I usually like Fred Wilson's essays, but I have to feel like he's on the wishful thinking hype train on this one. Through the lens of VC (and finance at large) monetization is always the question. However Fred is too quick to ignore that what usually makes open protocols successful is being free and relatively simple. Throwing blockchain tech into the mix is going to add tremendous complexity and friction to any protocol which will then be out-competed by a true open protocol.<p>Underlying this wishful thinking I smell a frustration that investors can't make money from open standards. But the reality is that open standards bring an incredible amount of value to companies and individuals that rely on them. Think about the transaction volumes happening over HTTP or SMTP, let alone TCP/IP. The value is immeasurable, it's just that finance can't get a piece.<p>This is one of those areas where we have to recognize that economics and GDP do not tell the whole story of human value. Blockchain tech is really cool, and I don't think we've scratched the surface of where it will eventually go, but I just feel dirty when I see how excited VCs and finance guys get about it.
This is micropayments, again. There have been many, many micropayment schemes. The trouble with micropayments is that all the enthusiasm for them comes from the people who want to collect them, not the people paying them.<p>One of the better ideas was micropayment email, as a solution to spam. You have to pay the recipient to get an email through, unless they've whitelisted you as a friend. A centralized service could do that. (One could see Gmail or Facebook doing that. LinkedIn already does. So do some dating services.)<p>Doing it in a distributed way is hard. Blockchains probably won't help; the cost of a Bitcoin transaction is too high and the network capacity is orders of magnitude too low for mail. Local proof-of-work systems have been suggested, but never caught on. (Probably not a good idea in the era of battery-powered devices.) Worth thinking about, though.<p>Urbit has a scheme where identities are anonymous but not free. That's an anti-spam measure, because spamming results in negative reputation for a paid-for identity. It thus make spamming expensive. Urbit is probably too weird to get much traction, but there are good ideas in there.
What the author describes, I would not call 'protocols' - The Bitcoin network is a hosted implementation of the Bitcoin protocol - It is not the protocol itself.<p>Tokens in the context of the Bitcoint protocol itself have no value - The value is derived from the popularity of the infrastructure, not from the popularity of the protocol.<p>If I forked the Bitcoin repo tomorrow and started my own altcoin based on it, my tokens would be worth $0 because nobody would know about or want to buy my virtual coins - Even if my network was based on the Bitcoin protocol.<p>The monetization does not occur at the protocol level - It occurs at the implementation/infrastructure level. You don't need tokens to monetize an open source project - The root of the strategy is merely to leverage the popularity of your open source project (and your status as its 'leading expert' - Since you built the thing) to offer a hosted/managed implementation of that open source project.<p>The value of tokens merely represents a stake in a specific implementation of a hosted/managed service - There is nothing open about that. It's the equivalent of paying a monthly fee for using a hosted SaaS.
This assumes that people will pay for some service. But I think there will always be someone who will just provide a free service to get rid of friction as much as possible and monetize via ads. Nowadays it's extremely cheap to run an app. Which means these hypothetical blockchain based apps will always be competing with a "closed" yet free version of itself, which has 0 friction.<p>Using the Twitter example, I can't imagine how a service that makes you pay for Tweeting can grow larger than a service that's completely free. The only motivation I can think of is people actually making money (in the blockchain currency) by Tweeting or any value generating activity, but this is also based on the assumption that this network becomes huge, otherwise stacking up these points won't matter that much anyway. Which goes back to my first point--I can't think of how this decentralized Twitter can be larger than its centralized counterpart.<p>Just trying to understand if I'm missing something. Can anyone enlighten me?
<i>> One of the problems we have had in tech is that there aren’t large monetary incentives to create and sustain open protocols. If they are open they cannot be easily monetized by traditional means.</i><p>Protocols should not be monetized. They exist for interoperability. Monetizing protocols is bad, because it's aimed at monopoly which always results in stagnation rather than progress.<p>Of course lock-in crooks like using closed / non-free protocols to control the market. But it's evil.<p><i>> OSS projects have been able to gain a foothold in many server applications because of the wide utility of highly commoditized, simple protocols. By extending these protocols and developing new protocols, we can deny OSS projects entry into the market. </i><p>Source: <a href="http://www.catb.org/esr/halloween/halloween1.html" rel="nofollow">http://www.catb.org/esr/halloween/halloween1.html</a>
<p><pre><code> > In this emerging model, Twitter could have adopted a
> protocol-based approach and issued a crypto-token,
> Twokens, that users could earn from things like amassing
> followers, reporting abuse, etc. Twokens could also be sold
> by the Twitter founding team to finance their operations.
> Crypto-exchanges could make a market in Twokens so that
> anyone who wanted to speculate on the future value of the
> Twitter protocol could do so.
</code></pre>
I don't understand this line of thought. A <i>Twoken</i> would be a sort of irredeemable financial instrument, which Twitter would issue hoping that speculators would mistakenly value these tokens based on the value of Twitter, as a company?<p>Common stock in Twitter is a financial instrument that gives you part ownership of Twitter. It has value because Twitter, as a company, has value. Twokens would be a financial instrument that gives you nothing, except the hope that other people will misunderstand this fact and buy them, pushing up the (offer) price. Great for speculators, useless for everyone else.
The problem is there's no way to estimate costs without a price up-front. You have to determine how many "tokens" to charge and that price won't be stable like the dollar. Just imagine paying a fixed BTC per request. It would be impossible to predict your costs. Of course you could peg it to the dollar but that's what we already do with paid API subscriptions which have a price known up-front with limits. I don't see what blockchain tech has to do with charging for API access.
Twitter does not have any incentive for open protocols. They even disabled feeds because you could follow people using any non-official client that might block advertising.<p>Blockchains do not solve the human problem, people wanting others to run software they provide and not any other. This, like Apple and Google locking down devices and Facebook and Google discontinuing XMPP, is about power.
I have a hard time getting on the same page as the author. How is a protocol where the owner charges for usage and rewards particular actions with a currency they own "open"? If we are distinguishing between "open" and "free" (SMTP and other examples given by OP would be both open and free) then that should be clarified.
> <i>But at the time, there wasn’t an obvious way for Twitter’s founders and management team to benefit from a protocol-based business model.</i><p>> <i>innovative new protocols emerge that are based on this new business model.</i><p>I think it is wrong to think about it in terms of "business model". Protocols (such as HTTP) do not have any business model, but they evolve just fine.<p>Replacement for twitter will eventually emerge, but I do not think it will be controlled by single entity. Why use crypto-currency to pay for tweets, if you can embed entire twitter into blockchain?
For me at least the definition of an open protocol is one where the spec is published and anyone can develop a complete implementation by following it which is free from licenses, royalties, etc.<p>I don't understand exactly what the proposed business model is or how it works here. If the business model is for Company X to develop and release a new open protocol which requires that implementations pay them cryptocurrency upon use, what's to stop implementers from just not implementing that part of the spec?<p>Or if the business model is that the protocol is both open and free, and Company X issues some new cryptocurrency in the hopes that people will speculate on it, why would they do that? By this article's own admission business models built around open protocols have disadvantages versus those built around closed protocols. So why would anyone want to bet on this company's future by buying its currency?<p>I guess the one thing I could see working would be if the company built not only the open protocol, but the initial user base to go along with it. If that user base was large enough before other implementations appeared, subsequent implementers might go ahead and pay whatever taxes the original implementer imposes in order to gain access to that user base. But this would imply that companies shouldn't launch with open protocols, they should only open up their protocol after it has succeeded; and also if the originator of the protocol controls such a large part of the user base, I don't see what stops them from moving those users to new versions of the protocol which progressively raise the fees they charge other implementors.<p>It bears mentioning that few if any of the open protocols we enjoy today were commercial projects which originated in the private sector and had a profit motive. If we can come up a way to align maximum profits with being open then that is great but it's worth considering other approaches as well. For example if a single, entrenched company controls a particular protocol with a large user base then developing an open alternative might be a good way for a consortium of competitors and other interested parties to collaborate and build a user base large enough to compete. Government might be justified in supporting such efforts as well. If there aren't already examples of governments getting involved when they view their national security to be at stake, we will see this soon.
Git is an epic example of a relatively recent extremely impactful open protocol.<p>OpenGL is another I can think of. I'm sure there are many more.<p>In my opinion, we are in the golden age of open source, with the caveat that big companies have subverted it, realizing that open sourcing a popular project and controlling the repo is tantamount to controlling an ecosystem, forking is not an option in practice.
I want to believe!<p>But if the protocol (and code) is really 'open', others can use it without needing any of the rationed tokens.<p>Sometimes, exclusion/scarcity will be part of the value-proposition on the 'genesis' network. Then – and perhaps only then – many parties have aligned motivations for continuing to enforce a dominant, original token regime. This may only be the case for cryptocurrencies.<p>Consider instead an adversarial, spam-and-abuse-prone protocol/platform like "fast & wide microbroadcast" (Twitter). That wouldn't necessarily need <i>one</i> access-token – Wilson's 'twokens' – whose value accrues to core or original developers, or early adopters. It could support many competing token/trust roots, for different schools of thought on communication/conduct tradeoffs. That's good on many axes of diversity and adoption! But it also again raises the public-good problem, of how to fund initial development (and continued wise evolution) of the 'common protocol'.
Protocals that are intentionally crippled by requiring a block chain action are not helpful. These aren't things that need to be monetized; that might even bias the protocols into being bad for users and developers.