Cryptonetworks are not Companies
Joel was the first person that stuck the word cryptoeconomy in my mind. It was mid-2017 and the idea struck me because most everyone was thinking about cryptonetwork valuations (most commonly ICOs) in the context of company valuations. Which is partially why they were considered so obscene.
What the crypto market vaguely understood, though could not fully articulate, is that the prices being paid were for emerging economies. Emerging economies using a protocol in place of the government, specializing in a single (digital) service, and capable of global scale from inception. The good ones, at least.
Perhaps the best way to visualize the idea is as follows: instead of each country having its own redundant verticals of industry, a protocol forms a horizontal-coordination-mechanism that participants from every country can tap into. By doing so, the protocol enables a global market for provisioning, pricing, and consuming that service, driving it to the lowest cost possible.
A cryptonetwork won’t be suitable for every service. Most attempts will fail, with currency flops that make central bankers look prudent. One of the most common early reasons will be the “attempted cryptonetwork” was really a company financing through the public utility of a real cryptonetwork called Ethereum.
Only services that thrive off decentralization will successfully organize and incentivize human activity using this new architecture. Cryptonetwork services will be macro and blunt, not excelling at granularity.
On the micro-scale we will have companies that bundle services provided by underlying cryptonetworks. They will create beautiful interfaces, cater to granular-preferences and be capable of customer service. As I’ve tweeted about a few times, these companies will draw from a mix of cryptonetworks and centralized services, whatever is most economical for their needs. Each cryptonetwork that gets to scale will have thousands (tens of thousands? hundreds of thousands? millions?) of these companies consuming services from it.
Both cryptonetworks and companies will generate large amounts of wealth in cryptoland, one doing so through a cryptoasset and the other via equity. With cryptonetworks, the winners will be fewer but with returns greater than any other asset class from this time period, while with companies there will be a higher number of more modest winners. Whatever your choice, stick to your knitting, and remember that there are many ways to skin the crypto cat.