Case for SectorCoins

Open blockchain projects are about decentralizing services. For example, Filecoin for storage, Golem for computation, Ethereum for smart contracts, etc. Many of them are also platforms, and many of these services are generic enough to power many other services. I think a big group of them will replace / consume existing market sectors. For the purpose of this post, let’s call them SectorCoins.

Definition

A SectorCoin is a blockchain that powers a decentralized economy in a functional sector. It could be transportation, hospitality, or any other sector that involves multiple roles who exchange value. Grouping the blockchain by sectors is powerful because common building blocks and application-specific networks can be leveraged horizontally. To a consumer, it is a service network with options and scale. To a developer, it is an open platform that makes application development simple. To a business or entrepreneur, it is an opportunity to create new businesses within an open ecosystem. The decentralized nature means every participant gets to share the direct benefits as the network grows in size. If we take the transportation sector as an example, the SectorCoin can support taxi, limo services, school pickup, navigation provider, traffic analytics, or any other transportation-based application.

Benefits
 
The efficiency of SectorCoin come in three forms — common building blocks, network effect, and token-enabled price advantage.

Every transportation business needs navigation, vetting / reputation management, safety management, crisis responding service, fleet management, and many more. The blockchain enables these roles to be filled in a decentralized manner, and applications can leverage these common building blocks instead of building everything from scratch. The scale of these services can range from small mom and pops to large corporations.
 
Any customer brought onto the network by any application can discover other applications on the platform. The person that rides in the taxi also needs her child be picked up from school. The same person may also use a commuting service going to/from work. The right incentive structure can even convince existing off-chain businesses to move onto the blockchain — taxi companies may be more willing to work with an open, decentralized technology platform than a proprietary company like Uber.

Many blockchains distribute tokens to attract participants. For example, Steem distributes a certain amount of newly mined tokens to holders who write good posts. On top of this, the token demand goes up as speculators purchase and hold them with the expectation of future appreciation. Thanks to this incentive, token-based service providers are now able to provide their services at a cheaper price than their non-blockchain competitors. This fundamental price advantage can be very powerful if the service provider takes both fiat and tokens, hiding the complexity from users.

Creating a SectorCoin

Not all blockchain projects are good candidates for SectorCoin. It lives somewhere between the completely generic platform like Ethereum, and the use case specific projects like FirstBlood. Projects like Filecoin and Golem are more likely to grow into SectorCoins. One can easily see opportunities to build value-add services on top of these platforms.

There are also many technical considerations for building SectorCoins. Since you are creating an open platform powering many different types of applications, issues on performance and scalability need to be carefully though out. We have seen some projects choosing to use existing blockchains like Ethereum, while other projects started completely new blockchains. But as the Ethereum ecosystem continues to grow, I can see ERC20 tokens become more and more of an industry standard. The security of a major blockchain and the ability to leverage existing smart contracts is a major time saver for new projects.

For early SectorCoin developers, an interesting entry point to the market could be through contracting. Consensys is as an interesting example within the Ethereum world. It has a portfolio of applications on the Ethereum blockchain but also provides consulting services to anyone interested in building Ethereum. Entrepreneurs come to Consensys with industry expertise, and Consensys helps them create applications on top of Ethereum. This benefits the entire network in the long run.

Conclusion

The blockchain is still in its very nascent state. 2017 will bring us many exciting new capabilities like Proof of Stake and fast payment channels. Many new projects are slated to launch, and the pace of experimentation will only get faster. SectorCoins can play a major role in bringing the blockchain to everyday consumers.

Thanks to Jordan Cooper, Doug Petkanics and Arthur Falls for reading drafts to this post