It’s been five months since I got involved with Swarm and boy, that seems like a lifetime already. It’s incredible how fast things move in the world of crypto but I guess by now this is common knowledge.
During these five months I have been fortunate enough to be around and work with the masterminds behind Swarm. I’ve had the pleasure of hearing Joel Dietz speak at CoinAgenda and had long conversations with Philipp Pieper, Jazzwall Sharad, Kate Kan and Chris Eberle about the platform’s potential for disruption.
The insights I’ve drawn from the time I have spent contemplating about Swarm and its many functions has convinced me that Swarm is perhaps the most underrated crypto project out there and I often wonder if people who know of Swarm, actually understand all the implications of a fully decentralized, A.I. driven investment platform which enables the tokenization of real-world assets. Not to mention the possibility of self-governance through liquid democracy. Yes, I know, this is a mouth full.
The more one understands each piece of the complex Swarm puzzle, the clearer it becomes just how revolutionary the platform is.
When I first heard Joel Dietz claim Swarm represents the Third Wave of Blockchain, I thought it was a marketing gimmick. Today I am convinced he is right and I will try to explain why.
The Blockchain Evolution
Yes, Bitcoin is incredible, and the technology that enables it is revolutionary. There is no doubt in my mind that the concept of a decentralized ledger is one of the most disruptive ideas humans have conceptualized and transformed into reality.
Stated simply, Bitcoin’s blockchain records financial transactions in a distributed, decentralized ledger that is maintained by the network. At its core, the blockchain does not get simpler than that.
I like to compare bitcoin’s blockchain to unicellular organisms. They are very specialized and limited. But without them we would not have the vast array of multicellular organisms we encounter today.
Unicellular organisms can’t do much; they have a memory and they reproduce. Pretty much like Bitcoin. They are very “simple”. This is what I now understand to be the “First Wave” of blockchain, or as I like to call it, the dumb blockchain.
Most of the blockchains in the first wave were very similar to Bitcoin’s—they were specialized in keeping track of a specific data type in their ledger and the only thing that changed was the datatype.
If Bitcoin is the dumb blockchain, Ethereum is the smart one. It has developed - and allowed for - smart contracts and turing complete computational capabilities.
Ethereum’s ability to process inputs in a smart contract that lives on its decentralized ledger is what makes it smart. It can receive an input and then, based on computer logic, decides how to proceed. In 2017 we witnessed a wave of smart blockchains (Neo, EOS, Cardano, Qtum, and Waves, just to name a few) and there is no doubt that the smart blockchain is here to stay. It is also more capable than its older sibling.
If we take my cellular organism analogy further, we can see how smart blockchains can be compared to multicellular organisms. They are definitely smarter and more complex than their counterparts.
This is what is commonly referred to as the Second Wave of Blockchain.
The Intelligent Blockchain.
Welcome to the Third Wave of Blockchain - the intelligent blockchain.
The more I draw parallels between blockchains and nature, the clearer it all becomes. In the same way that multicellular organisms developed consciousness and intelligence, we will find something similar happening with blockchains.
The dumb blockchains do a remarkable job in recording data and keeping them transparent and immutable. The smart blockchain can now combine and process all that data creating vast amounts of datasets. Through the application of machine learning derived from these datasets, the next generation of blockchains will become intelligent.
In an unsettling resemblance to how living organisms have developed through millions of years, we now find ourselves creating the next logical evolutionary step in the brief history of blockchain. AI-driven blockchains will soon be the norm and Swarm is one of the first of its kind. Swarm is the intelligent blockchain.
Another very interesting aspect of the new generation of blockchains, is that we are finally upgrading from recording, transferring and managing digital assets on the blockchain to actually putting real assets on the blockchain. That, coupled with A.I. and self governance, is what gets me so excited that sometimes I can hardly fall asleep at night.
If you have the most basic knowledge of Swarm, you probably consider it as an investment platform that enables varied real world investment opportunities. Some people actually think that Swarm is a fund, and just for the record, that is completely not the case.
Swarm is a platform which enables many individuals to come together and to fund pretty much anything.
If you have read the whitepaper or watched some of Swarm’s videos, you’ve probably heard about the Liquid Democracy system that will be implemented, the three tiered token model, some jazz about tokenization of real world assets, artificial intelligence and machine learning.
All those things are parts of Swarm, but Swarm is far greater than the sum of its parts.
It’s time to break Swarm down to its most basic components and see how they all fit together.
Swarm the platform
Usually, when I want to explain what Swarm is to a person familiar with blockchain, I start by drawing a parallel to Ethereum. I believe what Swarm does to real world assets is comparable to what Ethereum did to all the different single purpose blockchains that existed before it. By creating the ERC20 token standard, Ethereum enabled the mass production of tokens.
Before Ethereum, each new coin had to live on its own blockchain and it would have very limited functionality; it was difficult to create a new coin and you had to have deep understanding of how blockchains work. Now, even a person with very little knowledge of blockchains can create a custom token and tokenize any digital assets they can think of. As a result,we have seen an explosion of digital assets being tokenized through Ethereum.
What Swarm enables, by contrast, is the tokenization of real world assets with even more simplicity and ease of use than Ethereum users experience when deploying a new token.
Swarm is developing the SRC20 token standard, which is the minimum set of properties and functions necessary for the representation of real world assets on the blockchain.
You can imagine the SRC20 token standard as the basic blueprint necessary for the representation of a real asset. The SRC20 token will be an ongoing development effort, and new SRC20 tokens will be created to support the various real world assets they will represent.
All SRC20 tokens are designed to be 100% legally compliant and are considered securities, unlike ERC20 tokens which are mainly utility tokens.
Now, you might ask “Who gets to mint these SRC20 tokens?”. Well, pretty much anyone that thinks they have a good enough investment opportunity to put on the platform and it could find an appeal to the investment community. We refer to them as Syndicate Managers/Fund Operators. These individuals are responsible for bringing new assets into the platform. They could be a fund which represents many different assets or they could be a single real world object, representing itself.
After identifying and assessing the asset they would like to tokenize, syndicate managers fill a standard application form that is reviewed by the foundation. After the foundation performs its due diligence and concludes there are no irregularities or other issues, the syndicate manager is given the green light to prepare a sales pitch to the community and mint the necessary amount of SRC20 tokens required to purchase the specific asset.
This is how a new asset is tokenized in the platform. The SRC20 tokens go to what is called an initial asset offering (IAO), and if the minimum amount of tokens necessary to acquire the asset is allocated, the syndicate manager can close the offering and proceed to the next phase including triggering set-up of legal entities, deployment of capital, etc..
Tokenizing and Governing Real World Assets
Syndicate Managers will be the link between SRC20 token holders and the real world asset. It is their responsibility to create the SPV which will be legally compliant and which will acquire the asset. The Syndicate manager can be seen as an extension of the SRC20 token holders’ body — they are the active agent which can take action in the real world.
That is why governance is so important to the platform. Through liquid democracy voting, different SRC20 token holders will be able to propose ideas and express their wishes to the syndicate manager to act upon. Each asset fund will have their own community channel, exclusive to their token holders. Through these channels, investors will be able to communicate their ideas, propose what other investment opportunities they would like to invest in, and even create new funds with like minded individuals.
It is not hard to imagine a vibrant community, where many different funds with common interests get together to create even greater funds.
I can envision communities that are more inclined to invest in renewables, some that are focused on maximizing profit, others that are more interested in arts and so on.
What really gets me excited are all the new ways people will use the platform.
I can imagine different crypto communities creating a new access economy based on proof-of-stake. How would that work? Well, various crypto communities, foundations or masternodes could start acquiring real estate all over the world, with access granted to token holders that meet the minimum required staking amount.
There could be various different levels of access, for example. Members that hold only x amount of tokens would get access to less desirable locations, while holders with greater staking amounts would have access to more desirable locations.
The possibilities are not limited to access and property.
Imagine this. You’ve probably seen the magnificent story of how the Italian town of Cesana got the Foo Fighters to play there. With Swarm, any community could get together to bring a band they love to play in their town. An appointed syndicate manager would find a venue and get in touch with the band’s manager to figure out costs and logistics. The syndicate manager now mints the necessary token amount which, if fully allocated, would enable the concert to go ahead. Goodbye, Vevo, we are building concerts on demand! If this does not get you excited, I don’t know what will.
I could talk further about how Swarm will use A.I. to manage crypto asset funds based on a user’s risk profile, or how Swarm plans to use machine learning to collect investment data in order to run A.I. driven investments, and so on.
But this post is already getting way longer than I had anticipated so I will have to leave you to your imagination for now.
The most exciting thing about all this, though, is that you will already be able to invest in two funds on the 29th of January. Yes, you read me right. This means that in less than three weeks from the date of writing, Swarm’s beta version will be live.
The third wave of blockchains has finally arrived and if we have learned anything from the last two waves, it’s that you’ll probably want to ride it before it’s too late. The future is now.
Welcome to The Third Wave. Welcome, to Swarm.