Blockchain Developers vs. Business Suits: The Shifting of Power
In traditional economic models, money moves everything. From VC firms to angel investors, capital provides the catalyst for early stage startups and entrepreneurs to succeed. The north star is profit and value is measured by the amount of revenue a company can generate over an extended period of time.
Over the last decade, however, the growth of decentralized and open-sourced projects by blockchain developers has introduced a new north star: value. With alternative paths to innovation, these ecosystems challenge the need for traditional financial support and operate with alternative goals and metrics of success.
Your Money is No Good Here
Despite over $21,000,000,000 raised through Initial Coin Offerings in 2018 so far, over 800 cryptocurrencies are now dead with 81% of projects reported as scams. The race of innovation has turned into a battle of marketing dollars rather than the creation of purpose-driven technology.
As the industry begins to mature, we are learning cryptocurrency doesn’t necessarily need more money. It needs more support. More developers. More talent. It needs more value going into the system so value can come out.
More than the direct peer-to-peer transfer of assets, blockchain enables ecosystems to be rewarded internally and independently, without the external need of fiat based validation. Through the model of value-based economics, we are no longer restricted by the financial gatekeepers, but rather our ability to turn visions into reality.
Many blockchain projects have no central source of “revenue”. The entire success of the project is measured in the ability to create value into the world, not how much money they can produce.
To truly understand how value-based economies work without the need for money, we need to understand that profit is not value. Rather, profit is a fiat-based social construct and financial measurement we have created to help us identify value. In other words, value is the precursor. Profit is the subsequent outcome of an increase in value. You can’t have profit without value, but you can have value without profit.
The Bitcoin White Paper from Satoshi Nakamoto in 2008 was the largest example in human history of how a value-based economy can work at scale. Nine pages and 3500 words is all it took to inspire a worldwide movement and $250B empire. From idea to innovation, there was no request for funding. There was no lead investor to get the project off the ground, and there was certainly no Initial Coin Offering.
What the original cypherpunks lacked in funding, they made up for in value. What the developers lacked in marketing, they made up for with a deep desire for change. They were solving a problem, a real problem, and challenging the fundamentals of the world’s economy. There was only an idea, the execution on that idea, and the subsequent creation of value into the world.
Economics vs Tokenomics: DropBox vs. FileCoin
DropBox, currently valued at $10B, is a cloud based storage system that helps millions of people across the world. Users upload files and pay DropBox ($) to use its service. FileCoin, on the other hand, is a blockchain project with the same goal/mission, but achieving the feat in a decentralized manner. Users may upload files and pay (File Coin) to other peers on the network, allowing users to sell storage space to each other directly.
For simplicity, let’s imagine DropBox charges $10 to utilize 100GB a month on its servers. The company has a $5 cost to accomplish this, so each transaction represents $5 profit for DropBox. Over time, the amount of financial value (helping people use cloud storage) is measured by how much profit the company creates. Profit is the variable between value and reward.
The introduction of decentralized technology and blockchain based projects has enabled us to recreate this same value system without the need for that middle variable. When the Filecoin network launches, as with many traditional startups, there will be a low supply of storage and a low demand of people needing storage. For this reason, the native token (File Coin) has a very low price and economic value because there is little use case for it. However, if the network is able to increase its demand, and increase the quality of the product, the ecosystem will grow and the price of the token will organically rise (users need the coin to use the service). In this system, there is no ‘profit’. The token price simply resembles the value the network is helping generate at all times. There is no need to use fiat. There is no need to manually change the price. The network is self-sustaining, and the value is absolute.
The Paradigm Shift of Power
More than the original vision of Bitcoin, blockchain technology has presented a new world order of innovative freedom. No longer are developers just the builders, but collectively the origin and source of innovation itself.
Money is only a visual representation of perceived value; not the actualized value it creates. In the world of blockchain, money is nothing more than a middle-man, separating idea from innovation. The power of the decentralized world is in the hands of the blockchain developer, not the business suits.