16 Aug 2021
Web3 1 Comment
08/16/2021 invisio

Thread heavily inspired by Chris Dixon’s lecture: “Crypto networks and why they matter.”

“What problem does blockchain solve?” 

It’s a common question among crypto skeptics. And it’s a fair one – typically, products that can’t solve problems are flops. But is blockchain a product? Or is it a design space?

 

What the hell is a design space?

What is a design space? It’s a platform that lets you build new things on top of it.

PCs were a design space for MS Office and video games. 

Internet was a design space for social media and SaaS businesses.

iPhone was a design space for Uber, Tinder, and Google Maps.

 

As you might’ve noticed all the ‘new things’ mentioned above were a type of app. That’s because PC, Internet, and iPhone are computing platforms – an environment where a piece of software (an app) is executed.

And the more useful apps have been created, the more attractive these computing platforms became. But it’s a double-edged sword. The less useful apps, the less attractive the computers.

Imagine:

  • PC without software, 
  • Internet without e-mail and browser, 
  • iPhone without apps.

They would remain just toys for a handful of geeks. 

As blockchains are a new type of computing platform (we’ll get to the explanation later), we need to understand how this business model works.

 

Why computing platforms take so long to become powerful

So the goals for the computing platforms are:

1) create a design space that lets developers build a new type of apps,

2) then bring developers and entrepreneurs on board to build apps,

3) then, bring users to pay for the computing platform so they can use the new cool apps.

When the number of good apps reaches the critical mass, it builds strong positive feedback loops. That’s what happened in PCs, the Internet, and iPhones.

 

But how to convince developers to produce apps for a computing platform that has almost no users?

In the PC & Internet case, the platforms were technologically interesting, and hackers built apps for other hackers. That’s why the UX of the first PCs and Internet was hard.

 

 

The iPhone case was a little bit different. Steve Jobs made sure that the first iPhones had iTunes, Google Maps, e-mail, and the browser, to make the device useful for non-hacker users.

 

But even despite his efforts, iPhone was pretty hard to get in the early days. So were PCs and the Internet. 

In 1985 (9 years after the foundation of Apple), Steve Wozniak, Apple Co-Founder, thought that PCs were oversold. 

David Letterman was making fun of the Internet in 1995 (4 years after the first web browser) because it had almost zero truly innovative apps that were mainstream.

 

iPhone hasn’t been understood by journalists from TechCrunch, AdAge, Bloomberg, Guardian, and of course Steve Ballmer, who famously said: “There’s no chance that the iPhone is going to get any significant market share.”

https://bgr.com/tech/iphone-reviews-original-negative-ballmer-dvorak/

 

This pattern repeats itself with every new computing platform. That’s because it sometimes takes years until one of the 1000s apps becomes a ‘killer app’ that makes the computer worth buying. (For me in the 90s, this killer app for PC were video games)

 

Blockchain is a new type of computer

Why it’s important? Because, according to Dixon, blockchain is a new type of computer. 

It’s a computer that can make commitments, which means it can hard-limit itself. And because of that, blockchain can take different shapes.

Bitcoin is an application-specific computer like an Xbox or calculator. 

Which means it has many hard limitations. And thanks to these limitations, Bitcoin can perform its main task – storing and exchanging money – better.

 

Ethereum, on the other hand, is a general-purpose computer like a PC or iPhone.

Thanks to fewer limitations, developers can create more apps. That’s why there are 1000s of apps on Ethereum from art and music, through lending & borrowing, exchanges, games, social networks, and more.

 

There are other types of specialized blockchain computers. Solana is optimized for fast transactions. Arweave for file storage. And DeSo for social media.

Because blockchain is a new type of computer, it lets you create new kinds of apps. And because ‘software eats up the world,’ it’s big news. 

That’s why a16z built a giant $2.2B crypto fund.

 

What apps do blockchains bring to the table?

What kind of apps can now be created? Mostly apps that let you own, exchange, and distribute digital things – cryptocurrencies and tokens.

The most popular apps take the forms of Wallets, Smart contracts, NFT marketplaces, Decentralized Exchanges, and DAOs.

 At this point, most apps are skeuomorphic.

That’s why many people go into 1995 Letterman mode and say:

“Money transfers? Does a bank ring a bell?”,

“Owning company’s tokens? Do stocks ring a bell?”

“Logging in with Wallet? Does ‘Log in with Google ring a bell?”

 

But blockchain has already experienced real innovation. 

Like play-to-earn games such as Axie Infinity that haven’t been seen before. Like NFTs. Or DAOs. There are also numerous intriguing B2B applications on Hyperledger.

Here are some ideas from the 2020 Balaji Srinivasan’s lecture about potential killer apps on Blockchain.

The slide is around 2 years old, so some of the examples might be outdated (like OpenBazaar and CryptoKitties), but it gives a glimpse into what’s happening in the space.

Blockchain computer will get more powerful but it’s already good enough for some use cases

Okay, but if blockchain is a computer, is it a powerful one? To build powerful apps, you need a powerful computer.

You wouldn’t create:

  • MS Office for 70s PC,
  • Fortnite for the iPhone 1,
  • Or Salesforce for 56kbps Internet.

And Blockchain – like all early computers – is far from perfect. 

It means that some apps are now impossible to build because the infrastructure isn’t good enough. 

If you wanted to use blockchain, e.g., for playing Counter-Strike, it would be a disaster. You would experience big lags, and one day of playing a game would cost a fortune.

But it doesn’t need to be perfect from the start. iPhone 1 was good enough for Google Maps and Apple I was good enough for coding.

Blockchain’s present infrastructure is good enough for NFTs and DeFi. 

That’s why the De-Fi market has grown over 10X since the start of 2020:

And infrastructure matters.

Moving from 3G to LTE:

  1. Created space for data-heavy apps (YouTube, Snapchat, Instagram),
  2. Made smartphones more useful,
  3. And convinced more people to buy and use smartphones.

We might see the same effect when new blockchains get more powerful.

 

That’s why the community is working hard to improve blockchains. 

Bitcoin uses Lightning. 

Ethereum moves to ETH2.0. 

New blockchains such as Solana, Polkadot, and DeSo arise.

 

Because people earn crypto for creating a network, adding features, or operating it, they have financial incentives to make Blockchains better.

As Chris points out, it’s a Moore’s Law in its economic sense:

“If a lot of smart people who know computer science start thinking about computer science problems and have an economic incentive to do so, those computers tend to get a lot lot better.”

 

Blockchains are magnets for developers

Okay, so we have new apps, and the computer will get better. But what about developers that are key to the computing platform’s success? 

Look at @DarenMatusoka’s numbers of Ethereum developers joining the network. Similar trends are observed in other major blockchains.

So blockchain, like a proper computer platform:

1) delivered a design space that lets developers build a new type of apps,
2) brought developers and entrepreneurs on board to build apps,
3) and now finally brings users to the computer so they can use the cool apps.

 

The future of blockchain

It’s not hard to notice that blockchain experienced all the hype and doubts just like the older computing platforms.

But as blockchain computers get better and developers create new apps, some products such as MetaMask reach over 10 million active users.

It took 12 years, but it’s not that long for such a complex technology.

Blockchain obviously won’t take over everything. Just like you don’t do spreadsheets on your iPhone, you won’t do everything on the blockchain. But it is already a thing. And can play a vital role in the history of tech, serving as a backbone of Web3. 

Personally, I think that most people won’t even know that they use blockchain-based apps in the future.  Like most people don’t know, they use TCP/IP protocol when they surf the web or SMTP protocol when they send their e-mails.

As blockchain computers get more users, the developers will follow, and new apps will emerge. In the same way, as it happened with PCs, the Internet, and iPhones. 

That’s why the blockchain/crypto/Web3 community is so exciting to participate in. So if you’re interested in the future of the Internet, I highly recommend following this subject.

If you want to follow some crypto/blockchain/web3 OGs I recommend:

@cdixon on Web3,
@punk6529 on NFTs,
@packym for deep dives,
@balajis for all things blockchain/society/economy,
@FEhrsam for one-liners,
@neerajKA for current affairs commentary.

 

And if you want to learn how real projects work, I invite you to listen to Web3 Talks podcast where I ask Web3 founders about their projects, business models, customer acquisition strategies, and more. 

You can listen to it here.

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