Blockchain's Killer App: Movement of Value
When I fell down the Crypto rabbit hole in 2017, I was excited to understand how crypto can solve real world problems. One of the earliest papers I wrote with a Harvard Professor was exploring how blockchain can be used to enable what we called the Movement of Value. We focused on understanding the payments use case in the context of emerging markets.
After being in Web 3 for a few years now, the Movement of Value isn’t simply a payments use case / just relates to monetary value… it’s much more.
Today we explore how tokens, the technology / tool enabled by blockchain, power the Movement of Value. Hope you enjoy the read!
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What is blockchain good for?
Whenever new technology / innovation surfaces, we ask what is it even useful for?
Working in Web 3, a lot of skeptics ask me: what is the killer application for blockchains?
When most of us in Web 3 get this question, we start going down a rabbit hole to defend blockchain. We start talking about some combination of:
Proof of Work vs Proof of Stake
Inevitably we lose the skeptic in the details and jargon. 😵 😵💫
From the skeptic’s point of view, they are looking to find and understand the killer app — the one application / use case that applies to everyone. I.e. the new innovation is only useful if there is a killer app that only the new innovation can enable and it also adds a lot of value to a lot of people.
Maybe There is No Killer App
But perhaps the killer app thesis is the wrong framing for innovative technologies.
I went down a rabbit hole and found one of Vitalik’s old essays: The Value of Blockchain Technology
(For the uninitiated, Vitalik is a co-founder of Ethereum. Before Ethereum, he cofounded and wrote for Bitcoin Magazine — where he was writing about ideas that would eventually become the foundations of Ethereum… Talk about building in public).
One particular point stood out to me: What if all innovation is really about convenience and serving the long tail? i.e. there is no killer app in blockchain
Said another way, blockchains are not necessary, but they are convenient. Even if blockchain is a marginally better tool to solve a problem and they provide utility to a bunch of people, then they are useful.
Something is useful if the net value is greater than zero (value minus costs) i.e. does the innovation provide utility, and to how many people?
Whether there is one application (i.e. killer app) or many applications that each serve smaller groups of people is beside the point.
I prefer this framing because any major innovation rarely has just one use case. Major innovations (steam engine, the internet, etc) should have many use cases. If it is truly a major innovation, they should disrupt and change most, if not all industries.
Let’s look at two major innovations: The steam engine and the Internet.
What is the killer app of the steam engine?
Some say it’s the car. But transportation was already a concept before the steam engine. Before cars, humans were already finding ways to be mobile. The only difference is the steam engine made it more convenient to travel (i.e. cars are more convenient than horses).
What is the killer app of the Internet?
Some say it’s social media. But it’s not like social media wasn’t around before the Internet, it was just very inconvenient. Before social media, humans were already finding ways to be social. The only difference is that the Internet made it more convenient to socialize (i.e. digital social media is more convenient than IRL social)
Innovation always builds on an existing foundation. Innovation doesn’t start from scratch and invent a problem to solve, rather innovation reimagines how to solve a particular (existing) problem.
Both examples above highlight how the respective innovation brought utility in greater convenience to a lot of people. But these innovations also enable countless other “killer apps” and use cases.
The steam engine enabled more than the car.
The Internet enabled more than social media.
Blockchain’s Critical Job-to-be-Done
So … Why are blockchains useful?
If I had to choose a killer app or a few critical use cases for Blockchain, they would all center around formalizing the Movement of Value defined as the expression and/or exchange of value.
Expression of Value: define / represent any kind or any unit of value
Exchange of Value: trade / spend / receive that value
In every interaction in human society there is an expression / exchange of value.
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There are a few frameworks on value, but they all boil down to a few key value types:
Utility: value derived from some thing (a) solving a problem and/or (b) executing on a task. E.g. A hammer provides utility
Monetary: value derived from agreeing that something is “money” or a medium of exchange. E.g. ETH, USD
Social: value derived from interactions with others (extrinsic). E.g. an NFT that gives you access to a closed community.
Psychology: value derived from simply believing something is valuable. E.g. A painting that you find valuable simply because you like.
Defining anything along these value types is not objective but rather relative to the individual and/or context. E.g. what one considers as Social Value may be Psychological Value to someone else… you see this NFT as art, I see the same NFT as access to a community.
Taking the above further, it’s more interesting to look at the Movement of Value (expression / exchange of value) and how these value types interact with each other … because that is what Blockchain improves upon.
The open Movement of Value (expression / exchange of value) is Blockchain’s key Job-to-be-Done.
(Cryptographic) Tokens (fungible tokens, NFTs and Soulbound) is the application that formalizes the Movement of Value.
Tokens Power the (Open) Movement of Value
Tokens are infinitely programmable.
They can be programmed to formalize and represent value of any kind. Because their design space is infinite, they have the potential to bring the most utility to the most people. Cryptographic tokens can power an endless number of use cases — all of which are rooted in the Movement of Value.
If the Internet allowed for information to move at scale, blockchains enable value to move freely at scale (through tokens).
Value on the internet is not a new concept, but before crypto, there was no way to represent value without an intermediary, at scale. If a community found items in the video games they play to be valuable, they needed an intermediary to agree with them to formalize this value. They cannot trade or exchange the value with each other without an intermediary.
In Web 3, you can exchange this value without an intermediary because it’s open and permissionless. Web 3 promotes a bottom-up and grassroots approach to allow any number of individuals to define what is valuable (expression) and move that value (exchange) … all through programmable tokens.
Why is this Valuable?
We are not saying the state of the world today as it relates to tokens and blockchains is perfect… far from it.
But the technology tool (tokens) has already arrived (albeit nascent), what hasn’t are all the use cases that serve the long tail of users, i.e. the rest of us. This is a function of the space being so early in its life cycle but innovation is accelerating. [See: Web 3 Renaissance]
The more interesting question is: what does the Open Movement of Value enable?
Being able to represent / formalize / express anything of value and then move / exchange that value freely enables markets to proliferate.
Infinite markets enable infinite sub-cultures.
Infinite sub-cultures enable infinite communities.
Infinite communities enable everyone to belong at any level they want.
The legitimacy of these markets, sub-cultures, communities are decided by the participants through concepts such as utility, adoption and distribution. Tokens on blockchain formalize all of this.
As far as killer apps go, tokens come pretty close.
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This post was written for purely educational purposes. Nothing written in this post should be taken as financial advice or advice of any kind.
Empower yourself, DYOR (do your own research).