Yesterday after chatting with someone on the other side of the world about [KOINOS](https://koinos.io/), its progress and its value against Ethereum, I received a question that resulted in a book-like lengthy answer. After all these chat messages, I realised how difficult it can be to give short condensed answers to questions touching the core of some topic. In this post, you can read the answers I gave in many chat messages. I slightly edited what I wrote yesterday to increase readability, but at the same time, I didn't change too much. You may find my answer to the question below a little bit all over the place, but such a question is (for me at least) super difficult to answer without the wider context I added. When reading the below text, note that my chat partner and I had a discussion on KOINOS value assuming Ethereum could process gazillion transactions and keep the GAS fees under control (something that is not a reality without 2nd layer chains on top of Ethereum which results in all sorts of other issues and centralisation). ### The Question What is the function of a crypto coin’s value? The obvious answer is adoption, but what applications really require blockspace/chain? ![](https://images.hive.blog/DQmU6zB1jVuMR5aQcBpZeCwpHHSwADYtPUttGJN344Jw8GF/220911%20why%20blockchain%20-%20a%20chat%20with%20keving%20wong.jpg) ### The Answer: My Attempt Am not 100% sure if I understand your question. If this is a more general question about layer 1 blockchains including Ethereum, it becomes a more difficult question to answer. But if you believe the Ethereum chain has value, then any other base chain will have value as well. However, if your question also includes the 'why value' for the Ethereum chain, as I already mentioned, the question is more difficult to answer. Though difficult, I'll try and make an attempt. **why a crypto token has value** I suppose it's like with USD and EURO, when many use those tokens, those tokens will get value. Maybe the value of the token is a representation of the money made within the ecosystem of that token, similar to GDP and the value of the currency within that country from which we take the GDP. Intrinsicly a USD or EURO doesn't have any value anymore. No gold reserve and all that backing those fiat currencies anymore, already for 50-odd years or so. However, these coins/tokens still have value. These days the USD has more value than the EURO, mostly to do with the outlook in GDP within the Eurozone and the US zone. But that aside. **why a chain like KOINOS has value assuming Ethereum can process all transaction** When we transform more and more important services to blockchains, one shall never ever rely on a single chain. One shall not even rely on a bunch of chains using the same technology. Hard forks or other types of change to the base chain may disrupt all services in the ecosystem. A security error or whatnot will do the same. At least aeroplane-like redundancy shall be built in. Uptime of the database shall be 99,9999% or even 99,99999% or higher. Some systems in an aeroplane are designed to not fail a single time within a period of 30 years of flying. Note that 30 years is considered the lifetime of an aeroplane. So basically, such a requirement says: Never fail within the lifetime of the product. None of the blockchains individually can guarantee such availability and uptime. Therefore I strongly believe in a solution consisting of a whole bunch of base chains and services on top developed such that a user can always do his/her thing, regardless of the status of a single chain. Currently, we have too many Ethereum-like chains around (same tech). Therefore we are in need of different types of chains to get to a place that I believe we must go to before chain-based databases can become successful with adoption by many businesses and many users. The key systems in aeroplanes, like rudders systems, are designed with 3 channels. Each channel is designed by a different team/company that is not allowed to have any communication with or exchange of information between each other. When software is used in the design (which nowadays is always the case, whether it be software executed by a chip or software programmed chips, like FPGA's) each team MUST use a different software compiler. A software compiler that is empirically proven to not create errors in the translation from software to machine code, or FPGA. For instance, one team uses C using a C-compiler (must be ANSI C, can't be C+ or C++ since these compilers are not proven enough). The other team uses some other programming language and compiler, and the third team may use FPGA's using yet another technology and software compiler to design and program the chip. In operation, each channel checks the other channels. When all three produce the same result, all channels stay active. When one channel produces a different result, that channel will be removed from the algorithm, automatically. This is the approach to get to super super super high availability as well as a super super super high reliability that keeps the passengers in the plain safe at all times. Am not sure how this can be converted to base and/or multi layer chains in crypto, but I wrote this to give you an inside into how super high critical systems are built. IMHO base chains, or a set of base chains together, must adhere to such super high critical principle since too much will depend on them when we scale to the mass, businesses as well as citizens. KOINOS is built with different tech to Ethereum which is what we need IMHO. That in itself gives already value to a chains like KOINOS. **why chains are required, ie why distributed databases?** Interestingly, when you believe hardly any or no services require distributed transparent databases, then whatever we do in crypto space renders to zero value. We'll continue with what we have: Centralised systems, mostly private in nature, and some lesser private in nature (government systems I mean). Those lesser private systems are in effect still more or less private since nobody outside the government itself has a proper insight into what data is held and kept and used for what services. I'm someone who does not necessarily distrust all the institutions we have in my country, from the public ones (government) to private ones (like banks, insurances, and all). As a matter of fact: I have more trust I continue to keep my EURO's safe at some centralised private bank, to when I hold my EURO's on some blockchain with some of the available crypto wallets. The security levels at banks are higher than those around blockchains. Not that chains in themselves are not secure, I think those are highly secure. But whenever one accesses such a chain, the security levels in that workflow are lower than what banks build into their systems and workflows. Added to that, when I make a wrong transaction with my bank account, I have a bank that can help me to undo such transaction. Something we don't have in crypto space. So, if you like to continue giving trust to centralised/private companies, then chains are not required at all and render the whole crypto space worthless. However, the whole idea (in my view at least) is that the data itself that is stored is more transparent and more in our control, whether the services that make use of our data may be decentralised in setup or centralised. **a use case for blockchains: real-world assets** I do see a great advantage with blockchains in recording real-world asset ownership. Like land, house, car, and whatnot. In the fiat world, we need notaries to witness a transaction. With chain-based services, we don't need notaries anymore. Just one example here. Recently I bought a piece of land on [Satoshi Island](https://leofinance.io/@edje/satoshi-island-dao-based-society-getting-ready), without the need for a notary. A huge benefit for me. Transaction done in seconds. In seconds I became the owner of a real-world piece of land. For all this, we need NFTs or at least some form of NFT. Basically, we need data entries into an immutable storage solution, such as provided by a blockchain. Next to that, some paperwork needs to be done to link the NFT to the real-world asset. For Satoshi Island, this paperwork includes the ownership of the island itself and the link between the NFT and the physical area on the island. However, those paper documents only need to be done once, after which ownership can change hands in the digital space without the need for legal paperwork and notaries. For some forms of real-world assets, also a save storage system and location need to be arranged. For instance when digitising diamonds ([Tiamonds](https://leofinance.io/@edje/diamonds-become-tiamonds-next-level-integration-between-the-real-and-digital-worlds) is an example of this, created by [LCX](https://www.lcx.com/) with its domicile in Liechtenstein). I can think of more examples/use cases for which chains can be beneficial. That said, the mass and even many peeps playing ball in crypto space, don't distrust the fiat systems, but are in crypto space for whatever reason other than to replace the fiat systems. These days, too many companies use crypto to attract money for whatever they want to create but are not transparent with what they do. That's importing the fiat world thinking into crypto, which is not necessarily the right way to go IMHO. However, it is happening as we speak. **side step: issues with current NFTs** One major problem I have with the current NFT implementations is that the NFT itself is not stored on the blockchain. Most likely it is stored in some mutable storage solution that requires a service to access it. Only the link to the NFT is on the blockchain. This needs to change. The NFT itself needs to be stored in an immutable storage solution, ie blockchain or blockchain-like database or file storage system. Also, when the service that gives access to such NFT stops, the NFT itself shall still be accessible. These days, this is not guaranteed with most NFTs that link real-world assets to the NFT. **and another sidestep: anonymity** I tend to think in the direction that the anonymity side of how crypto started, needs to be replaced by a setup where crypto wallets are linked to the real-world owner. KYC essentially. This may cause issues, since when we do that, we may not want to see this link in public space. We may not want the world to see what we own, since this can lead to all sorts of problems. However, when we start to hide our transactions and assets from the public space, we may need encrypted transactions which affect one of the other benefits of blockchains, ie transparency. I have no solution in mind for this at this point in time though. But this is a huge problem to solve. We can also continue with anonymity, but this will cause all sorts of other problems, which we can see happening on a daily bases, today. **another personal fiat/crypto service experience** Years ago I gave a convertible loan to a privately held company in the fiat space. EURO's. Transaction from my bank account to theirs. A document from them to me. A notary in the process. Fortunately, a notary paid by the Ltd, hence free to me. Last year that loan was converted into shares. Usually, this happens with an official document in which the number of shares is recorded and all. Again a notary is involved. Since it's an Ltd, a privately held company, those shares are difficult to trade since no marketplace is available for them. This is because share ownership is recorded on paper, not in digital format, ie an offline process. This privately held company decided to work together with a Dutch fintech company that created a marketplace for shareholding (and trading) for privately held companies. That service uses the blockchain to store all transactions. Nice to see. The net effect for me is that I can sell my shares or buy more through the marketplace provided. That could be a benefit, though I didn't use that feature yet and may not use that feature for a long time to come. Actually, I likely wait to exit this company when this company is bought by another company, rendering this marketplace useless for me, ie I'll not have any benefit from the availability of the marketplace. At the same time, I have shares in other privately held companies, recorded in the traditional way, with a document and without a marketplace. If you ask me which solution you like to see implemented in my next participation in a privately held company, I won't have a clear answer for you. I do trust our systems in my country, hence I have equal trust in how my shares are recorded whether in the 'old' system or in the 'new' system. Essentially the new system using a blockchain to record the ownership of my shares doesn't have intrinsic value to me, other than the marketplace that is built around it. That said, such a marketplace could also be built into the old system, when we change some of the processes, ie replacing the offline nature and notary. Basically, any system that delivers a marketplace with more or less instant transactions, requires a database. This can be an open, transparent decentralised one or a closed, private, centralised one. I would trust a centralised database as well, that's what I'm trying to say. At least in my country. When I would buy shares in some private company holding with its domicile in let's say Uganda (sorry to all the peeps from Uganda), I likely prefer to have the transactions recorded on a blockchain :) **too early to conclude** Maybe we don't find the right solutions for chain-based services. When we don't find them, crypto space will die at one point in time. However, I think it is too early to conclude. We still need to progress and see if we can make something that works across the board. Too many crypto projects are not dealing with these issues, to be honest. Too many crypto projects are not trying to solve the core issues with chain-based services in order to replace fiat-system-based services. I predict we still need considerable time before a sufficient amount of projects start to tackle the core problems we have with crypto-based solutions and services. It could very well happen that the fiat world starts to embrace chains and renders all other chains to zero value. Who knows?! It could also happen that these fiat-based companies that are thinking in the direction of chain-based storage of data, will stop at one point in time to invest in trying this to get done and move back to the world they are in now: private owned, centralised, none transparent databases. In fact, when we humans across the world are able to upgrade all our public and private held systems, services and organisations to the levels of fully trusted ones, we don't need decentralised, transparent databases. If we can trust all the centralised databases and peeps handling them, all good as well :) It could very well be that, say 50 years from now when looking back, we conclude: All this chain stuff was nice and all as an experiment, but it didn't bring anything to us. Only time will tell :) ### What are Your Thoughts? Do you trust centralised institutions, services and systems? What use case and services you believe do require decentralised, transparent databases? What do you think of the current state of affairs? Do you believe we are heading in the right direction? Do you think crypto space will survive? What are your thoughts about the current implementation of NFTs? What do you think of the use cases I described? Will those be of value to you? Any thoughts and suggestions are very welcome. Am looking forward to them. ![](https://i.postimg.cc/bYF5sjr3/qsounds-divider-003gimp.png) a LEO/HIVE original ^{all media by edje unless stated otherwise} Posted Using [LeoFinance ^Beta](https://leofinance.io/@edje/will-crypto-survive-the-length-of-time-in-what-form-in-search-of-intrinsic-value-and-use-cases)