Skycoin set to disrupt the software-as — a-service (SAAS) platform market
One of the big technology trends over the last 15 years has been the emergence of software as a service. Companies like salesforce.com offer pay- -as-you-use services allowing small customers to compete on a more equal footing with large customers. The model allows the end customer to avoid lumpy capital investments in equipment (e.g. renting server capacity rather than buying servers) and to avoid expensive capital purchase of software. Instead, the customer pays a monthly user fee to salesforce.com and this is increased as the user adopts more funtionality or as the company adds more users to the software. Research firm KBV forecasts the global SAAS market will grow to $185 bn revenue p.a. by 2024.
Software as a service is enabled by Software as a service platforms, which are in turn provided by companies such as Microsoft, Oracle and Amazon, and which comprise components such as memory and processing power on-demand, with scalable pay-as-you use pricing.
But a new player on the block, Skycoin, is seeking to vertically integrate all the things these SAAS platform players offer and more, with new capabilities, higher performance, better security, more privacy and lower cost. It is a game changer.
Skycoin goes deeper in its level of vertical integration by not just integrating cloud storage and processing power but also integrating the internet routing and wireless access layer. The decentralized aggregation and integration of routing (via a new protocol), access, storage and memory allows for superior performance (speed and latency), and reliability, for example from self healing across hundreds of thousands or millions of nodes in the end state). The newtork gets better the more nodes there are, so in the early days node contributors are incentivized by the Skycoin organisation. Later, supply and demand will create an ecosystem in which contributors are paid based on demand.
Skycoin also goes broader in its level of vertical integration than conventional platforms by having a programming language that is based on Golang but is unique in being able to read or write from any program into a blockchain or blockchain smart contract. A company need not use any blockchain feature in their application to benefit from the skycoin platform, but some companies will want to do so to take advantage of new capabilities and business models. For example, the blockhcain extension allows monetary flows and escrows to be set up and programmed in smart contracts that will continue to operate even if a company goes into liquidation. Financial contractual agreements between companies can programmed. Governance and voting powers across numerous companies or a supply chain can be constructed. Or data can be disseminated in such a way that everyone that needs to can see it with a cryptographic guarantee that the data is immutable and has never been edited.
Most revolutionary is that Skycoin underpins its SAAS architecture with a transformational economic model. Decentralized resources of MPLS routers, antennas, storage and memory, are hosted by individuals or companies in return for financial compensation. The financial compensation is set across the network automatically according to transparent laws of supply and demand. At scale this will lead to near commodity pricing of all the elements as the people or companies contributing the resources will need to recover enough profit to make it worth their while. In the early days the Skycoin newtork will set the amount people are paid. Perhaps one day the model might evolve so that in the future people might be able to set a price they they want to achieve — but if they are too greedy, alternative resources will be chosen instead. Therefore the network will find a point of low cost with just enough profit to incentivise resource contributors.
Towards the end state, it is not inconceivable that some large centralised cloud providers such as Amazon may sell off spare capacity by joining the Skycoin ecosystem as getting some revenue for unused capacity is better than getting none. But eventually they will have to transform or be driven out of business by the lower cost base of Skycoin or they will have to focus on niche markets. They will probably face the innovator’s dilemma: they dare not move to a fully decetralized model as their source of high profit relies on them being centralized. We once thought IBM was invincible. Amazon, Google and Microsoft are no less invincible than IBM once was.
The common economic mechanism across the whole Skycoin ecosystem that allows the automatic supply and demand is a currency called coin hours. Coin hours will be tradable for pounds or dollars but can also be earned through providing equipment or services. They can be spent on equipment or services.. They can also be earned by holding a low-inflationary asset called Skycoin which is analogous to holding equity and voting power in the ecosystem. Equity (skycoin) holders get a dividend of coin hours which they can sell or directly use (achieving slightly higher value) in the ecosystem.
Skycoin is not the only company to have seen the potential of aggregating decentralized resources with a new economic model and offering it as a SAAS platform. But existing competitors suffer from one or more major limitation that their architectural design can’t overcome: speed limitations, security limitations (because they trade off security for higher speed), or high cost of storage (because in their architecture, high speed and low payment transaction costs are traded off against high storage costs).
In the short and medium term, application providers, middleware companies (e.g. providing applications such as ISP in a box, or modules that can be reused for CRM applications) and corporates and small businesses will flock to this new platform which will be fully launched by the end of 2019 after six years in development. It is truly a paradigm shift in software-as-a-service platforms. Beyond this, if Skycoin is one day able to grow its reach to the kind of penetration that Microsoft or Amazon have reached, we might look back and see that it wasn’t just a software as a service platform in the making, but was the beginning of the new internet in the making.
