
The Golden Age of Open Protocols - worldvoyageur
http://avc.com/2016/07/the-golden-age-of-open-protocols/
======
dasil003
I usually like Fred Wilson's essays, but I have to feel like he's on the
wishful thinking hype train on this one. Through the lens of VC (and finance
at large) monetization is always the question. However Fred is too quick to
ignore that what usually makes open protocols successful is being free and
relatively simple. Throwing blockchain tech into the mix is going to add
tremendous complexity and friction to any protocol which will then be out-
competed by a true open protocol.

Underlying this wishful thinking I smell a frustration that investors can't
make money from open standards. But the reality is that open standards bring
an incredible amount of value to companies and individuals that rely on them.
Think about the transaction volumes happening over HTTP or SMTP, let alone
TCP/IP. The value is immeasurable, it's just that finance can't get a piece.

This is one of those areas where we have to recognize that economics and GDP
do not tell the whole story of human value. Blockchain tech is really cool,
and I don't think we've scratched the surface of where it will eventually go,
but I just feel dirty when I see how excited VCs and finance guys get about
it.

~~~
srtjstjsj
> This is one of those areas where we have to recognize that economics and GDP
> do not tell the whole story of human value.

This is true, but in the other direction from your statement's surface
meaning:

Open standards are in great us, but count as $0 in GDP, since they are free.
You might say that means that GDP undercounts value. but really, no one
derives value from open standards -- open standards enable valuable
activities, some of which are GDP (for example, ecommerce), and some of which
are not (for example, emailing pictures to my grandma, which is negative GDP
compared to printing and mailing).

GDP overcounts:anything we spend money on is GDP, even if it is just a means
to an end; and undercounts: many valuable things have no price, and more
generally, most purchased end-user products are worth more than their price.

~~~
barrkel
Using GDP as a measure is only ever done because we don't have reliable
alternative measures. We set up economic systems not because they are good in
themselves, but because they're a way of connecting productive capacity to
demand with the ultimate aim of increasing well-being - the pursuit of
happiness and all that. Some people seem to lose sight of that: capitalism too
is not an end in itself, it is a means to an end. Financialization needs to be
watched closely to ensure it's still hewing to society's best interest.
Arguably Brexit, Trump et al are emerging from this gap.

------
Animats
This is micropayments, again. There have been many, many micropayment schemes.
The trouble with micropayments is that all the enthusiasm for them comes from
the people who want to collect them, not the people paying them.

One of the better ideas was micropayment email, as a solution to spam. You
have to pay the recipient to get an email through, unless they've whitelisted
you as a friend. A centralized service could do that. (One could see Gmail or
Facebook doing that. LinkedIn already does. So do some dating services.)

Doing it in a distributed way is hard. Blockchains probably won't help; the
cost of a Bitcoin transaction is too high and the network capacity is orders
of magnitude too low for mail. Local proof-of-work systems have been
suggested, but never caught on. (Probably not a good idea in the era of
battery-powered devices.) Worth thinking about, though.

Urbit has a scheme where identities are anonymous but not free. That's an
anti-spam measure, because spamming results in negative reputation for a paid-
for identity. It thus make spamming expensive. Urbit is probably too weird to
get much traction, but there are good ideas in there.

~~~
runeks

        > The trouble with micropayments is that all the enthusiasm for them comes 
        > from the people who want to collect them, not the people paying them.
    

That's because the people paying them have never lived in a world where micro-
payments are possible, but the people who want to accept micro-payments have
studied them, and see a potential. It's like before the car was invented: all
the enthusiasm came from car inventors, not the general public; the people
just wanted faster horses.

Micro-payments enable applications that were not possible before, like
trustless pay-per-view, where you pay 0.1 cent per second of video. So the
excitement is understandable, I think. The execution just hasn't been all that
impressive.

I think the Stroem protocol [1] will be the winner in the short term (within
the next decade), enabling a form of micro-payments that are not trustless,
but with so little barrier to entry for micro-payment issuers and so huge
benefits (send money to anyone anywhere instantly and incredibly cheap), I
think it's inevitable. But just as with Bitcoin, we have to accept that it's
not what some crypto enthusiasts envisioned. With Bitcoin, many people thought
some cryptographic construction would solve the double spend problem, but in
the end it was brute force - proof of work - that (partially) solved it. I
think the same will be the case for micro-payments. We want trustless micro-
payments, of course we do, but in the end I think a promissory note-based
system will be stable enough that its lack of complete trustlessness (á la
Bitcoin) won't be a deal-breaker.

[1] [https://www.strawpay.com/docs/stroem-payment-
system.pdf](https://www.strawpay.com/docs/stroem-payment-system.pdf)

~~~
marssaxman
I see it exactly the opposite way. The people getting excited about micro
payments are the ones who have failed to grasp the revolutionary potential
offered by the prospect of doing things collectively, in distributed fashion,
without having to saddle every interaction with the overhead of commerce.
Amazing things become possible when you give up the need to pay and be paid;
the micropayment people don't seem to be able to see that vision.

We've been doing commerce for millennia; it is profoundly boring.

~~~
jwatte
If there is no payment system, then resources are guaranteed to be
oversubscribed and exhausted if they are at all interesting. In the Iain M
Banks Culture, that works, but we're not there yet.

~~~
marssaxman
That's the scarcity model in a nutshell, and it has run its course. We won't
get to a Culture style future by nickel-and-diming each other; we'll get there
by developing better mechanisms of communication, fostering low-overhead group
decision-making, which will allow us to collect, share, and distribute
resources without having to run everything through the enervating meat-grinder
that is commerce. Capitalism got us where we are, but we have to build
something better if we want to go further.

The best parts of my life are already voluntary, cooperative, and social -
people working together to make things better for each other. I want more of
this, not less. Micropayments just drag the old way into the new. Why waste
our time on that? Let's build the future we actually want to live in.

~~~
pipermerriam
This. A thousand times this.

------
jondubois
What the author describes, I would not call 'protocols' \- The Bitcoin network
is a hosted implementation of the Bitcoin protocol - It is not the protocol
itself.

Tokens in the context of the Bitcoint protocol itself have no value - The
value is derived from the popularity of the infrastructure, not from the
popularity of the protocol.

If I forked the Bitcoin repo tomorrow and started my own altcoin based on it,
my tokens would be worth $0 because nobody would know about or want to buy my
virtual coins - Even if my network was based on the Bitcoin protocol.

The monetization does not occur at the protocol level - It occurs at the
implementation/infrastructure level. You don't need tokens to monetize an open
source project - The root of the strategy is merely to leverage the popularity
of your open source project (and your status as its 'leading expert' \- Since
you built the thing) to offer a hosted/managed implementation of that open
source project.

The value of tokens merely represents a stake in a specific implementation of
a hosted/managed service - There is nothing open about that. It's the
equivalent of paying a monthly fee for using a hosted SaaS.

------
cocktailpeanuts
This assumes that people will pay for some service. But I think there will
always be someone who will just provide a free service to get rid of friction
as much as possible and monetize via ads. Nowadays it's extremely cheap to run
an app. Which means these hypothetical blockchain based apps will always be
competing with a "closed" yet free version of itself, which has 0 friction.

Using the Twitter example, I can't imagine how a service that makes you pay
for Tweeting can grow larger than a service that's completely free. The only
motivation I can think of is people actually making money (in the blockchain
currency) by Tweeting or any value generating activity, but this is also based
on the assumption that this network becomes huge, otherwise stacking up these
points won't matter that much anyway. Which goes back to my first point--I
can't think of how this decentralized Twitter can be larger than its
centralized counterpart.

Just trying to understand if I'm missing something. Can anyone enlighten me?

~~~
Eerie
> But I think there will always be someone who will just provide a free
> service to get rid of friction as much as possible and monetize via ads.
> Nowadays it's extremely cheap to run an app.

Blocking the ads is cheaper.

~~~
cocktailpeanuts
than what?

~~~
draw_down
Paying

~~~
cocktailpeanuts
Dude if you have a point to make, by all means do it, but don't half ass your
comments with one word, because I have no idea what you mean by it's cheaper
to block the ads than pay for it. Blocking is done by end users. Paying for
ads is done by advertisers. They are different people.

------
shmerl
_> One of the problems we have had in tech is that there aren’t large monetary
incentives to create and sustain open protocols. If they are open they cannot
be easily monetized by traditional means._

Protocols should not be monetized. They exist for interoperability. Monetizing
protocols is bad, because it's aimed at monopoly which always results in
stagnation rather than progress.

Of course lock-in crooks like using closed / non-free protocols to control the
market. But it's evil.

 _> OSS projects have been able to gain a foothold in many server applications
because of the wide utility of highly commoditized, simple protocols. By
extending these protocols and developing new protocols, we can deny OSS
projects entry into the market. _

Source:
[http://www.catb.org/esr/halloween/halloween1.html](http://www.catb.org/esr/halloween/halloween1.html)

------
runeks

        > In this emerging model, Twitter could have adopted a   
        > protocol-based approach and issued a crypto-token, 
        > Twokens, that users could earn from things like amassing 
        > followers, reporting abuse, etc. Twokens could also be sold 
        > by the Twitter founding team to finance their operations. 
        > Crypto-exchanges could make a market in Twokens so that 
        > anyone who wanted to speculate on the future value of the 
        > Twitter protocol could do so.
    

I don't understand this line of thought. A _Twoken_ would be a sort of
irredeemable financial instrument, which Twitter would issue hoping that
speculators would mistakenly value these tokens based on the value of Twitter,
as a company?

Common stock in Twitter is a financial instrument that gives you part
ownership of Twitter. It has value because Twitter, as a company, has value.
Twokens would be a financial instrument that gives you nothing, except the
hope that other people will misunderstand this fact and buy them, pushing up
the (offer) price. Great for speculators, useless for everyone else.

~~~
lisper
No, twokens would have had value because you could redeem them for a share of
the audience on Twitter.

~~~
runeks

        > [...] redeem them for a share of the audience on Twitter.
    

I don't understand what you mean by this. Can you clarify?

~~~
lisper
I don't really know how to make it any clearer. Twitter could, if they chose
to, "sell eyeballs" by promoting/preferring certain accounts and/or tweets
over others. They could sell these preferences and promotions for twokens,
which would in turn lend some legitimacy to the promotions because twokens
would have to be "earned" somehow. I'm not saying this would necessarily be a
raging success, only that Twitter could ground the value of twokens in their
ecosystem.

------
alexmingoia
The problem is there's no way to estimate costs without a price up-front. You
have to determine how many "tokens" to charge and that price won't be stable
like the dollar. Just imagine paying a fixed BTC per request. It would be
impossible to predict your costs. Of course you could peg it to the dollar but
that's what we already do with paid API subscriptions which have a price known
up-front with limits. I don't see what blockchain tech has to do with charging
for API access.

~~~
pfraze
> I don't see what blockchain tech has to do with charging for API access.

In the situation he's proposing, Twitter's product wouldn't be an API; it
would have to be a blockchain protocol.

> You have to determine how many "tokens" to charge and that price won't be
> stable like the dollar.

I agree, pricing is a problem. Do you poll exchanges for the current rates,
every time you make a transaction? It's not ideal.

I think Twitter is a bad example, also. Twitter and file-hosting are already
free, within usage constraints. Why would people want to start paying for it?
Also, all of the blockchain clones of Twitter have been much less efficient,
and provided little benefit over the central model.

\- edited for brevity -

------
erlehmann_
Twitter does not have any incentive for open protocols. They even disabled
feeds because you could follow people using any non-official client that might
block advertising.

Blockchains do not solve the human problem, people wanting others to run
software they provide and not any other. This, like Apple and Google locking
down devices and Facebook and Google discontinuing XMPP, is about power.

------
hashkb
I have a hard time getting on the same page as the author. How is a protocol
where the owner charges for usage and rewards particular actions with a
currency they own "open"? If we are distinguishing between "open" and "free"
(SMTP and other examples given by OP would be both open and free) then that
should be clarified.

~~~
api
Open means it is documented and anyone can interoperate or create a compatible
implementation. The S3 API is open and there are many competing
implementations, but Amazon de facto holds the reference implementation.

A SaaS value add "orbit" is another way to monetize. Personally I think going
all cryptocurrency on this is overthinking it in most cases.

------
jkot
> _But at the time, there wasn’t an obvious way for Twitter’s founders and
> management team to benefit from a protocol-based business model._

> _innovative new protocols emerge that are based on this new business model._

I think it is wrong to think about it in terms of "business model". Protocols
(such as HTTP) do not have any business model, but they evolve just fine.

Replacement for twitter will eventually emerge, but I do not think it will be
controlled by single entity. Why use crypto-currency to pay for tweets, if you
can embed entire twitter into blockchain?

~~~
mdellavo
HTTP response 402: Payment Required

"reserved for future use"

------
apatters
For me at least the definition of an open protocol is one where the spec is
published and anyone can develop a complete implementation by following it
which is free from licenses, royalties, etc.

I don't understand exactly what the proposed business model is or how it works
here. If the business model is for Company X to develop and release a new open
protocol which requires that implementations pay them cryptocurrency upon use,
what's to stop implementers from just not implementing that part of the spec?

Or if the business model is that the protocol is both open and free, and
Company X issues some new cryptocurrency in the hopes that people will
speculate on it, why would they do that? By this article's own admission
business models built around open protocols have disadvantages versus those
built around closed protocols. So why would anyone want to bet on this
company's future by buying its currency?

I guess the one thing I could see working would be if the company built not
only the open protocol, but the initial user base to go along with it. If that
user base was large enough before other implementations appeared, subsequent
implementers might go ahead and pay whatever taxes the original implementer
imposes in order to gain access to that user base. But this would imply that
companies shouldn't launch with open protocols, they should only open up their
protocol after it has succeeded; and also if the originator of the protocol
controls such a large part of the user base, I don't see what stops them from
moving those users to new versions of the protocol which progressively raise
the fees they charge other implementors.

It bears mentioning that few if any of the open protocols we enjoy today were
commercial projects which originated in the private sector and had a profit
motive. If we can come up a way to align maximum profits with being open then
that is great but it's worth considering other approaches as well. For example
if a single, entrenched company controls a particular protocol with a large
user base then developing an open alternative might be a good way for a
consortium of competitors and other interested parties to collaborate and
build a user base large enough to compete. Government might be justified in
supporting such efforts as well. If there aren't already examples of
governments getting involved when they view their national security to be at
stake, we will see this soon.

------
endergen
Git is an epic example of a relatively recent extremely impactful open
protocol.

OpenGL is another I can think of. I'm sure there are many more.

In my opinion, we are in the golden age of open source, with the caveat that
big companies have subverted it, realizing that open sourcing a popular
project and controlling the repo is tantamount to controlling an ecosystem,
forking is not an option in practice.

------
gojomo
I want to believe!

But if the protocol (and code) is really 'open', others can use it without
needing any of the rationed tokens.

Sometimes, exclusion/scarcity will be part of the value-proposition on the
'genesis' network. Then – and perhaps only then – many parties have aligned
motivations for continuing to enforce a dominant, original token regime. This
may only be the case for cryptocurrencies.

Consider instead an adversarial, spam-and-abuse-prone protocol/platform like
"fast & wide microbroadcast" (Twitter). That wouldn't necessarily need _one_
access-token – Wilson's 'twokens' – whose value accrues to core or original
developers, or early adopters. It could support many competing token/trust
roots, for different schools of thought on communication/conduct tradeoffs.
That's good on many axes of diversity and adoption! But it also again raises
the public-good problem, of how to fund initial development (and continued
wise evolution) of the 'common protocol'.

------
Joof
Protocals that are intentionally crippled by requiring a block chain action
are not helpful. These aren't things that need to be monetized; that might
even bias the protocols into being bad for users and developers.

