Pools create costs, solar removes costs
7,015 karma · joined February 27, 2009
Imagine an HTTPCoin in 1995: how would it's price be affected by the constant stream of web IPOs?
The point is not to compare the market cap of Bitcoin or Ethereum to the market cap of previous protocols at all. The point is precisely that the previous generation of protocols created immense value but most of it got extracted at the application layer while, as you said, there are many small but highly profitable Bitcoin businesses, but the bulk of the economic value is in Bitcoin itself, not in those.
Contrast that to the web where there is little economic value in the protocol and a lot of economic value in web applications.
Bitcoin's liquidity and network effects, in a nutshell. I don't think a competitor will be able to match Bitcoin on those fronts. And it's not just about the developer and technology community, it's about the media, governments, companies, investors, regulators, financial institutions and even regular people who are getting used to the name Bitcoin.
But, honestly, it doesn't matter. This stack is blockchain-independent. Whatever blockchain or currency ends up succeeding in the long run doesn't take away from the fundamentals of this stack: decentralization of data and processes, cost reduction, and consumer power.
I focus on the Bitcoin blockchain because that's what the market has chosen to build on top of because there are no better alternatives yet. We'll see what happens if and when they come (e.g. ethereum), but I worry that it'll be too late by then and the market won't take it.
To answer your question what's unsettling about this (and not in a bad way) that since so much of this stack is commoditized it becomes very hard to extract value where traditional software business do (20-50% cut rates, etc.) so it is much harder to be profitable, but at the same time it's much easier to bootstrap an application when you have access to an open pool of data.
I think it's an interesting dynamic that, if this turns out to be true, will really change the way software businesses work at the application layer. But I'm 2-3 posts away from doing a deep dive into that part of the stack – there's some things I'd like to go over first.
[1] Depending on your definition of rich.
I estimate that we'd have about 60-70% unemployment, and no jobs for those people to go to because, well, other people just aren't spending any money.
(Resubmitted due to a typo in the URL)
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This covers most of things I used Parse for.