In each of our cells there are tiny machines called enzymes that can manipulate molecules and chemical reactions with a precision we don't yet fully understand. For example, we have enzymes that can repair DNA at the molecular level. If evolution created nanomachines of such precision and efficiency, nothing stops us from creating our own nanomachines, tailored to suit our needs. This is what Richard Feynman proposed in 1960 and what is now known as nanotechnology or molecular engineering. Although many molecular-scale technologies can have the nano- prefix, in the context of this essay nanotech refers to atomic and/or molecular manipulations in order to obtain devices with atomic precision. Albeit still at an early, most theoretical stage, the consequences of such technology are beyond imagination.
We are still decades away from the capacity our cells possess. Nonetheless, already serious efforts are being made to develop this field. Molecular manipulation can be done to a certain degree in biotechnology, but real nanotech as defined above goes one step forward. For instance, scientists have made a moving part out of a few strands of DNA four-ten-thousandths of the width of a human hair, a promising step toward building DNA motors and eventually nanodevices. Synthetic biology is another emerging field that aims to engineer new functions in biological systems not found in Nature. So far most applications involve, say, cell division counters but these can pave the way for the creation of artificial organisms such as "designer bacteria" and other predecessors of nanodevices.
Computers play a pivotal part in nanotechnology as they allow us to develop molecular models and foresee the nanodevices we desire to construct. Furthermore, as nanotechnology evolves, new and more powerful computers will emerge, which will lead to breakthroughs in nanotechnology and yet to more powerful computers. Hence we may have a cycle of scientific discovery unprecedented in human history. It will be the singularity.
Because of the singularity, it is shortsighted to discuss the applications of nanotech, but here's an attempt: In computer science, we would have nanocomputers which would in turn open the door to the development of androids and artificial intelligences. Nanotech would pave the way for the development of an army of molecular robots and nanodevices that would allow us to completely dominate Nature. We now dominate it at a macroscopic level; we would then dominate it at a microscopic level too. With molecular medicine we would eliminate many, if not all, diseases with intelligent nanodevices capable of repairing and changing our cells. (Just for curiosity, my first idea towards curing aging, inspired by the legendary TV series Transformers which I used to watch growing up, was to use microscopic devices capable of reinforcing our neurons with metal shields to greater strengthen them and prevent their demise.)
In synergy with other technologies like genetic engineering, the changes each of us could pursue would be staggering with nanotech; from having a skin invulnerable to bullets to augmenting our physical and psychological capacities. Industrial, agricultural, and environmental applications are almost unimaginable at this stage: eradicating hunger, creating molecular superconductors at room temperature, developing nanomachines that eliminate pollution, etc.
Importantly, we would be capable of space expansion and colonization. Each nanomachine would be capable of amazing molecular engineering achievements and even of reproducing. Remember that every single adult human being started as a tiny cell containing all the genetic instructions to blossom into an adult being. In a sense, these molecular assemblers are like a human egg. The goal behind nanotech is to create such tiny nanodevices that, if properly coded, can give rise to machines with a high level of complexity. Thus nanodevices would make excellent scouts in space exploration. To give an idea of the inherited power of nanotechnology, just think that a bacterium with a generation time of 20 minutes can in 48 hours, if allowed to grow, reach a population 4000 times the weight of the earth. This means that a nanodevice with enough mass and energy has the potential to create planets, outposts and life throughout the galaxy. Of course this is theory but it shows the dimension of the powers we're dealing with.
There are some dangers inherited to nanotechnology, as I also mention elsewhere. For example, the grey cloud, theorized by Ralph Merkle as a doomsday offspring of nanotechnology. Basically, the grey cloud is a self-replicating airborne nanodevice that catalyzes carbon dioxide into graphite. Should such nanodevice be unleashed and, in as little as a few days, a solid wall would cover the earth, block the sun, and eventually destroy life on earth. The dangers of nanotech are another reason for space colonization. While the development of true nanotech is likely still decades away, it will forever change humanity.
Drexler, Eric K.; "Engines of Creation" (1986). It's the most famous book about nanotechnology. A classic that is fortunately available online.
Drexler, Eric K., Chris Peterson et al; "Unbounding the Future: the Nanotechnology Revolution" (1991). Another book about nanotechnology, also available online.
Freitas Jr., Robert A.; "Nanomedicine, Volume 1: Basic Capabilities" (1999). An interesting, but highly technical and speculative overview of using nanotechnology in medicine. Available online.
Zyvex; the first molecular nanotechnology development company.
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