Blockchains will replace networks with markets.

Naval (@naval)

1/ Blockchains will replace networks with markets.
2/ Humans are the networked species. The first species to network across genetic boundaries and thus seize the world.
3/ Networks allow us to cooperate when we would otherwise go it alone. And networks allocate the fruits of our cooperation.
4/ Overlapping networks create and organize our society. Physical, digital, and mental roads connecting us all.
5/ Money is a network. Religion is a network. A corporation is a network. Roads are a network. Electricity is a network...
6/ Networks must be organized according to rules. They require Rulers to enforce these rules. Against cheaters.
7/ Networks have "network effects." Adding a new participant increases the value of the network for all existing participants.
8/ Network effects thus create a winner-take-all dynamic. The leading network tends towards becoming the only network.
9/ And the Rulers of these networks become the most powerful people in society.
10/ Some are run by kings and priests who choose what is money and law, sacred and profane. Rule is closed to outsiders and based on power.
11/ Many are run by corporations. The social network. The search network. The phone or cable network. Closed but initially meritocratic.
12/ Some are run by elites. The university network. The medical network. The banking network. Somewhat open and somewhat meritocratic.
13/ A few are run by the mob. Democracy. The Internet. The commons. Open, but not meritocratic. And very inefficient.
14/ Dictatorships are more efficient in war than democracies. The Internet and physical commons are overloaded with abuse and spam.
15/ The 20th century created a new kind of network - market networks. Open AND meritocratic.
16/ Merit in markets is determined by a commitment of resources. The resource is money, a form of frozen and trade-able time.
17/ The market networks are titans. The credit markets. The stock markets. The commodities markets. The money markets. They break nations.
18/ Market networks work where there is a commitment of money. Otherwise they are just mob networks. The applications are limited.
19/ Until now.
20/ Blockchains are a new invention that allows meritorious participants in an open network to govern without a ruler and without money.
21/They are merit-based, tamper-proof, open, voting systems.
22/ The meritorious are those who work to advance the network.
23/ As society gives you money for giving society what it wants, blockchains give you coins for giving the network what it wants.
24/ It's important to note that blockchains pay in their own coin, not the common (dollar) money of financial markets.
25/ Blockchains pay in coin, but the coin just tracks the work done. And different blockchains demand different work.
26/ Bitcoin pays for securing the ledger. Etherium pays for (executing and verifying) computation.
27/ Blockchains combine the openness of democracy and the Internet with the merit of markets.
28/ To a blockchain, merit can mean security, computation, prediction, attention, bandwidth, power, storage, distribution, content...
29/ Blockchains port the market model into places where it couldn't go before.
30/ Blockchains' open and merit based markets can replace networks previously run by kings, corporations, aristocracies, and mobs.
31/ It's nonsensical to have a blockchain without a coin just like it's nonsensical to have a market without money.
32/ It's nonsensical to have a blockchain controlled by a sovereign, a corporation, an elite, or a mob.
33/ Blockchains give us new ways to govern networks. For banking. For voting. For search. For social media. For phone and energy grids.
34/ Networks governed without kings, priests, elites, corporations and mobs. Networks governed by anyone with merit to the network.
35/ Blockchain-based market networks will replace existing networks. Slowly, then suddenly. In one thing, then in many things.
36/ Ultimately, the nation-state is just a network (of networks).
FIN/ Thank you, Satoshi Nakomoto. And to all the shoulders that Satoshi stands upon.
*Ethereum