Protocols as Minimally Extractive Coordinators — Placeholder

Protocols encode the rules of engagement that coordinate the exchange of a service between a global supplier and global consumer. The flatness with which a protocol treats everyone that interfaces with it is part of what drives its efficiency as a coordinator of exchange (no room for human corruption or capture).

If a supply-sider runs unprofitably for too long, they’ll shut down. But that doesn’t mean the protocol shuts down. The protocol only shuts down when the last supplier goes offline because they, too, were running unprofitably. If no supplier can run profitably it’s likely a poorly designed protocol, or one supplying an unneeded or overly crowded se... See more

Distributors are not imperative for every consumer (tech-savvy ones can go straight to the protocol), but I believe the majority of consumers will access protocol-produced-services through candy-coated distributors. For an example of this, look at how many people hold the private keys that control their bitcoin, versus store their bitcoin on a dist... See more

Competitive markets kill inefficiencies and drive down costs, which should allow protocol-coordinated-services to outcompete company-coordinated-services, accruing to the consumer’s benefit

One could argue that fat margins early is one way suppliers are compensated for the risk they’re taking as pioneers in cryptoland.

This is a deep, deep topic, so the simple thing I’ll emphasize here is a cryptoasset is used as the incentive layer to tie the suppliers, distributors and consumers together. While the rules that drive a cryptoasset’s value can feel similar to a profit-driven business, if you look more closely they are typically providing the incentive to connect p... See more

Protocols provide structure for businesses, but are not businesses themselves; they are systems of logic that coordinate exchange between suppliers (businesses) and consumers of a service. As coordinators of exchange, protocols should be minimally extractive, whereas businesses are incentivized to be maximally extractive (that’s profit, and a busin... See more

To avoid confusion, I should note minimal extraction doesn’t mean cryptoassets that capitalize protocols will capture minimal value; if something is minimally extractive, but globally produced and consumed, the coordinating asset can capture a significant amount of value.

Such strictness means the supplier and consumer don’t need to know each other, and without knowing each other they also have zero-recourse in meatspace-land, where things can get messy, slow and expensive.