Ethereum, equality, and profits

How will decentralized apps make money?

Ethereum is, by the very logic of its programming, an egalitarian platform. It’s designed from the ground-up to discourage ASIC mining — and in turn, discourage Ether from concentrating among relatively small numbers of individuals and organizations.

The same logic runs through the thinking of the Ethereum team. Follow the blog, and you’ll see frequent references to the Gini coefficient — the most common measure of income distribution. This sort of thinking is guiding the development of the mining algorithm and likely other aspects of the platform’s holy decentralized triumvirate: Ethereum, Whisper, and Swarm.

So in its very DNA, Ethereum skews egalitarian in at least one rather important respect.

But what about the Dapp corner of the equation? How do the people creating and developing Ethereum’s apps (including the Ethereum devs themselves) feel about the notion of equality?

Well, in the IRC channels there’s a bit of a debate raging at the moment. This recent thread touched on the same issues.

The question at hand is, how will Dapps make profits?

There are many awesome and wonderful aspects of working on Ethereum. However, for those of us investing time, energy, and resources into building Dapps, it’s not unreasonable to expect a potential return on our risk. This is new ground. If it turns out to be as fertile as we think it is, a lot of people — particularly those who are currently risking time and money — could stand to do very well for themselves.

So for the entrepreneurs of Ethereum, there’s an instinctual desire to make money while we’re busy changing the whole goddamn world.

The most idealistic of us aren’t too bothered by these questions. They envision an ecosystem where everyone shares in the profits — if there are profits at all. It’s a utopian vision where everyone somehow benefits from the big old decentralized singleton.

This sounds nice on paper. But is it fair that the entrepreneur assuming the risk must share the resultant rewards disproportionately? And — more crucially — if fees are a race to the bottom, where does the money come from? Whether you want to issue dividends or plan on disrupting a traditional centralized business model, you still need money to fund those activities.

Perhaps equality and profits are not mutually exclusive. Maybe there’s a way to lift all boats and make everyone happy. I think you’d agree when I say one of the great aspects of Ethereum is that the get-rich-quick, to-the-moon crowd is in very short supply. Yet the profit motive is nonetheless crucial; it fuels and sustains innovation, and incentivizes risk-taking.

Does the very nature of Ethereum’s smart contracts ultimately force equality over profits? Will Dapp creators have the ability to choose, on their own, where they’d like to sit on this scale?

These are fundamental questions. How they’re answered will likely have a major impact on Ethereum’s adoption over the next few years.