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Comment by 16th_hop | Hacker News Reader

Because a protocol with a finite number of coins has an inherent value to it, by virtue of the fact that other people are there and you can only use it if you have a token. Imagine I have a club, and it costs $5 to enter. You can always just create your own club for $2, but it's not a given that people will come. This is how a completely open-source protocol can monetize.

The same is true with Bitcoin or Ethereum. You can fork it and make your own, but the majority of the people want to use one of the original protocols, and you can only use the protocol if you pay with the proper protocol token (either BTC or ETH).

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Because a protocol with a finite number of coins has an inherent value to it.

But not value that can be captured by the creator of the protocol. Let's go back to cloud storage. Sellers of storage sell 1GB-Month for 1 token (or whatever). Buyers of storage eventually run out of tokens because they've given them all to sellers. So they have to purchase the tokens back from sellers for dollars. How much will sellers charge? The cost of storage (plus whatever profit they can get away with).

At that point buyers of storage are paying exactly what they'd pay for storage if the token system didn't exist. It's just this goofy middle layer of scrip. There's no magical extra money that the protocol creator can siphon off.

Step back and look at the big picture. The only way for a protocol creator to make money is for either sellers of storage to charge less than they otherwise would or for buyers of storage to pay more. Why would either of those two groups ever want to do that?

...uhh, or people could rent storage and get paid a token fee, thus generating revenue

Yes, sellers (or renters) of storage can make money. Sure.

I'm saying that the creator of the protocol won't.

The creator of the protocol makes money because they issue 20% of all tokens to themselves, and then wait until later to sell it (once the token is in high demand).

I don't see how that works either. People know that 20% is out there just waiting to move the market so that has to have an impact on spot prices which either means that buyers or sellers of storage (or both) are getting a bad deal. Again, why would they do this?

If a distributed cloud storage protocol became as ubiquitous as e-mail, the difference would be that buyers could buy tokens from anyone and not concern themselves with who actually stores their data. Also, anyone with spare storage capacity could join the network to squeeze a small amount of value from it until they have something more productive to do with it.

That's also how proof-of-work systems should have worked with surplus compute cycles, except ... ASICs. I basically consider Bitcoin broken because of this.

As to how the protocol creator makes money, they can sell storage like everyone else, but creating a protocol doesn't require the same initial capital as starting a whole cloud storage company.

I think its rather like the owner gives the storage to people for some money and from thereon it's your storage. You can keep and use it or sell it to whatever value you (and probably the market) thinks it is worth for.

Even if there is a finite number of coins, at that point it's just speculation and economics of supply and demand. That still doesn't explain any "value" added attribute to it. Oil has a finite number of supply, that affects its pricing and supply and demand, but it also serves a purpose( which would explain its value. Someone coming up with an ICO to fund a project that has no benefit or value whatsoever other than to say here's a finite number of coins well that's clearly speculation and if anything pump and dump 101.

The value of the token comes from the value and purpose of the protocol the token is used for. For example, Etherium's value itself is backed by the ability to run "smart contracts" on the Etherium platform itself. Most of the classic (hash) coins are pretty much fiat currency, the value coming from the ability to speculate, trade, and spend, like with any real-world currency. Et cetera.

Except when the smart contract with 1/2 the ether in it, does exactly what it's programmed to do, then you hard fork and pretend it didn't happen.

Because? Value?

Sorry, I really lost a lot of faith after that one.

"Because a protocol with a finite number of coins has an inherent value to it"

No, it doesn't. Being scarce, by itself, is not valuable at all. Being useful is was gives something value. In fact, I'd argue a protocol that I have to have a coin for is much, much, much less useful, and therefore less valuable, than one that doesn't.

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