I just received a comment on a previous post I wanted to address in a blog post, since the reply would be long and there’s a lot of good stuff I can pack into a post.

First – the setup. I was discussing how a Kinesis silver token was NOT the same as Doge or Bitcoin – whereas the latter promised a spot on a ledger on a blockchain, the KAG not only places a spot on a blockchain stating you own a token, but that token is redeemable for silver.

Second – the comment:

“Great work, Nate. While I totally agree in regard to “fiat” (non backed) cryptos that are “currencies” (bitcoin, litecoin etc), that they will suffer the fate of all fiat currencies and revert to their intrinsic value ala Voltaire, a distinction must be made between cryptos that have uses other than as a currency. A great example (I am a holder) is Theta. It holds 3 US patents, and its main feature is video streaming via the blockchain by sharing of unused broadband of network participants . It solves the internet’s main problem today, without the cost and radiation if the 5G rollout. A distinction must be made when discussing the crypto universe. It is not all bitcoin. Far from it, as bitcoin’s overall share is decreasing every day. Would like to hear your thoughts.”

My take….

The commenter is mostly correct, in that I unfairly lumped items like theta into a basket of doge/BTC where this token supposedly is used with sharing bandwidth. Meaning, it might be closer aligned with the “Asset backed digital currency” as the token promises a service that is redeemable for the token. So while it may not be a HARD asset like gold or silver, it’s a service. Still, an asset, but perhaps intangible and hard to price.

Let’s back up here. What is Theta? I don’t know. Much. I know what I heard from listening to Bix Weir, and the promises that it solves problems of bandwidth as opposed to 5G. The problem is, I’m not really sure how the TOKEN works in this instance. The SOFTWARE is what should be doing this, and I’m unclear what utility the token brings to this equation.

Let’s back up even further….

Many years ago, there were all kinds of Peer 2 Peer sharing softwares out there. You downloaded the software, and then searched the portal and could find all kinds of pictures, videos, and software out on this thing. The items were not really stored on central servers. Or, they could be, but perhaps someone down the block from you had the file you were looking for. Instead of pulling it from a server, you pulled it locally. This decentralizes storage. The problem you would run into with things like this is you had no idea what the hell you were downloading from who, and this would sit on your hard drive for someone else to be able to take from you. Scary stuff in today’s day and age. Many of us looked at this for 5 minutes and said, “hell no”. One of my buddies from a long time ago downloaded tons of movies and burned them to DVD to get his own library. Then he got into trouble. Lots of copyright stuff.

In my world of IT, I was an enterprise admin over VERY large IT systems back in the day, and we would use a tool called SCCM (System Center Configuration Manager). I was an SCCM architect many years ago, and with this, you would place “distribution points” (DPs) all over the world to service your many thousands of machines. When you have a patch that would go out to harden systems, you’d create the automated silent install, test, and then stage this on all of your DPs all over the world.

Security edit: SCCM packages, when created, would have an MD5 hash in a database. When these files were on a folder on a DP, prior to a client installing the software, it would check to verify the has was correct. This prevents someone from altering the content of the folder on the DP prior to installation. End edit.

You click a button to deploy it, and then machines would check in with the mothership, find what network segment they are on, and find the closest DP to pull content from. One place I worked at had 252 DPs worldwide. This keeps thousands of machines from pulling content locally to them, rather than pulling gigs of data across a WAN. Furthermore, I was an expert with something called “Operating System Deployment” (OSD), which I’d then send new operating systems to people overnight. We’re talking potentially 50-100 GB of data between the Operating System and all software needed to install. You needed local DPs to segment traffic to not create too many collisions up the food chain using ethernet and CSMA/CD.

Eventually, an add on to SCCM came out from 1e called Nomad. With this, the promise was that you can remove most DPs from your architecture. It was a file sharing system, if you will. A NOMAD agent (software) would go on a machine, and you could then remove DPs around the world. We took 252 DPs down to 5, essentially putting one on a continent. This takes the bulk of transmission using BITS one time across the pond, and then once there, you can then have machines individually pull. How? It was a form of election service. If you had a machine in a local network segment who had the files (or fragments of files) you were looking for, you could get it from your local network and you tax the local switch. If no one on your local segment had what you were looking for, it then goes up one step in your CIDR notation and polls that local network. If no one has it, going up the food chain, you then pull the content from your continent (example) DP and then you have it locally. That one time hit now has your local network segment having that software. Then, anyone else who needs this software will poll the local network agents and find that you have it, and download it from you. Now, you have multiple machines in a LAN that can service requests. So on, and so forth.

The hub and spoke model still exists, but the taxing of network transmission is at your local switch rather than at your centralized distribution point. There still is centralization, but the heavy lifting is now done at localized switches after a master is elected to be the first to pull it down.

Security Edit: When you decentralize things, you still need the hashes to be registered in a centralized location for verification so man in the middle attacks don’t happen and you are getting the content you are expecting. If you have bits and bytes all over the place, you may have lots of hashing done, which can be a nightmare. End edit.

Fast forward to theta. The promise is the TOKEN is going to help with sharing bandwidth. They then talk about Theta Fuel. The overall concept seems to be that people can share my unused bandwidth and I can use their unused bandwidth. While I GET where they are coming from, this would have to come from a local switch level OR an agent would need to be installed on my endpoint and/or I would need to grant people access to my local network. I tried to figure that perhaps I just watched an episode of The Black List and it is stored in my local cache for a week. One of my neighbors wants to watch it, and can download/stream from my device – working in a sense with file sharing. As far as BANDWDITH sharing goes, it’s not really a valid concept. Why? In my development, there are times where I can barely stay connected. My local switch is getting hammered with all of the houses of 5 kids on 15 different internet devices. My LOCAL SWITCH is hammered. NO ONE in my localized network segment has free bandwidth. We are overloading the switch and causing collisions with CSMA/CD – in a crude manner.

What theta seems to want to do is to purchase bandwidth from someone offering free bandwidth. But if EVERYONE is faced with lack of bandwidth, no one has “free bandwidth”. Comcast might tell me I have 300Mbps but I can tell you at times of congestion with all of the kids around here playing video games, there’s no free bandwidth from the PROVIDER.

The “solution” is essentially prioritizing traffic and decentralizing streaming services. For example, you can prioritize VOIP traffic as first, so emergency calls can go through. Then you might do things like video services like Zoom and MS Teams so people can work. Then, perhaps you layer entertainment, like video game traffic. Last would be streaming services – and streaming services need to solve THEIR problems with things like NOMAD above. If I want to watch The Black List, you start to download all of the packets needed in a buffer from more localized watchers within your closest subnets. When you watch something, it stays resident in your cache for a period of time. At the bit and byte level, portions of this will be pulled by other users in closer segments to you. This minimizes the ridiculous traffice from the service DPs around the world. This then alleviates congestion at the service providers, like Comcast.

Another solution here is to make gamers and high res/high traffic personnel pay a lot more for bandwidth. They would be routed through more expensive and faster infrastructure. You want real time shoot and kill games with stupid high res with a $3,000 video card, well…you need to be on a turnpike of sorts using your own toll booths. For ME – these toll booth for these games COULD be where a theta token comes in. There are millions of gamers out there, and this is a generation that would adopt this sort of thing. But – this still requires different routing at a service provider level to get that type of traffic routed through the super highway.

Lastly – to add to the concept of services with a token, I find it sort of unnecessary. One management team I worked under in 2005 opened their own IT shop. Their model was to have users buy blocks of service time. For example, 200 hours of a block would be paid for up front, and the users would then be provided 200 hours of service and consume it over time. The issues with services like this are sometimes a contract is drawn up, services are requested, and then a requestor doesn’t pay, expenses get racked up, and the IT service provider could suffer great losses. By having an up front purchase, you alleviate the collection problem – but the purchaser now has a “token” of sorts where you can redeem a service – it’s a pre-paid IT service. What if the IT company goes out of business? Your token is worthless.

That being said, buying a theta token or any other token for a service to me appears to be unnecessary. Why not just buy blocks of time with your credit card? I believe the idea is that you can buy this service, and then perhaps trade the rights to that. If you buy this 200 hours of prepaid IT services, and the prices skyrocket, then this prepaid service value goes way up. To be able to trade that contract to someone else would provide some value.

So the idea with a theta token is that people THINK this IT prepaid service may cost a LOT down the road, and they buy in cheap with the idea someone may need this service and buy these tokens from you down the road to “share bandwidth”.

The problems you have:

  1. No “common person” can really tell you how this theta token will work. What does it do. I haven’t read white papers. This is the problem with adopting complex technology. 99% of the people out there don’t want to spend hours to research this. They want to plug something in and it works.
  2. Widespread adoption. Whatever service token you buy, you are wildly speculating others will also need this token down the road. Again, this is speculation, and with this, you need to be extremely careful about your allocation towards this type of investment. No one may ever adopt. This is the problem I see with Kinesis – I see the potential, and it’s pretty straightforward to me that this advocates for gold and silver to be money again. For me, this could be 1-3 years yet. I’m patient. Many of you see a hot token, jump in, see the momentum, and then ask “where lambo” after a week.
  3. Early adopter penalty. This goes more in line with the speculation, but it’s possible you have invested a lot of money into an 8 track whereas 2 years from now they will be at Blu Ray. Theta or any other token COULD be extremely useful in a lab and do exactly what they say, but by the time widespread adoption comes around, your Theta token could be the 35th most adopted item. Or, my Kinesis KAG/KAU might be the payment for everything. Who knows? And – Bix could be right, Theta could change the world and those who bought in at $.25 for $10,000 could be Theta millionaires soon. Just know that early adoption rarely is the gold standard of something. It is usually replaced with something more efficient.

Overall, any token that promises a service has risk of delivering on that service if they go out of business. What if you load up on theta tokens and the TV companies go a different route? You are holding that token with no services to redeem. So why have a token for a single utility at all with that level of risk? Wouldn’t it make sense to just pay for blocks of time with a credit card or KAG/KAU?

My point is, it is EXACTLY like buying a Chuck E Cheese token. When you go to Chuck E Cheese, you take your hard earned money, and buy these tokens. These tokens provide a service. It’s a prepaid IT service. However, what happens if you are sitting on 100 tokens and one of the three below happen?

  1. Chuck E Cheese goes out of business?
  2. The cost to operate the equipment goes up due to labor and energy costs. Where a game used to cost one token, it now costs two. The VALUE of your Chuck E Cheese token is now halved.
  3. Who is really trying to buy your Chuck E Cheese tokens on an exchange? It would be more prudent to just buy from the provider when you go there.

So while the utility tokens are NOT the same as BTC/Doge Coin, they are most certainly not “money” like Kinesis KAG/KAU. To add something here, items like Ethereum deal with things like smart contracts and I see this evolving to the Kinesis type of platform. For example, perhaps ETH allows you to buy 1,000 widgets in exchange for 100 KAU. ETH blockchain records the transaction as a contract and establishes ownership of those widgets and KAU.

While my lack of 100 hours of intense indoctrination into BTC precludes me from commenting on it, according to Mr. Saylor, I’ll take my 26 years of IT experience, 10 years of college, and 11 IT certifications at the enterprise level against his Kool Aid brigade. While I love the innovation that some of these things are doing, the overall concept here is “blockchain” as a ledger to record, and items you want to peg to that blockchain as hard assets allow the salami slicing of REAL money in gold and silver. While you CAN allow intangible assets like services to be recorded on the blockchain, it’s rather unnecessary to trade the rights to consume the service at a prepaid cost when no one can tell you the actual cost of that service. It is nothing but CRAZY speculation that it would be widely adopted or actually necessary. Those who do go all in on wild speculations can hit the lottery ticket. Most lose a fortune. Buyer beware.

That being said, tokens that are promising SOMETHING in return for your token. A service? Perhaps. It’s better than the NOTHING that BTC/Doge promise.

Overall, the theta guys and those buying these tokens might be right. I don’t think they are, but I reserve the right to be wrong. I just think their solution to bandwidth sharing isn’t changing the infrastructure, it’s trying to buy/share bandwidth that simply doesn’t exist at the service provider level. If you want Netflix streamed faster, they need to either build out more DPs or take a NOMAD approach to decentralizing content. Gamers in high res/high response need to use a super highway at the service provider level. That has nothing to do with your TV…or Theta.

So – Theta is a Chuck E Cheese token. You buy them for a promise of a service down the road. While this may insult you, it’s the easiest way to describe to a lay person what it is. My KAG/KAU is money. So they are different. And, I personally don’t want to insult Chuck E Cheese by trying to compare it to the trash that is crypto currencies that promise you nothing in return for your money.

See the source image