device will lead to real economic value, not just idling on standby, or worse, crunching numbers just to spew a hash, as PoW does.
This global marketplace of computing power is the vision of SWAZM, a blockchain start-up that is developing a turnkey IaaS solution, custom-made to deploy and scale up distributed apps. By leveraging on the bleeding-edge performances of our technology, we hope to go beyond serving as the foundation for future blockchain projects and to create a worldwide marketplace for computing power.
We look forward to a future where developers could deploy their innovative distributed apps on a low-latency, indefinitely-scalable network, one that could serve hundreds of million users in the same time; To a future where computing resources are fairly and efficiently used and to a world where computing power is an accepted currency, truly embracing mankind’s position in the Age of Information.