The Internet’s Industrial Revolution

Key Points

  • “…the Division of Labour allows people to improve their skill sets and save time and resources which results in technological innovations.”
  • “Polkadot enables the specialization of the internet through three of its capabilities: parachains, a relay chain, and chain bridges.”
  • “…a developer team can be entirely focused on building their decentralized finance (DeFi) platform rather than the platform’s security that allows for its safe utilization.”

Adam Smith was a Scottish economist and moral philosopher most widely known for his book An Inquiry into the Nature and Causes of the Wealth of Nations aka The Wealth of Nations. Published in 1776, the book catalogs 17 years of observation of the Industrial Revolution (1760-1820) and highlights several economic concepts, one being the Division of Labour. In short, the Division of Labour is the separation of tasks in an economic system so that participants may specialize. This is brought about by systems of trade which include the rule of law, a medium of exchange, banking infrastructure, etc. The impacts of this concept as described by Smith are:

“The increase of dexterity in every particular workman; the saving of the time which is commonly lost in passing from one species of work to another; and the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.”

In a more modern vernacular, the Division of Labour allows people to improve their skill sets and save time and resources which results in technological innovations. Today, the internet is beginning to experience its own industrial revolution via the creation and implementation of blockchain technology enabled layer 0 protocols, namely Polkadot.

Polkadot enables the specialization of the internet through three of its capabilities: parachains, a relay chain, and chain bridges. This is the part where I could subject you to highly technical jargon and you smile and nod. However, I am a benevolent crypto blogger and will spare you from this fate. Therefore, I will briefly discuss each of these capabilities that is in no way exhaustive.

Parachains are standalone software architectures that provide a common set of backend protocols for security and scalability purposes. Blockchains outside of Polkadot, such as Acala, save development time and resources by connecting to them. However, not any blockchain can request to plug into a Polkadot parachain. A process called a parachain slot auction requires that prospective blockchains bid for the opportunity to win this temporary privilege. The key word being temporary since parachain occupancy is not permanent, but rather a fixed amount of time up to 24 months. This implies that blockchains must reenter a parachain slot auction once their current parachain lease period is coming due. This is to prevent stagnant or underperforming blockchains from remaining in the Polkadot ecosystem and thus preserving its innovative nature. The winning bids for parachain slots on Polkadot have yet to be realized, however on Kusama, Polkadot’s sister blockchain ecosystem, parachain slot auction winners have paid up to $186M worth of Kusama tokens for them. Clearly, blockchains and the companies that develop them recognize the importance of being able to save time and resources as they prepare for Web 3.0.

The next capability is the Polkadot relay chain. This is the main Polkadot blockchain that every parachain is connected to and where transactions on these parachains are finalized. The fundamental purpose of the relay chain is it allows parachains to send data between one another using a common language format called XCM. In other words, the relay chain translates what is being said between two or more blockchains. The desired goal is for blockchains to trade data with one another seamlessly without middlemen or developing this extremely complex capability themselves. The nature of the relay chain’s network effect will magnify the necessity for missing complementary specializations and push the standards for incoming/renewing parachain auction participants higher and higher.

The final capability that enables internet specialization are bridges. Much like the Polkadot relay chain,

“a blockchain bridge is a connection that allows the transfer of tokens and/or arbitrary data from one chain to another. Both chains can have different protocols, rules and governance models, but the bridge provides a compatible way to interoperate securely on both sides.”

In comparison to the relay chain, bridges connect blockchains outside of the Polkadot ecosystem rather than ones within it. Therefore, bridges enable Polkadot’s parachains to be interoperable with more mature blockchains that may not be interested in becoming a parachain themselves such as Ethereum, Bitcoin, or Solana. Additionally, this makes parachains all the more appealing since developer teams no longer need to budget time and resources towards the creation of these bridges.

While Polkadot has many more capabilities and features, it is clear to see that the above mentioned three have the potential to usher in the Division of Labour amongst blockchain enabled technology and in turn enable them to specialize. This begs the question, what impacts will specialization have on the next generation of the internet commonly referred to as Web 3.0?

To answer this question, I have devised three predictions for the coming internet industrial revolution.

The first is rather straight forward and mirrors Smith’s beliefs which is, the rate of technological innovation will in part increase, both inside and outside of the web. This comes from more time and resources being spent on solutions themselves rather than what supports them. In the words of Smith,

“when the whole force of the mind is directed to one particular object, as in consequence of the division of labour it must be, the mind is more likely to discover the easiest methods of attaining that object than when its attention is dissipated among a great variety of things.”

For example, a developer team can be entirely focused on building their decentralized finance (DeFi) platform’s features rather than the platform’s security protocols. The second and third order effects of this are the faster deployment of blockchain enabled technology, rampant proliferation of that technology into non-web-based business models, and greater value generation for customers.

The second prediction, is leaner and more dynamic company structures. Building off the previous prediction, companies could be task organized to purely innovate and maintain their products and services. This leads to the likely scenario of eliminating support roles to a greater degree than the current trend of lean teams augmented by AI/ML. To continue with the previous DeFi platform example, the company would eliminate all network security staff entirely rather than keep a lean team paired with AI/ML solutions like we observe today.

The final and most abstract prediction is the genesis of decentralized metaverses. As opposed to centralized metaverses, such as the one being proposed by Facebook, decentralized metaverses will not have a central governing authority acting as gatekeeper to the digital environment. Rather, they will evolve based upon the needs of their inhabitants and allow for seamless functionality between the blockchains that construct them. However, it is important to remember that digital borders will be blurred due to bridges and the future result could be a multi-metaverse comprised of both centralized and decentralized ones. In fact, a recent partnership between Facebook and a Polkadot project called Pontem may be hinting at this exact outcome.

Bustle Rack

https://oceanprotocol.com/

https://opensea.io/

https://youtu.be/6p717UMLpxM

https://twitter.com/CryptoDiffer

https://twitter.com/polkadotnews

11 comments

  1. Adam Smith would be proud of this post! I really like the comparison between the specialization of work and Blockchain, in particular Polkadot. I find Polkadot’s features of Parachains and Bridges very interesting, in particular the fact that parachain occupancy is not permanent. If there’s anything I’ve learned the past couple of weeks, it is that I need to know more about Blockchain!

  2. For me, this blog post finds a delicate balance between explaining new topics in an understandable way without simplifying them so much they lose their value. I found the parachain auction element fascinating, and appreciate its purpose. Though I am not as knowledgeable, I do agree with the connection between the division of labor and web 3.0 allowing for more specialization within organizations. Looking 10-20 years in the future, what kind of class do you think will be taught to students in higher ed that will prepare them for this new technology?

    1. It is tough to think of a titles, but I think classes will cover how to identify blockchain ecosystems based on traditional business models, how to structure your Web 3.0 based business, how to strategically identify and collaborate with other Web 3.0 based businesses, marketing in a metaverse environment… I could go on, but those are the ones at top of mind.

  3. This semester, I am learning about blockchain technology for the first time and am finding the concept of layer 0 protocols fascinating. It appears Polkadot and its competitors are beginning to change how we view technology for the better. Specifically, I love the idea of a decentralized metaverse, though I will admit I need to do much more research on this topic. But from my little knowledge, the idea of having decentralized online communities sounds exactly what the internet was made for. Excited to see what the future holds for this space.

    1. Happy I got to be a part of your learning process this semester!

  4. Being new to many of the topics you’ve covered this semester, I get a lot out of the diagrams as they provide a clean way to visualize everything so thank you for including those. Parachain slot auctions are what piqued my curiosity the most within your post and as I did a bit more research I was really surprised to read that there are currently only 100 parachain slots. I was expecting far more. This had me thinking about the duration of each contract and made me wonder if some sort of subleasing market will come out of this if auction winners are able to extract the value needed from the parachain before their contract lapses. Under this format, I can absolutely see how we’re watching a new division of labor unfold which is exciting as we’ll be able to further specialize. The Grammarly extension I use for proofreading still doesn’t recognize the word “parachain”…I wonder how long until that changes.

    1. 100 is the starting number. If you dig into the Polkadot wiki it states that more slots may be added per polkadot network or entire polkadot networks may be added and interconnected.

  5. I absolutely agree with the second prediction of leaner and more dynamic company structures due to the reduced risk companies would be responsible for, if the layer 0 protocols are able to provide such a level of security. In the world of lean and agile development, being able to completely subtract security risks from the equation would have an exponential increase in performance and output. The idea as a whole is still very unclear to me, as I’m sure decentralized security protocols typically should be to non-experts, but if it is able to provide a pretty universally accepted layer of security then I would not be surprised if this massively incentivizes people to support Web 3.0.

    1. Listen or read material put out by Moonbeam Network and its CEO. He does a great job of articulating the benefits.

  6. You had done a fantastic job explained something that, before I took this class and watched your presentation, I couldn’t wrap my head around. This blog is technical, sophisticated, and you were able to deliver it in a way that didn’t intimate a nontechnological reader! Great work!

  7. Thanks for the tweet directing me to this post (I’d missed it first time around.) My head is spinning a *little* slower after reading through this the first time… I do have to read through it again and that by no means is a critique — it’s very well written, but I’m still just starting to wrap my head around blockchain. I definitely need to take that blockchain class!

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