Finding Champagne in Bubbles
The promise of the decentralised cloud
Blockchain = Venture dollars
Blockchain + Cloud = Venture dollars ^ 2
Blockchain + Cloud + IoT = Venture dollars ^ 3
Blockchain + Cloud + IoT + VR = Venture dollars ^ 4
Metaverse = Infinite venture dollars
The irony of a VC substack with both blockchain and cloud technology in the title is not lost on me, all I need to do is change my profile picture to a Cryptopunk and start tweeting about the metaverse.
It’s in even further bad taste at the height of a bull market where pixelated JPEGs are going for more than a house, houses that are even compounding at 20% per annum.
NFTs, the stock market, Dogecoin - pick your asset and there are almost certainly signs of a big bubble waiting to pop.
Reckless fiscal & monetary policy, combined with a sprinkle of irrational consumer psychology, is leading to rises in every asset price except for the ones which inflation is so inadequately measured by (CPI looks at a consumer basket of goods not alt coins).
So why bring up blockchain?
Underneath the speculation, the day traders & the downright scams, there is an incredible shift occurring in the infrastructure of the internet. While only at its infancy, it’s one that in my view will outlast many of the most popular crypto projects of today.
The decentralised cloud.
Most of the internet traffic is directed to large warehouses full of servers managed by 3-4 companies. These cloud providers take care of servers, storage, networking and virtualisation. In the process of outsourcing, we have lost control over the internet. That's why AWS can shut down servers when they so choose. Around half of all corporate data is stored on the cloud.
With this concentration of compute, has come a centralisation of power.
But things might be changing….
What if each of these functions could be managed by the internet itself?
That’s exactly what is happening.
Peer to peer networks are providing decentralised cloud services at each level of the stack.
Filecoin allows you to store files securely around the world.
Golem allows you to access computing power from anywhere.
Helium even allows IoT devices to access a peer to peer hotspot anywhere.
The infrastructure is being built to create an internet that is actually decentralised as opposed to the highly censored, permissioned Web 2.0.
Blockchains offer the perfect way to create decentralised marketplaces where nodes can offer their resources to the network in exchange for a utility token, a ledger can track what is owed between two parties without the need for trust between them.
It is exactly the type of exchange that Satoshi would have wanted, two parties who don’t trust each other relying on a distributed group consensus.
Generally, there are some common features to business models that are behind the decentralised cloud. Most offer strong incentives for people to supply their surplus resources to the network. For the demand side, they win because they can offer resources at lower prices than centralised providers, whose resources are idle most of the time. In decentralised cloud computing, you only pay for what you use.
What is the most interesting project, you ask?
The Helium project is wild. See those green dots? They are people in Sydney who have bought their own special Helium hotspots, providing coverage for one of the largest peer to peer networks in the world.
IoT devices such as lime scooters can then connect to this LoRaWAN network for a fraction of the cost of connecting to a cloud provider.
Amazingly, these people are now making money by simply having a hotspot in their room. In some cases, people have yielded thousands of dollars in passive income after a modest $300 initial investment for the hotspot.
According to Token Terminal, Helium has made USD 3.55 million in the last 30 days alone (since October 2021).
And it’s only getting started….
Decentralised is not always better…
To say that the centralised cloud is going to be completely disrupted by blockchain technology would be hyperbolic. There are many use cases where having a really large data centre in the desert is way better than a peer to peer network. For one, the decentralised cloud is not good for dynamic data that is constantly updated, public cloud will always be better for this.
But there are a lot of uses cases where it could eat the public cloud….
Take for instance, a content delivery network (CDN). I will save you the boredom of explaining what that is but basically it’s used every time you watch a YouTube video to make the video load faster.
It involves putting lot’s of small servers all over the world and then caching popular content so it loads faster than a traditional web server.
It’s big business and incumbents are billion dollar giants such as Akamai who in 2021 had a market cap of USD 17B.
But there are new kids on the block, Theta is a blockchain designed for peer-to-peer video streaming as a decentralised CDN. Anyone with spare internet bandwidth can become a video distribution node and receive rewards on the blockchain.
If you are live-streaming the latest Skepta drop, instead of the video having to travel all around the world to reach you or through a CDN that is not nearby, it can travel from your neighbour’s computer to yours.
That means Skepta streaming will be lightening fast.
The promise of the decentralised cloud is one of the least hyped use cases of the blockchain which just might turn out to be the most transformative.