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?