
The Transaction Costs of Tokenizing Everything - thisisit
https://elaineou.com/2017/10/14/the-transaction-costs-of-tokenizing-everything/
======
woah
This article is a collection of straw men. It extrapolates the failure of one
dot-com era startup (Mojo Nation) into the extremely wide ranging thesis

> As it turns out, bandwidth — and most computational resources — are simply
> too cheap to meter.

This is patently false, as bandwidth and all other computational resources are
metered on a huge scale today, by centralized cloud computing and ISP
companies.

It's even false for BitTorrent. The article describes BitTorrent with

> After Mojo Nation’s demise, a former employee stripped the token incentives
> out of the protocol and created a simple tit-for-tat filesharing system.

However, most serious BitTorrent users are active on trackers which require a
certain seed:leech ratio, thereby metering the user's contribution. The fact
that no money is involved has more to do with the fact that most of them are
used to share files in violation of copyright, not because of some intrinsic
law of computational resources being "too cheap to meter".

It also references some hare-brained scheme cooked up by Enron shortly before
their collapse to claim that bandwidth cannot be traded, and makes the false
assertion that all peering and internet transit today is free.

~~~
jcfrei
I think the author summarized his hypothesis quite well in the title: The
Transaction Costs of Tokenizing Everything [... are too high compared to the
costs of bandwidth, etc.]. If you introduce a bidding market for every
computational resource then that itself creates new costs (keeping all the
systems running that create bids, check if they have been filled, cancelling
old ones, drafting bidding protocols, etc.) that might largely offset the
gains in more efficient resource allocations.

~~~
floatrock
And it might not.

That's like going up to Eisenhower after he proposed the interstate system and
saying, "Wait, the cost of paving over that much land and building that many
overpasses might largely offset any gains of this supposed more efficient
transportation network."

All new technologies introduce costs, but ideally they also act as multipliers
that bring far more benefits.

The multiplier effect might not be enough, but then again, it might be. You're
not really saying anything.

Better to talk about _under what circumstances_ the benefits-multiplier might
not be enough to make up for the costs. For example, someone elsewhere in the
thread said that yes, if humans were bidding on such tokenization, it might
create too many barriers. But look at all the ad networks we've built where
billions of tiny auctions happen instantaneously -- that's all by machines. So
if the system is built for machines, the multiplier effect could be
potentially huge.

------
AgentME
The article keeps mentioning torrents as a free panacea that disproves the
need for decentralized monetized hosting systems, but for some reason no one
else ever helped seed the torrent of my encrypted backups when I posted it
onto piratebay.

~~~
admax88q
Google, Amazon or Tarsnap will all host it for you for a small fee.

What value is there in decentralized hosting across lots of commodity nodes of
your private encrypted data? As opposed to ”centralized" hosting with a few
different providers.

~~~
gwbas1c
Might be useful as a P2P backup? For example, If I want to backup 1GB, I have
to donate 3GB to the network.

Considering the hardware cost, it's probably obvious why everyone just pays a
3rd party.

~~~
adrianN
I'm pretty sure that plugging a big USB stick into your router is cheaper than
paying some cloud service to host your backups. The problem is that it's a lot
more complicated to have distributed backups than just plugging storage into
an internet-connected device in your home.

------
elevensies
I just realized, I'm severely confused about what Filecoin _is_ , and possibly
ICOs in general. I assumed "ICO" was analogous to IPO. If a token is
essentially a bearer share that is coupled to the payment system. No reason
you couldn't create the coin, run it privately until you get some revenue, and
then offer it, as IPOs are usually done.

But when I search Filecoin's website for "revenue" and "profit", I only see
references to the participants in the system, and not the token holders.

[https://www.google.ca/search?q=site%3Afilecoin.io+revenue](https://www.google.ca/search?q=site%3Afilecoin.io+revenue)

[https://www.google.ca/search?q=site%3Afilecoin.io+profit](https://www.google.ca/search?q=site%3Afilecoin.io+profit)

I did a quick search of the top 5 tokens on
[https://coinmarketcap.com/tokens/](https://coinmarketcap.com/tokens/) and I'm
not immediately finding any clear statements on how profit is made and
distributed.

A question for people who are better informed, is there any kind of list or
tracking on tokens payouts? Something like this
([https://arxiv.org/abs/1703.03779#](https://arxiv.org/abs/1703.03779#) ), but
for non-ponzis?

~~~
lojack
ICO can mean any number of things, but typically refer to a token that is tied
to something that isn't its own currency. I'm assuming the Filecoin is
redeemable for data storage on their network, but I'm not super familiar with
that technology specifically. To give some other examples...

Tether is a token tied to fiat currency

NEO Gas is used for compute time in their smart contracts. NEO also has a
currency that is used to mine gas. It can be a little confusing, but one of
them is a token and one is a coin. This is different than Ethereum, where the
currency is also the token used to pay for compute time.

I can dig deeper and give examples of how some of the other tokens work, but
unfortunately I'm not super familiar with the other tokens in the top 5.

And, yes, ICOs can be tied to some number of shares in a company. In these
cases, the token is redeemable for a share of the company.

~~~
elevensies
Ok, so I think I can understand Tether. A token represents a share of a bank
account balance. So the organization that controls Tether buys and sells the
coins to keep the balances balanced. So the value of the token is predicated
on the existence and continued support of the company. The on-blockchain
nature is valued for transaction processing, and allowing it to be wired into
other contracts (I presume), not for decentralization, because you have to
trust the Tether organization, N=1. Otherwise Tether would just be a database
and a website, backed up by some bank accounts, i.e. a bank.

Are you aware of any tokens that don't rely on some kind of managing external
organization's voluntary continued support? Or at least anything run like an
ETF, where someone can deliver a basket of assets and get them tokenized? Or
the inverse?

~~~
lojack
NEO Gas is an example of this. Gas is a token that represents a fee that can
be paid for executing the smart contract. Unlike Tether, when a smart contract
is executed the Gas is consumed. NEO uses a consensus algorithm called proof
of stake, so more NEO Gas is created using a coin (neo shares) which represent
your stake in the consensus. In this case both the token (gas) and coin
(share) have value, but the token can be redeemable for something -- smart
contract execution.

Here's a list of fees associated with the token: [http://docs.neo.org/en-
us/sc/systemfees.html](http://docs.neo.org/en-us/sc/systemfees.html)

------
mbrock
The good torrent sites do have token systems, though, and manage their
economies in pretty interesting ways, e.g. periods of "freeleech" to stimulate
engagement; stipends for new users; bounties for desirable rare content; etc.
And this goes back to warez FTP sites.

Maybe private trackers would be a good use case for blockchain storage tokens.
Certainly the hypothetical seeding ratio I could have on a certain private
tracker for art film would be actually valuable to me.

------
rfugger
Yes, these are terrible interfaces for humans, but they are excellent
interfaces _for machines_. Well, to be fair, they are tricky interfaces to
program to, but the potential in terms of fast and efficient resource
allocation in a world where more and more decisions are automated is huge...

------
macawfish
This is super real. I don't want added abstractions of value if they're not
necessary.

To me, the brightest possible future of money is generosity combined with raw
_dimensional analysis_ , as in _people having education about how to count
physical resources_ and a willingness to work together and share in creating
more abundant lives for themselves and others.

To the extent that tokens help do that, cool. But if they just become another
tax/rent pyramid then to put it frankly, fuck that i don't want it.

~~~
deckar01
Markets that decouple price from consumption are unsustainable. Consumers who
consume less than the average have an encentive not to participate.

------
gwbas1c
I thought this was going to be an article about the resource overhead of bad
serializers in network applications!

Disappointed!

------
rahimnathwani
s/Vince Cerf/Vint Cerf

