Blockchain technology is quickly expanding beyond bitcoin. While many blockchainbased next internet craze of bitcoin see the blockchain as no more than competition for existing payment methods or gold, I believe blockchain blockchainbased next internet craze is the harbinger of things the world has never before seen. In a world with many blockchains and hundreds of tradable tokens built on top of them, entire industries are automated through software, venture capital and stock markets are circumvented, entrepreneurship is streamlined and networks gain sovereignty through their own digital currency.
This is the next phase of the internet. Yet Ethereum, a blockchain protocol that allows arbitrarily complex financial transactions to be encoded by anyone and executed in a provably accurate manner by a distributed network, has seen a de minimis amount of VC investment.
So why is less VC money flowing into Ethereum? Perhaps it is more risky, and perhaps investments in failed bitcoin companies has lowered interest. But importantly, entrepreneurs now have an alternate route blockchainbased next internet craze funding their projects.
We are seeing entrepreneurs issuing their own blockchain-based tokens to raise money for their networks, sidestepping the traditional, exclusive world of venture capital altogether.
The importance of this cannot be overstated — in this new world there are no companies, just protocols. Using this new model, entrepreneurs create blockchain-based tokens that represent ownership in the network they are building, and also act as fuel for their network. For an investor, there are not shares of a company available, only the blockchain-based token. As the blockchain space expands, disproportionate blockchainbased next internet craze will go to holders of the actual tokens, not traditional venture investors betting on a shares of a company.
These tokens are application specific — they are not meant to be general-purpose units of value like bitcoin. For example, tokens built on Ethereum like REP and GNT power a decentralized prediction market and a peer-to-peer market for renting computation, respectively. These application-specific tokens, or app-tokens, are built on top of existing general-purpose blockchains like Bitcoin and Ethereum.
For the first time, open-source project creators can blockchainbased next internet craze monetize their open-source network. Historically, successful open-source projects like blockchainbased next internet craze torrent protocol or the Tor network were not directly monetized at the protocol level.
Now, the founder of a decentralized file storage network can issue blockchain-based tokens that represent ownership in the network. However, these tokens are not like stock certificates, which represent ownership but have no real use. App-tokens are actually used in the network to participate. In the file-storage market example, they are used to prove file ownership and buy and sell storage space. The founder of the network keeps roughly 10 percent of the tokens for themselves and their founding team, and if their network becomes popular, the demand for tokens rises, and because the supply of the token is fixed, the price increases.
This means that founders can monetize their networks directly by simply holding their tokens and making the network useful. If they need liquidity to continue funding the project, they can simply sell the tokens on the open market. In addition to rewarding founders, these app-tokens allow participants in networks to actually own a piece of the network. This network equity ownership is unprecedented.
In this new blockchain-based model, that value is actually given back to the users of the network, proportional to their contribution. What this means is that what ultimately disrupts many of the major web services created in the last decade could be peer-to-peer protocols, not companies. This would be similar to the effect that the torrent protocol had on media companies, but on a much larger scale. The result would be twitter the protocol without Twitter the company, facebook without Facebook, uber without Uber.
And as an investor, for the first time, it is possible to blockchainbased next internet craze a portion of these networks, which will power the future infrastructure of the internet. To be sure, the blockchain space is still mostly in a phase of experimentation, but the first breakout apps will be explosive because blockchainbased next internet craze financially incentivize users to participate in the network. Imagine being able to actually make money when you contribute on social media.
The future internet will be decentralized. Olaf Carlson-Wee is the founder of Polychain Capitalwhich manages a hedge fund that invests exclusively in blockchain-based assets.
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