Continuing on the theme of what decentralization is good for, this week I would like to focus on one of the most powerful drivers in the near-term: Platform Risk.
Platform Risk is is the risk that the tech platform that you build your product/app/business/life on will become a critical dependency, will become unreliable, and/or worse, will screw you in the end.
Here is a post from a few years back that details many different flavors of platform risk, many of which are benign, and some of which are malicious. And here are some examples, to make it more concrete:
- Microsoft Windows: withholding APIs & documentation from competitors, and blocking distribution
- ISPs / Telcos: blocking / throttling certain kinds of traffic (especially video & VoIP)
- Google: determining the fate of sites reliant on search traffic and therefore at the whim of the algorithm
- Apple / iOS: blocking competitive apps, withholding APIs, taking a 30% cut, to the point that app developers have formed a union
- Amazon: competing with third-party sellers and manipulating search results
This is not to say that any of these acts are necessarily illegal, or even immoral. But if you are investing serious time and money — especially dropping everything to build a business on a platform — these kinds of risks are of grave concern.
So, what does decentralization have to do with platform risk? When the platform is a protocol (i.e, decentralized) rather than a company (i.e., centralized), the rules of engagement are known up front and can’t change on a whim or because of a business decision.
If we think about the original internet protocols (TCP/IP, HTTP, SMTP, FTP, SSL, etc), they are a set of networking, communications and data exchange protocols that ultimate form the platform we know of as the web. While there are certain forms of platform risk on the web (e.g., stability, speed, security), the web on the whole has become a very stable and reliable platform, generally absent of the flavors of risks detailed above.
Cryptonetworks (i.e., public blockchains and cryptocurrencies) combine the architecture of the original internet protocols with the functionality of today’s corporate applications platforms (data management & transactions). While there are still major issues to solve before these systems collectively become a mainstream platform, they are gaining major adoption from developers in large part because developers are so keenly aware of platform risk, and see cryptonetworks as a type of platform they can trust.
As an illustrative example, let’s compare downloads of the Truffle framework (a popular dev tool for Ethereum):
… with the price of ETH over the same time period:
Developers are the canary in the coal mine when it comes to platforms. And at the moment, they are pointing to the desire for platforms with less inherent risk, more reliability and more trust.