Ecosystem Federations Are A Multi-Trillion Dollar Opportunity

I have written previously that I believe Amazon is the last stage of the previous era of Web2 technology organizations. Of all the companies, Amazon has the most modular approach which has unlocked startup like cadence and innovation while maintaining scale benefits.

Read my previous article here: https://www.linkedin.com/pulse/disruption-corporations-coming-rex-st-john

Initially I wanted to leap directly to “Network States” as the next stage for corporations, but I believe we will see an intermediary stage I am calling “Ecosystem Federations” first.

These ecosystem federations are a blend of techniques. They decentralize the right things and centralize the right things in a highly designed way to arrive at a structure which moves like a startup (Amazon), is profitable like Amazon and decentralized like a DAO.

Ecosystem Federations will arrive which I believe will give Amazon a run for its money.

These ecosystem federations are the result of carefully analyzing the key lessons of Cosmos, Polkadot and Amazon and transferring them into the Web3 industry. When these lessons are understood and applied — we will see a revolution in organizational structures similar to the Kieretsus of Japan.

What are the key learnings from Amazon? They are as follows:

• Amazon Prime like offerings help build massive loyal customer bases which can be used to disrupt markets
• Communications are a form of waste, so you need modularity without too much talking and too many giant meetings

Federations will require membership dues to function as well as a share of network transactions of blockchains in their network.

Let’s watch some video.

First, we need to review this critical piece of video on the topic of Amazon Prime. The Prime model will form the backbone of Federations and is critical to understand.

✂️ Amazon is a disruption factory

✂️ Amazon Prime

Amazon Prime is the backbone for how this works providing a ready made army of loyal customers. With the combination of Amazon’s modular structure and bias towards interconnectedness and reduction of overhead (they actively embrace silos, believing that communication is a form of waste) — Amazon is the model to learn from.

Similar to Amazon, ecosystem federations will enter and disrupt new markets by applying the same lessons.

Here is my templated design for a basic federation. This model can be applied across any blockchain ecosystem:

• Projects must pay a monthly fee, perhaps $1,000, there can be tiers here
• Individuals in the federation should pay a monthly subscription, perhaps $50, there are citizenship benefits here and also options for tiers
• The federation should centrally manage events, perhaps a DAO and coordinate between them with a common communications layer
• The core unit of a federation is “the project,” where each project should be a web3 blockchain of its own
• The federation should require that all projects operate a node. In a homogenous network like Cosmos, the blockchain should be an IBC linked Cosmos. In a heterogeneous network, projects across many blockchains should perhaps use Axelar or similar to register total activity in their network
• Federations require a common communications framework
• The federation should organize regular online and offline events, especially creative off-sites focused on productivity
• The federation should negotiate group rates on insurance, 401K and similar for its portfolio
• The federation should maintain different membership levels and citizen participation levels
• The federation may operate banks of validator nodes and require staking to them by members
• Governance is important but I believe federations will shade more “Republic” than fully democratic DAO

Those are the basics. Of these, the ability to require that member projects roll up taxes on transactions to the federation is the most important.

The key here is that federations are able to drive economic activity within their local niche and monetize it by taxing a share of economic activity in that niche.

I believe it should be possible to federate projects across blockchains with the use of Axelar.

What about the math? Federations I believe will be best in ecosystems with 30 or more projects which have funding and activity. Federations only become possible in markets which have sufficient flow of economic activity and venture finance.

Here is a model federation financing

• $1,000 / month * 30 projects = $30,000 / month
• $50 / month for 500 citizens = $25,000 / month
• Add sponsorships and investment and other sources of revenue and things add up quickly.
• Add a treasury of tokens and NFTs and things really begin taking off — the upside can be billions from this

Federations feel to me like the future of many blockchain niches. Federations will work best when they centralize core ecosystem functions:

• Events
• Business development
• Marketing
• Jobs placement
• Membership benefits, retirement, healthcare
• Communication nodes network via something like IBC or Axelar
• Validator banks

Federations are a blend between corporations and ecosystems which seek to centralize common public goods (business and administrative functions) while enabling Amazon Prime and Amazon structural efficiencies.