Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
Chris Dixon’s recent piece on why decentralization matters is currently making the rounds online. It clearly explains the first two eras of the internet and how the third era is developing as we speak. Cue decentralized cryptonetworks.
I particularly like how he describes the relationship that centralized platforms – like Facebook – have to their users and to their complements (other businesses, software developers, creators, and so on).
In the early days it’s all about cooperation and doing everything you can to attract users. The platform gets more valuable the more users are on it and so the immediate goal is to build up the network effects and lock people in.
But as the platform grows, the relationship flips (top of the S-curve). In Dixon’s words, it becomes a zero-sum game whereby to continue growing the platform starts extracting data from its users and competing with its complements.
The promise of cryptonetworks is that they will do away with many of these negative externalities, but at the same time empower the kind of sophistication that we see today with centralized platforms.
The venture capitalists are circling because a fundamental shift in the architecture of the internet will mean disruption. I’m following it because I want to understand how it may apply to real estate and the built environment.
Steven Johnson has a terrific piece in New York Times Magazine called: Beyond the Bitcoin Bubble. Here is a snippet:
The only blockchain project that has crossed over into mainstream recognition so far is Bitcoin, which is in the middle of a speculative bubble that makes the 1990s internet I.P.O. frenzy look like a neighborhood garage sale.
But the point of the article, as its title suggests, is to talk about what all of this craziness could mean for the future of the internet and how, in some ways, it could be a return to what the internet was always intended to be.
The real promise of these new technologies, many of their evangelists believe, lies not in displacing our currencies but in replacing much of what we now think of as the internet, while at the same time returning the online world to a more decentralized and egalitarian system. If you believe the evangelists, the blockchain is the future. But it is also a way of getting back to the internet’s roots.
Some are calling this new, decentralized internet version 3.0. We are currently living with internet 2.0. Practically speaking though, what could this shift really mean for us?
One example that is given in the article has to do with urban mobility – a topic that is particularly relevant to this audience.
Internet 2.0 has created a winner-take-most economic model. And in the case of mobility – at least in the world of apps – that winner is Uber. But with internet 3.0 and the blockchain, this could be possible:
Just as GPS gave us a way of discovering and sharing our location, this new protocol would define a simple request: I am here and would like to go there. A distributed ledger might record all its users’ past trips, credit cards, favorite locations — all the metadata that services like Uber or Amazon use to encourage lock-in. Call it, for the sake of argument, the Transit protocol. The standards for sending a Transit request out onto the internet would be entirely open; anyone who wanted to build an app to respond to that request would be free to do so.
Cities could build Transit apps that allowed taxi drivers to field requests. But so could bike-share collectives, or rickshaw drivers.
I don’t know about you, but I find this perspective a lot more interesting. I recommend you read Steven’s article. It will help you cut through a lot of the Bitcoin noise.
Below is a keynote talk by Benedict Evans about what’s going on in tech today and what may happen in the next ten years. It covers: the growth of mobile; S-curves; Google / Apple / Facebook / Amazon (who knew Amazon had so many employees?); machine learning; autonomous vehicles/impact to cities; mixed reality; crypto-currencies; and so on.
For those of you interested in crypto-currencies – and that appears to be everyone these days – it’s interesting to hear how Evans describes their current position at the beginning of the curve: “The tech works, but what’s the use case?” This is not to say the potential isn’t huge. It is. Automated trust. Distributed and programmable money. But the future is still unclear.
Here is a brief summary of how the Blockchain is being leveraged for the real estate industry. Many jurisdictions are already using it, or experimenting with it, for their land registries.
I’ve been writing about Bitcoin sporadically since about 2013. But I really should spend more time getting deeper into this world. Many believe it will underpin the next wave of innovation in the tech space.
He starts by talking about motivation and coordination.
The state, he argues, is good at coordination, but not so good at motivation. The market, on the other hand, is good at motivation, but not so good at coordination. Money and self-interest are powerful incentives.
He then talks about how networks have improved the market, the firm, and the state. When the cost of sharing information drops, everything gets better.
But there are downsides to networks. For one, they form monopolies. Consider Facebook in social. Google in search. Amazon in ecommerce.
They also create environments ripe for censorship and “algorithmic abuse.” Everything you see in your feeds is optimized to make you respond and/or feel a certain way. The line between delivering you relevant content and deliberate manipulation is perhaps a fine one.
So what’s the solution? Decentralized blockchain networks are one exciting possibility. But they also have their own limits and drawbacks. Albert touches on those in his talk.
The video is about 24 minutes. If you can’t see it below, click here.
I haven’t backed a lot of projects on Kickstarter, but I definitely enjoy the process of discovering a project that I’m interested in and then providing a small, seemingly insignificant, sum of money to help make it a reality.
In this case, it’s a collection of two books by William Mougayar about Bitcoin, blockchains, cryptocurrency, and decentralization.
So while at first glance it may seem like these books having nothing at all to do with city building and real estate, I am betting that they will over the long term, which is why I am doing my homework today.
“The fundamental characteristics of blockchains are puzzling to consumers, corporations, governments, policy makers and regulators, because their implementation challenges centrally orchestrated trust, and enables a new kind of trust: one that is distributed, decentralized, from peer to peer, and not centrally managed by any single entity. Take any service, and add “without previous center-based authority”, and replace by “peer to peer, trust-based network”, and you will start to imagine the possibilities.”
If all of this isn’t enough to pique your interest, then you should also know that William is from Toronto. Great things come out of this city 🙂
I am very interested in bitcoin because of the underlying technology behind it – namely the blockchain. And that’s because it has the potential to be applied to and to disrupt many different industries and sectors, including real estate.
That’s why I was fascinated to learn over the weekend that Honduras, with the help of a Texas-based company called Epigraph, is in the midst of building a permanent land title registry system based on the blockchain architecture.
This is particularly important for Honduras because the country currently suffers from a significant amount of land fraud. And according to Reuters, 60% of land is actually undocumented. So the impact of a secure blockchain-based registry system could be transformational.
Obviously the impetus for Honduras doing this is to fix the broken system that they currently have in place. But there’s no reason that it couldn’t also be done in the developed world to reduce transaction costs and improve overall transparency in the marketplace.
Hopefully Honduras will show us how it is done.
If you’re curious and would like to learn more about the blockchain, here’s a short primer. Once you’ve read that, you can then check out this post I wrote talking about how the blockchain could be applied to real estate.
To start off the year, I thought I would talk about something pretty geeky, but very forward looking: Bitcoin.
I wrote about Bitcoin just over a year ago when I was first starting to wrap my head around it, but a lot has happened since then. Many of you might know that 2014 was a terrible year for Bitcoin and that its price has declined significantly (chart from Coinbase):
But does that mean Bitcoin is a flop, or that the hype has just died down a bit?
If you follow what’s being discussed within the tech community, you’ll know that there are still lots of people who are bullish on Bitcoin. But more precisely, they are bullish on the underlying architecture behind Bitcoin and something that is called the Blockchain.
I’m not going to get too technical in this post (if you want that, go here), but I do want to talk about three things (that I’ve mostly learned from the folks over at Union Square Ventures): the Blockchain, why it matters, and what it could mean for specific industries such as transportation and real estate. I promise to make it relevant at the end.
The way to think about all of this is in layers.
The Blockchain is the foundation or base of Bitcoin. It’s essentially a decentralized public ledger that keeps track of all the Bitcoin transactions. Decentralized means that not one single person or company owns the database. It’s free for anyone and everyone to see. This structure is important because it enables peer-to-peer transactions across the internet, as opposed to going through a bank or other intermediary.
But the key takeaway is that Bitcoin is simply one example of a “protocol” built on top of the Blockchain. And there are many others in the works, including a protocol for realtime ride sharing (Lazooz) and a protocol for a decentralized peer-to-peer marketplace (OpenBazaar). And so the real innovation is the Blockchain, not Bitcoin itself.
Why does this matter?
It matters because these protocols are, again, not owned by a single entity, which is remarkably different than the way most things work today. Take for example the residential real estate industry. In the Greater Toronto Area, the data that emerges from home listings and sales is owned by the Toronto Real Estate Board.
And since this data is privately owned, a lot of it remains only accessible to “members” or real estate agents. The Competition Bureau has been fighting for more openness, but the Toronto Real Estate Board obviously wants to keep as much of this data as it can to itself. Who can blame them.
But what if somebody came along and created a new protocol for a decentralized peer-to-peer home marketplace? In that case no one would own the data, which means everyone would have access to it. And that would completely change the landscape. I’m fuzzy on what this protocol would even look like, but it seems entirely possible given what else is in the works.
And if this Bitcoin Blockchain revolution does actually take place, it wouldn’t be restricted to only non-tech legacy industries. Joel Monegro of Union Square Ventures believes that “decentralized protocols” such as Lazooz and OpenBazaar (mentioned above) could even have a big impact on companies such as Uber and eBay, respectively.
I’m still trying to wrap my head around all of this, but I want to understand it and I thought you all might as well. Because even though it seems very tech right now, the implications would also be very non-tech if it turns out to be true.
