Bitcoin (Open) Vs Facebook (Closed) — Why ICO matters | Part — 1

There are a lot of noise around cryptocurrencies like Bitcoin and its underlying technology Blockchain. Here is a graph (from CBInsights) pointing to bitcoin’s meteoric rise to fame.

This is not just a consumer fever (un)fortunately, corporations, businesses are interested in blockchain. A lot of businesses are talking about it as well. Here is a graph (from CBInsights) which shows how many companies are talking about it in their earnings call.

Interesting Eh? To the Moon!

The recipe for this is a combination of Innovative technology (Decentralized distributed database aka blockchain), and a killer app aka bitcoin. This created a network effect resulting in a meteoric rise of value, usage, popularity and fear.

There are more than 1500 cryptocurrencies in the market, and none of them is an actual competitor to bitcoin. The real competitor to bitcoin is FACEBOOK!

You can compare bitcoin with its peers like Litecoin and Ethereum, but I think they have a lot of founders risk attached it. Bitcoin doesn’t have that risk, but that is not the contributing factor to its success. The actual success lies in the network effect, a phenomenon where increased numbers of people or participants improve the value of a good or service.

Internet became successful because of the network effect, and so did bitcoin. These are all technologies, but Facebook is one company that has the same level of the network effect.

Facebook’s ICO(?) — The Ultimate Weapon

If Facebook decides to do an ICO, it can quickly become the world’s largest ICO. If you think about it, it has the medium, platform, users to add value to the token and distribute it across its platform. It can quickly overtake bitcoin.

Realistically, Facebook might not get into the decentralized environment. I see Facebook as an advertising company which sells its user data to the highest bidder (with and without consent). The use cases for those data range from advertisements to downright manipulation. Once, Facebook manipulated the emotions of over a half a million users as a part of a psychological experiment to see how emotions can be spread through its network.

Facebook, with its godlike power, can change and shape the world — Not just people but the technological landscape as well. This is not a far-fetched idea. This has happened before, and it will happen again in the future. I think blockchain and cryptocurrencies have enabled the open source to provide checks and balance to the soulless technological giant.

Open Vs Closed

To understand why Blockchain and cryptocurrencies are the keys to topple Facebook’s power, let’s look back at the history for a minute. There was a time in the 90s where there were a lot of protocols that were being built. For example, HTTP, HTTPS for the internet, IMAP and SMTP for email and if you look closely, these were projects that were funded by Government agencies and academia. Then internet bubble happened, and capitalism moved into the ecosystem. Then, there was a dramatic shift towards centralization of power. Companies like Google, Facebook came along and took over the entire ecosystem.

In the 2000s, there was very little protocol development work, BitTorrent and RSS were a few honourable mentions. But nothing lasted. If you look at it without any biases, you can see a battle between closed and open. Closed clearly won.

Let’s take RSS Feed for example; it started off well as an open social protocol which got popular for a while and could have been a real rival to the closed social platforms like Facebook and Twitter. But unfortunately, it lost. Now, it is not a central source of news as Facebook. There were many alternatives to Facebook, but nothing survived.

One popular theory is, they had all the money. Closed social platforms had a better business model than open. They had all the developers and brilliant minds working on it. Many people say, it is the user experience, but I think that is not the case. Gmail is based on open protocol, and it has a really good to use and so as web browsers. Closed had a better business model for the last 15 years. Period.

Let’s revisit RSS vs Facebook, Facebook won, and now we have a closed social platform which is a breeding ground for fake news and facts. It can topple governments, create chaos. So much power for a platform which started off as a “hot or not” website for drunk college kids.

I’m not saying RSS was better than Facebook. Obviously, it lost because it wasn’t useful and not a lot of brilliant minds were working on it. An open social platform is more accountable to its users than a closed Facebook which is trying so hard to satisfy its stockholders and the advertisers. The best example for this is its “Growth at any cost” motto in their “Ugly Memo”. So how does Blockchain and Cryptocurrencies come in to this picture?

Why Blockchain & Cryptocurrencies are the keys to toppling Facebook’s power?

The answer is Initial Coin Offerings (Again!) and Miner Network. ICOs have become an alternate way of raising money. But, I look at ICO as a way to bring capitalism to open source development. Closed social platforms had all the money, and now there is a way for open social platforms to raise funds through ICOs and hire brilliant minds to solve and develop better products.

Let us look at another example, Recently, the Heartbleed bug in the OpenSSL caused a lot of damage. If you look at the team behind OpenSSL, they’re a non-profit with a group of 10 or 11 part-time developers and an annual budget of around half a million dollars. Every year, the OpenSSL team have to go around and look for grant and do what non-profits do. On the other hand, Golem Network, a marketplace for peer to peer computation raised 9 million dollars in 19 minutes after the token launch. Now they can afford high pedigree full-time employees, offices and work properly.

ICOs has given way for us to invest either in the company or invest in the protocol for equity ownership. If you look at the history (once again), if you go back in time to invest in an upcoming technology like the Internet, you had two ways. One is to invest in companies like Amazon, Google or Facebook or buy domain names. Also, you have to be really fortunate enough to invest in companies like Amazon like you have to be in an elite group of investors that Jeff Bezos would like to approach.

Now, ICOs have truly democratised the way companies raise capital and to be honest; it is the secret weapon to bring balance to this closed social network dictatorship.

Now let us talk about accountability and how the miner network fits in the picture. I would like to call the miner network as an Open source infrastructure.

We have had open source software before, but this is the first time we see an open source service. These miner networks are like public AWS and calling the miner network a waste of energy is like calling a public park — a waste of space.

These minter networks can be used for all sorts of things. As this is a decentralized environment, developers can freely use the infrastructure without getting cut off even by the founders of the infrastructure. For example, if you are an Ethereum developer building something on top of the Ethereum infrastructure, Vitalik Buterin, the founder of Ethereum can’t pull the plug on you if he doesn’t like you for some reason.

The level of democratisation doesn’t end here. If the network wants to make a major decision, All the stakeholders (token holders and miners) can cast their vote using their hash power. This won’t happen in many companies and especially Facebook. Mark Zuckerberg holds a massive amount of voting stock and his decisions may have a cascading effect on its 2 billion users.

So, what’s next?

Well, now open source has the cryptocurrency ecosystem to fuel its growth. Even though ICO is being abused by bad actors to scam investors, honest and talented people working on seemingly impossible tasks and developing internet 2.0. We will have to participate and shape the future technological landscape actively.

But for now, we are stuck with Facebook, and it looks a bit cooked after being in hot waters for so long. People keep using Facebook even though they hate it and the network effect is the reason behind it.

Jeff Bezos once said

There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.

Mark Zuckerberg firmly believes that Facebook falls in the second category. To validate this belief, in the upcoming parts, I’m going to look at Facebook’s various (failed) business model (including ads) and provide my ideas on how to fix Facebook’s main problems like Fake news and much more.

Let me know what you think of this post in the comment section.

This post was originally published here.