Cryptocurrenices: the native business model of attention

There has been lots of attention this week on cryptocurrencies and blockchains, what with Consensus conf and the Token Summit and lots of related announcements.

And with like lots of new things (thinking back to Twitter circa 2010) I find myself spending a lot of time explaining to people what blockchains and cryptocurrencies are, and why we think they’re interesting.

It has taken us years to peel away layers of understanding around Bitcoin and blockchains — see “Bitcoin as Protocol” (2013), “The blockchain as verified public timestamps” (2015), “The Golden Age of Open Protocols” (2016), “Fat Protocols” (2016).  We’ve been chewing on this idea that cryptocurrencies aren’t just digital money, they’re something else — they’re a new way of storing and verifying data, a new way of building tech platforms, and a new way of monetizing activity on the web.

One way I’ve been thinking about it recently is that cryptocurrencies are the native business model for open source and open data.  I come from a background working in open data, open source, and open standards — mostly in the context of cities and governments.  I spent the better part of 2008-2011 working to advance standards like GTFS and Open311, and searching for the super-forces that would drive adoption (see Where Do Web Standards Come From?).  The big takeaway from that time was that standards don’t propagate themselves — you need some sort of major driver to pull them into market (in the case of GTFS it was Google Maps).

What we have now learned from cryptocurrencies and blockchains is that they can provide that driver.  By creating an economic incentive — the cryptocurrency or token — to create a shared open data asset, we now have powerful driver for open data, interoperable through open standards.   This is the point of Joel’s Fat Protocols piece — that with cryptocurrencies and blockchains, we can now monetize the underlying token and let the data be open, rather than controlling the data and monetizing access.  This is a really big deal.

Take that a step further, we can now re-think how we build “platforms”. Think social networks like Twitter, who have historically been forced to close down their APIs in order to keep attention within their own ecosystem, rather than let it “leak” to third parties. Blockchains and cryptocurrencies offer an alternative here as well — by monetizing through an underlying cryptocurrency, we can now afford to be “open” when it comes to platform interoperability.  As much as I dislike the Rare Pepe project because of its racist roots, one thing stands out: the way it’s open and interoperable by default. From this article describing the project:

Interoperability

Finally, the potential of rarepepe model doesn’t end with simple digital asset collection and trading. What’s even more remarkable about this token model is that third party developers or projects can bring external value and use cases to pepe tokens thanks to their open and permissionless nature.

Interoperability and permissionless nature is what differentiates tokens on the blockchain from closed proprietary systems or private blockchains whose essences are control and permissioned. Whether you like it or not, as long as it’s on an open and public blockchain people will create unexpected use cases and synergies that even token issuers cannot imagine sometimes. In my opinion, this is the biggest advantage of using tokens on a public blockchain and this type of cross collaboration has started to emerge already with Pepe.

For example. the Rarepepeparty project is developing a trading card game with some RPG element utilizing rarepepe tokens and user created memes. If you own those cards in your wallet and prove its ownership, you will be able to play your dank pepecards within the game.”

So what we have here is now a new business model for platforms.  Whereas in the past, you had to lock down your platform in order to control the flow of eyeballs, either for transactional revenue or ad dollars, now the incentives are flipped — the more people who use it and build on it, the better, so let it be open.

So really, what we have now is a new business model for attention.  One where we can be open to share attention with others, as long as we are bound by an underlying cryptocurrency or token.  This is relevant to any platform or network with an advertising-based business model.  As everyone knows, it’s hard to make money in the ad business if you’re not Facebook or Google, so it’s exciting to think that maybe you don’t need to be in the ad business to build a successful and sustainable social platform.  This is what Kik is pioneering today with the launch of the Kin token, and if this works I suspect it will be a model that many ad-supported networks follow.

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  • jason wright

    adapt or die – so what are Google and Facebook working on?

    • great question – no doubt it’s a topic of conversation if not active experimentation

  • Hit the nail on the head with this one, Nick! I’m going to be sharing this with some of the growing number of people asking me why ETH is valuable – this helps explain what the open token economy really means.

    • awesome, glad it helped — we are here to serve…

  • awaldstein

    Nicely explained.

    So here is what I don’t get.

    Kik does what it just did so boldly.

    I’m Nike or Bose and have a few hundred million dollars in brand marketing budget to tarket Kiks users.

    There is no play within almost any of these structures for brands.

    What happens to that budget? How do these big brands play in this structure?

    • wouldn’t they just buy Kin and allocate them as they saw fit as part of the promotion?

      • awaldstein

        so brand is simply a monetary exchange?

        • not sure I totally understand the question…. I think with any cryptocurrency on any network, it becomes and internal and external currency that can be bought and earned, so brands who wanted to participate that way could if they wanted to.