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One question I would like to see discussion on is about the process of capturing value by the builder of a blockchain. Web 1.0 was about selling stuff. Web 2.0

One question I would like to see discussion on is about the process of capturing value by the builder of a blockchain. Web 1.0 was about selling stuff. Web 2.0 was about hoarding data and using it to sell stuff. If blockchains are Web 3.0, what's the model? Bitcoin was released free and the designer got nothing beyond the initial stake, which only works for coins. Ethereum is run by a foundation. Say I want to launch a blockchain startup and really hit the sweet spot according to this paper, how do I build a business on it?

itamarst 9y ago
1. ICO. 2. Run away. 3. PROFIT.
deleted 9y ago
[deleted]
kerkeslager 9y ago
The original idea of blockchain was at least partially to prevent a central entity from centralizing the value of bitcoin and capturing its value. What you're describing is the antithesis of what Satoshi intended. Now, I'm well aware that technology isn't inherently ideological. So you could hypothetically come up with a way to hack it to make it do what you want to do. And a lot of people are trying to do this, i.e. the SegWit folks, but the way they're doing this is by breaking the fundamental decentralization of blockchain to make it more federated/centralized. It's a perversion of Satoshi's vision, but it's not unethical or technically invalid. But the question I have is, why? A business is inherently about taking money from disparate sources and putting it in a central location: your business' bank account. You might be able to do this with blockchain, but it's working against the decentralized, untrusted model, not with it. A datomic-style log handles the ledger aspects of blockchain with a fraction of the technical complexity, and you don't need the untrusted aspects of blockchain if you're running a centralized business (ostensibly, you trust yourself). If you succeed in using blockchain to run a centralized business, it's despite the model, not because of it. There's one exception, which is that the underregulated nature of the current blockchain industries and the hype around blockchain open up some opportunities (i.e. this is why the SegWit folks can make money off this). But that's more about checking the "blockchain" keyword off in your marketing/legal materials than about the actual benefits of the technology (i.e. ICOs--the only benefit blockchain actually gives is that it allows you to skirt financial regulation, which has nothing to do with the technical benefits of the technology). And as regulations are put in place and hype fades, a lot of these opportunities will dry up: most are temporary and the ones that aren't are extremely difficult technically. Blockchain IS a revolution, but it's not a revolution that can be easily coopted by rent-seekers (and make no mistake, that is what you're proposing). The rent-seekers will eventually break it (they always do) but then it will be just another financial instrument, and unless you have an in-depth technical AND social understanding of the technology (like the SegWit folks) you're unlikely to be one of the rent-seekers who benefits from this. There are a lot of lower-hanging fruit out there to build a business on.
- JoeAltmaier 9y ago
  I don't see it. Waiting forever for transactions, paying a high fee to exchanges for what should be a few milliseconds of code to run - how is this not rent-seeking? How is bitcoin not already centralized?
  - kerkeslager 9y ago
    Exchanges don't typically run/implement their own blockchains, which is what my post and the parent were talking about. Most exchanges are 100% centralized, I agree. But it's entirely possible to buy/sell/trade Bitcoins without ever interacting with an exchange, so I'm not sure that means Bitcoin is centralized.
    - JoeAltmaier 9y ago
      What percent of transactions do we suppose are done privately? Compare with the percentage of normal financial/investment options are exercised privately. At a guess, almost the entirety of Bitcoin trades are exchange-based. I'm suspecting that ordinary finances win this round.
      - kerkeslager 9y ago
        I don't think we have a ton of evidence either way, but: 1. Private exercise of of investment options usually occurs within the context of brokerages, hedge funds, and companies exercising their own stocks, no? For the first two, they have to be large enough to have lots of clients, and the last one is limited to one stock. I'd see the brokerages/hedge funds as a form of federation so that it doesn't make sense to distinguish it from exchanges on the centralization/decentralization spectrum, and stuff internal to a company doesn't really occur on the open market in the same way so I'm not sure it's relevant at all. 2. Percentage of trades isn't the only metric: ease of trades is also relevant. I could find a Bitcoiner on Craigslist and give him cash at a coffee shop for coins. Doing this with most traditional financial instruments would be difficult if not simply illegal. Coins for cash at a coffee shop isn't probably the most common use case, but it's certainly easy and possible, and that's relevant.
lumberjack 9y ago
This is a general problem with decentralized alternative platforms. There is no way for the creator to really profit massively out of their project. But there could still be economic incentives. For example, if GNU Taler succeeds as a payment system and manages to replace Visa, that could mean less fees for both customers and merchants which would be incentive enough for the merchants and customers to adopt the system. Basically you cannot think in terms of traditional business models. You need to think of it as a free software project that might potentially be a massive cost saving for enough people to adopt it.
- philipodonnell 9y ago
  I think its quite rare for a product to find widespread adoption because it reduces costs for the users unless a portion of the reduced cost can be captured by the entity building the product. The way this reads now, the only products built on blockchains will be industry consortiums trying to "cut out the middlemen", which they will then use to limit competition by excluding new entrants.
- deleted 9y ago
  [deleted]
notahacker 9y ago
Find somebody else that already has the possible use case for blockchain and sell the basic tech and support to ensure all their relevant operations systems interface with the blockchain. The same basic business model used by various companies that were building e-commerce platforms in the nineties and have been winning massive contracts using "cloud" in their presentation more than their competitors ever since, often without any server space or software IP of their own. Works better if there actually is a real sweet spot for those client(s) to share data with blockchains, but even using the word as a buzzword enough might seal the deal. This model isn't as exciting as "disrupting X with blockchain" but it's certainly possible to build a profitable business with it.

itamarst 9y ago

1. ICO. 2. Run away. 3. PROFIT.

deleted 9y ago

[deleted]

kerkeslager 9y ago

The original idea of blockchain was at least partially to prevent a central entity from centralizing the value of bitcoin and capturing its value. What you're describing is the antithesis of what Satoshi intended. Now, I'm well aware that technology isn't inherently ideological. So you could hypothetically come up with a way to hack it to make it do what you want to do. And a lot of people are trying to do this, i.e. the SegWit folks, but the way they're doing this is by breaking the fundamental decentralization of blockchain to make it more federated/centralized. It's a perversion of Satoshi's vision, but it's not unethical or technically invalid. But the question I have is, why? A business is inherently about taking money from disparate sources and putting it in a central location: your business' bank account. You might be able to do this with blockchain, but it's working against the decentralized, untrusted model, not with it. A datomic-style log handles the ledger aspects of blockchain with a fraction of the technical complexity, and you don't need the untrusted aspects of blockchain if you're running a centralized business (ostensibly, you trust yourself). If you succeed in using blockchain to run a centralized business, it's despite the model, not because of it. There's one exception, which is that the underregulated nature of the current blockchain industries and the hype around blockchain open up some opportunities (i.e. this is why the SegWit folks can make money off this). But that's more about checking the "blockchain" keyword off in your marketing/legal materials than about the actual benefits of the technology (i.e. ICOs--the only benefit blockchain actually gives is that it allows you to skirt financial regulation, which has nothing to do with the technical benefits of the technology). And as regulations are put in place and hype fades, a lot of these opportunities will dry up: most are temporary and the ones that aren't are extremely difficult technically. Blockchain IS a revolution, but it's not a revolution that can be easily coopted by rent-seekers (and make no mistake, that is what you're proposing). The rent-seekers will eventually break it (they always do) but then it will be just another financial instrument, and unless you have an in-depth technical AND social understanding of the technology (like the SegWit folks) you're unlikely to be one of the rent-seekers who benefits from this. There are a lot of lower-hanging fruit out there to build a business on.

JoeAltmaier 9y ago
I don't see it. Waiting forever for transactions, paying a high fee to exchanges for what should be a few milliseconds of code to run - how is this not rent-seeking? How is bitcoin not already centralized?
- kerkeslager 9y ago
  Exchanges don't typically run/implement their own blockchains, which is what my post and the parent were talking about. Most exchanges are 100% centralized, I agree. But it's entirely possible to buy/sell/trade Bitcoins without ever interacting with an exchange, so I'm not sure that means Bitcoin is centralized.
  - JoeAltmaier 9y ago
    What percent of transactions do we suppose are done privately? Compare with the percentage of normal financial/investment options are exercised privately. At a guess, almost the entirety of Bitcoin trades are exchange-based. I'm suspecting that ordinary finances win this round.
    - kerkeslager 9y ago
      I don't think we have a ton of evidence either way, but: 1. Private exercise of of investment options usually occurs within the context of brokerages, hedge funds, and companies exercising their own stocks, no? For the first two, they have to be large enough to have lots of clients, and the last one is limited to one stock. I'd see the brokerages/hedge funds as a form of federation so that it doesn't make sense to distinguish it from exchanges on the centralization/decentralization spectrum, and stuff internal to a company doesn't really occur on the open market in the same way so I'm not sure it's relevant at all. 2. Percentage of trades isn't the only metric: ease of trades is also relevant. I could find a Bitcoiner on Craigslist and give him cash at a coffee shop for coins. Doing this with most traditional financial instruments would be difficult if not simply illegal. Coins for cash at a coffee shop isn't probably the most common use case, but it's certainly easy and possible, and that's relevant.

lumberjack 9y ago

This is a general problem with decentralized alternative platforms. There is no way for the creator to really profit massively out of their project. But there could still be economic incentives. For example, if GNU Taler succeeds as a payment system and manages to replace Visa, that could mean less fees for both customers and merchants which would be incentive enough for the merchants and customers to adopt the system. Basically you cannot think in terms of traditional business models. You need to think of it as a free software project that might potentially be a massive cost saving for enough people to adopt it.

philipodonnell 9y ago
I think its quite rare for a product to find widespread adoption because it reduces costs for the users unless a portion of the reduced cost can be captured by the entity building the product. The way this reads now, the only products built on blockchains will be industry consortiums trying to "cut out the middlemen", which they will then use to limit competition by excluding new entrants.
deleted 9y ago
[deleted]

notahacker 9y ago

Find somebody else that already has the possible use case for blockchain and sell the basic tech and support to ensure all their relevant operations systems interface with the blockchain. The same basic business model used by various companies that were building e-commerce platforms in the nineties and have been winning massive contracts using "cloud" in their presentation more than their competitors ever since, often without any server space or software IP of their own. Works better if there actually is a real sweet spot for those client(s) to share data with blockchains, but even using the word as a buzzword enough might seal the deal. This model isn't as exciting as "disrupting X with blockchain" but it's certainly possible to build a profitable business with it.