It was immediately obvious to me that a ‘coin’ could be much more than that. A ‘coin’ could not only represent a means of storing wealth, but could also come to represent anything at all: an asset, a message, provably-owned data, an object in the real world, something for sale… anything at all.
I feel that this ability for a coin to represent anything at all – and the ability for Bitcoin’s scripting language to describe complex transactions secured and redeemable under a variety of user-defined conditions – is where Bitcoin’s true power lies.
The Knowledge Economy
This got me thinking: what if the blockchain was more than just a ledger of funds or assets? Could the blockchain come to represent common consensus about what its users believed reality to be at that moment? If so, could a system be created on top of the blockchain which would specifically act as a ‘knowledge mining’ and ‘consensus creation’ system, shifting part of the work required from ASICS to humans in return for quality information about the world and the beliefs of those participating in it?
Such a network would have fantastic inbuilt advantages over traditional methods of generating common knowledge about the present (for example the usd/BTC exchange rate at the moment), and would be a powerful means of discovering knowledge about the future according to its users (for example, tomorrow’s predicted usd/BTC rate).
This information, being generated as a function of the activity of all it’s users, would thus be generated in a truly decentralized manner, and not managed by any one party or group of people. Its accuracy and update frequency would reflect its usefulness and general adoption within the greater ecosystem that created it; it would, thus, become a network-generated store-of-knowledge as well as a store of value.
Conceptually, this made a lot of sense, but the hows of implementing a system like this was not immediately obvious, until I realized we are all already participating in this very activity simply by speculating on the price of bitcoin or any other alt-coin. This realization – that market speculation itself is the means to generate information – quickly led me to some groundbreaking work and a detailed white-paper on ‘decentralized prediction markets’ written by a Yale scholar named Paul Sztorc.
Predicting the Future, Defining the Present
Paul’s project, Truthcoin, takes the concept of Prediction Markets – markets where predictions about the future are traded like shares of a stock, and therefore whose speculation reflects the general consensus of its market participants – and applies these concepts to a distributed environment. The result, in theory, is the genesis of a series of ‘information marketplaces’ where the generation of distributed knowledge emerges as a function of users’ participation in these markets.
The theory is that the creation of ‘free markets of information’, driven by market forces, will lead to a renaissance of sorts in how information is generated and maintained by those who use it and need it, without constraining intermediaries between the two. Paul claims such markets could:
- End debates about the contentious issues of today, such as climate-change, heritability of IQ, effect of GMOs etc.
- Prevent anyone (even politicians, industry leaders) from lying about a target claim.
- Encourage and compensate whistleblowers.
- Provide ‘market advice’ on the relative impact of decisions on outcomes (“If we adopt X Fed policy, what effect on inflation can we expect?”).
- Provide insurance (buying and selling) opportunities for catastrophic global disasters, earthquakes, hurricane, etc.
- Allow tradable binary financial derivatives, for example on the BTC exchange rate, or the solvency of exchanges, or to create replicating portfolios of ‘real-world’ assets (gold, DJIA, BTC).
- Recreational gambling in real time, always at actuarially fair odds and low fees.
- Allow for the creation of ‘Trustless Dominant Assurance Contracts’ which allow financing of public goods such as lighthouse, roads, etc. with no counterparty risk.
The Future of Syscoin
Why am talking about this now? Because technology like Truthcoin’s is where I think Bitcoin’s Killer App lies, and where we have been and will continue focusing our attention on over here at Syscoin. As you may know, we’ve got a new service in alpha at the moment – Syscoin Assets.
Syscoin assets will allow you to create a variety of asset classes from simple tokens to convertible, dividend paying asset chains. Far from being the pinnacle of technology for Syscoin, assets will enable a series of more complex services focused on bringing exactly the kind of innnovative and novel functionality promised by Truthcoin and other forward-thinking Bitcoin 2.0 projects. That’s exciting to us, and we hope it is for you too.