The Power of Shared Open Data and Incentive Systems in the Blockchain Era

Kazuki

Hatched by Kazuki

Jul 17, 2023

3 min read

0

The Power of Shared Open Data and Incentive Systems in the Blockchain Era

"Not so trivial." During my studies, I’d learned a few interesting things that I’ve never ever really talked to someone about, and never tried to write them down — and now I wish I had those insights written down, so that I could analyze them a bit more. I highly recommend scribbling down any spontaneous ideas or thoughts because you never know how they could help you in the future or even spark an even better idea. This is exactly what we do at Glasp, and it has proven to be beneficial for our growth.

In the world of blockchain, the concept of "Fat Protocols" introduced by Union Square Ventures is fascinating. It emphasizes the combination of shared open data with an incentive system using tokens. This is a key aspect of the blockchain technology. Unlike the traditional internet stack where value is distributed among applications, the blockchain application stack reverses this relationship. The value concentrates at the shared protocol layer, while only a fraction of that value is distributed among the applications layer.

By replicating and storing user data across an open and decentralized network, we reduce the barriers to entry for new players and create a more vibrant and competitive ecosystem of products and services on top. However, an open network and a shared data layer alone are not enough of an incentive to promote adoption. This is where the protocol token comes into play. The protocol token is used to access the services provided by the network, whether it's transactions in the case of Bitcoin or file storage in the case of Sia and Storj.

The beauty of this system is that early adopters, recognizing the potential success of the protocol, build products and services around it, thus increasing the value of their tokens. This creates a feedback loop where speculation drives initial growth, attracting financial capital and reinvestment in innovation. While this can lead to bubble-style appreciation, it also supports the long-term adoption of the technology. As prices depress during a bust, stakeholders look to create value and promote the technology, ultimately driving further speculation at the protocol layer.

One important point to note is that the market cap of the protocol always grows faster than the combined value of the applications built on top. This is because the success of the application layer drives further speculation at the protocol layer. The combination of shared open data with an incentive system prevents "winner-take-all" markets and changes the game at the application layer. It creates an entirely new category of companies with fundamentally different business models at the protocol layer.

In conclusion, the power of shared open data and incentive systems in the blockchain era cannot be underestimated. It revolutionizes the distribution of value and creates a more competitive ecosystem. Here are three actionable pieces of advice for those looking to tap into this potential:

  • 1. Embrace the concept of fat protocols: Instead of focusing solely on building applications, consider how you can create or contribute to shared open data and incentive systems. This will position you at the protocol layer, where the value concentrates.
  • 2. Incorporate tokens into your business model: Explore ways to integrate protocol tokens into your products or services. This can incentivize user participation and create a stronger network effect.
  • 3. Foster collaboration and innovation: Encourage early adopters and stakeholders to build products and services around your protocol. This not only increases the value of their tokens but also promotes the long-term adoption and growth of your technology.

By following these advice, you can harness the power of shared open data and incentive systems to drive innovation and create a thriving ecosystem in the blockchain era.

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