The Future of Technology: Combining Familiar Surprises and Incentivized Protocols

The Future of Technology: Combining Familiar Surprises and Incentivized Protocols

Subscribe to Sequoia's newsletter. This simple call to action reflects the mindset of successful entrepreneurs and investors. When entering a meeting or considering an investment, it's important to have a positive outlook on what the company could become. What type of future is this team creating? What type of future do I want to live in? What type of future do I want this company to help create?

To answer these questions, one must consider the unique opportunities that exist in the market or ecosystem. What has changed to enable this opportunity today? Why couldn't it have been created earlier or later? The success of many technology giants can be traced back to a key enabler, whether it's a technological advancement or a shift in consumer behavior. These companies take advantage of the perfect timing, harnessing the curiosity of consumers while providing them with a sense of familiarity.

In the world of blockchain and decentralized applications, the concept of "fat protocols" has emerged. Unlike the traditional internet stack, where value is concentrated at the application layer, blockchain flips the script. Value now concentrates at the shared protocol layer, with only a fraction distributed to the applications layer. This shift is made possible by the combination of shared open data and an incentivized token system.

By replicating and storing user data across an open and decentralized network, rather than individual applications controlling access to silos of information, we create a more vibrant and competitive ecosystem. This reduces barriers to entry for new players and promotes innovation. However, an open network and shared data alone are not enough to drive adoption. This is where the protocol token comes into play.

The protocol token serves as a means to access the services provided by the network. Whether it's transactions, computing power, or file storage, the token fills the gap and incentivizes adoption. Early adopters recognize the potential of these protocols and build products and services around them, further increasing the value of their tokens.

It's important to note the role of speculation in the early growth of these protocols. Interest often outpaces token supply, leading to bubble-like appreciation. While speculation may seem volatile, it actually drives technological adoption. The boom attracts financial capital, some of which is reinvested in innovation. The bust that follows can support the long-term adoption of the technology as prices depress and stakeholders look to create value around it.

This combination of shared open data and an incentivized system disrupts the traditional "winner-take-all" markets. It creates a new category of companies with fundamentally different business models at the protocol layer. The market cap of the protocol always grows faster than the combined value of the applications built on top. The success of the application layer drives further speculation at the protocol layer, creating a positive feedback loop.

In conclusion, the future of technology lies in creating familiar surprises and incentivized protocols. Understanding the unique opportunities in the market and harnessing the power of shared open data can lead to innovative solutions. Here are three actionable pieces of advice to consider:

1. Embrace the neophilic-neophobic paradox: Consumers are curious to discover new things but also afraid of anything that is too new. Find ways to marry new and old, creating moments of meaning that resonate with your target audience.

2. Look for key enablers: Timing is crucial in the success of any venture. Identify the technological advancements or shifts in consumer behavior that uniquely enable your opportunity today.

3. Harness the power of speculation: While speculation may seem volatile, it has proven to be a driving force behind technological adoption. Understand the role it plays and leverage it to attract financial capital and promote innovation.

By combining these insights and taking action, we can shape a future where technology creates meaningful change and opens up new possibilities for all.