Discover more from Matt Rickard
Is Ethereum a Dumb Pipe?
Telcos vs. the internet, SaaS vs. cloud providers – when can platform-owners compete with applications on their platforms? When are platform providers subject to only becoming dumb pipes that move bits instead of offering high-level services?
While I wrote that AWS is Not a Dumb Pipe, Ethereum (and Bitcoin, and many other web3 platforms) might be.
Ethereum wants to be a protocol – a published and formal specification, slow-moving changes by committee, and a relatively stable API and ABI.
Ethereum introduces new contract standards – ERC-20 (tokens) and ERC-721 (NFTs), which manifest simply as a few functions defined as an interface. These standards don't live in the runtime or infrastructure at all.
The fact that Ethereum has not included higher-level applications in the standard means that applications are more difficult to build – simple questions like "list all transactions to an address" require custom work.
Liquidity (apps, users, monetary liquidity) maybe means that these platforms are not interchangeable as they seem. AWS exhibits some network effects (mostly documentation and open-source), but mostly just economies of scale. Crypto protocols often have more network effects baked in.
Commoditized protocols (especially decentralized ones) often create value but have a different entity capture most of it. See examples of email (Gmail) or git (GitHub). Who captures the value? Scaling layers? On-ramps/off-ramps? Regulated exchanges?