Comment by natrius | Hacker News Reader

Comment by natrius | Hacker News Reader

Here's another angle on Ethereum: I think it's going to put Walmart, Amazon, Uber and Airbnb out of business.

Consider Amazon. They buy goods from manufacturers, then sell those goods to consumers for higher prices and pocket (or spend) the profits. Pretty simple. They provide a great service that makes it easier for people to buy and sell stuff, and they get paid well to do it.

But what if all of Amazon's customers wanted to band together and cut out the middleman? They could use their collective buying power to get the same prices from manufacturers, but eliminate the profit and just pay lower prices. It's possible, but it'd be hard to achieve. Who would run the system? How would they make decisions? It's so hard that the customers would give up, finish buying their disposable consumer goods, watch an episode of Humans and go to sleep.

Or one of them could come up with a solution. "Hey y'all, I wrote the software for a marketplace system to connect us all directly to manufacturers, but I know you can't trust me to never take a cut if I run the system myself. So instead, I'll run it on a global computer that no one controls. Programs on the global computer can never change, and no one can fake their data. That means the system will be out of my control and the rules are set in stone. It's everyone's system."

That global computer is called Ethereum, and it lets us build new kinds of software that can coordinate human interactions so powerfully that this guy's solution just might work. You could build other kinds of apps on Ethereum too, like voluntary social safety nets, apps that let your future smart appliances talk to each other long after their manufacturer shuts down, or pretty much the entire financial industry—all without any middlemen to charge you or restrict your access.

If you know how to program, you should learn how to build apps on Ethereum. And not just the code that runs directly on the global computer, but web apps and mobile apps that you already know how to build, just with the global computer as the backend instead of a private computer. I will help you get started. (niran@niran.org)

Maybe I'm overly optimistic. That's a risk I'm willing to take. You should too.

I've heard this specific dream pitched before and while I think it's a great idea it still doesn't solve the issues around shipping specifically. One of the things Amazon does really really well is the logistics of shipping the product to the customers and while a bunch of people coming together to buy goods straight from the producer would cut out the profit taken by the middleman it wouldn't help with getting the items to your door. Individual manufacturers simply can't negotiate the contracts that Amazon has with UPS and individual manufacturers don't have the the warehouses and the massive infrastructure Amazon has. If a producer made 10,000 widgets and sent them out to 10,000 people that is a lot more difficult than simply sending a pallet to Amazon and having them sell the items and send them to the customers. They aren't just some website that lets you buy things, there is an enormous infrastructure that supports the commerce.

This is something you can get a better sense for when you back Kickstarter projects and see just how much time is spent around packaging and shipping. It is a huge task that a lot of inexperienced companies get totally swamped by.

Edit: I would also like to add that if we bought goods straight from the manufacturer then we would have to deal with greater ship times as well. If you're ordering something from a factory across the US it's going to take a week to get to you. But if Amazon or another marketplace has already purchased the item and stores it a day away from you or in the same city (knowing that there is a chance someone like you is going to order one soon) then you can get the item much faster. That convenience is something that really only a logistics and warehousing middleman can do effectively and people pay for that convenience.

Edit 2: I don't work for or am affiliated with Amazon.com - I just have seen into the belly of the beast at a few online retailers and have good sense of what goes on in there.

UPS is going out of business, too. UPS owns warehouses, trucks, and planes, none of which are very defensible advantages. Like the companies I listed, they're a network effect company. Those companies are going away because bigger networks can be formed on the global computer by anyone who wants to participate—warehouse owners, truck drivers, bike messengers, etc.

UPS gives Amazon a good deal because they push so much volume, and it's way easier to sell to one company than it is to sell to millions of them. But the global computer makes it feasible to directly connect every producer with every consumer—it won't be hard to sell to millions of them. If a shipper needs guaranteed future business, customers can band together and put a contract for lower prices on the global computer that enforces a payment or reputation penalty if a minimum spending limit isn't reached. Decentralization gives everyone the economies of scale that once required the backing of a megacorporation.

Most of the advantages of scale are reducible to middleman-free interactions on the global computer.

I think there will be a similar flood of ideas of business to run on ethereum that are ahead of the market.

Back in the dot com boom, there were people who understood the potential of the internet and pushed plans to take advantage. Many failed to hold together because there had not been a large enough migration of users to the new medium.

I agree with you about Ethereum's potential, but I think the first businesses to succeed will be low overhead outfits that can handle waiting out the slow transition.

I am thinking about what would have happened with Amazon if they had started AWS, Amazon Instant Video, and Amazon Prime Now back in '97. They would never have been able to pay developer salaries waiting for 2011 to come. The biggest upside on Ethereum will be a company that understands the medium, starts small, and presses the envelope.

When dot com companies failed, their work was thrown away or sold for pennies on the dollar to companies who ignored it. Decentralized systems built on Ethereum are forces of nature: they don't get shut down and don't depend on any group in particular for their functions.

Some products might be too early, but they'll just keep running with their small user bases until the market is ready. Companies should proceed with caution, but individuals who want to make an impact should start today.

what prevents Amazon, specifically Amazon, from pivoting and doing the same? They certainly have some forward thinking people within the org, and an enormous and dedicated work force behind them. Do you think they're sincerely overlooking this?

Is an Amazon that pivots to take no profit on its sales still "Amazon"? I think it's different enough that my claim stands.

I don't understand your point. Are you saying that a commercial chokepoint on all transactions is cost-free?

My understanding is that Ethereum adds a cost to absolutely all transactions. Am I wrong?

You are correct. You have to pay someone a tiny amount: the cost to make executing your transaction, storing the blockchain, and mining a block worthwhile. That cost is far less than the monopoly rents that beneficiaries of network effects collect. It is cents per transaction.

What about user interface and user experience? That's a key area that all the successful companies you've listed do very well, and something that decentralized approaches traditionally don't do well.

The typical user doesn't care how it works under the hood--they just want their room/driver/goods and services quickly and with a minimum of fuss. Being good at this will remain difficult and expensive even in a world where Ethereum dominates. Perhaps it competes better on the infrastructural level, against the likes of credit card companies, banks, and cloud services than against polished b2c applications?

Exactly, and also this will make users to pay more for almost the same service if they just get what they want without to much complexity

There's actually no justification for charging for this.

The "cost" of making the transaction includes development costs, which you've had $18m to pay for (isn't that enough?) and computer cycles, which are distributed anyway.

So what you're actually doing is adding a commercial chokehold and red tape into a system designed for the open distribution of value and information.

You're simply aiming to become an alternative monopoly.

Thiel approves, of course. I think the idea is a very bad one, because I believe in removing all friction and cost of entry to the absolute maximum extent possible - not in automating red tape with contract code.

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