Invisible & Strictly Better: How Decentralized Apps Go Mainstream
New products, platforms and protocols break into the consumer mainstream when the average user engages based on the benefit of the service (i.e. faster, cheaper, better) without being forced to care about the enabling technology. To date, the users of decentralized blockchain applications have been primarily those with a pre-existing interest in the space. That may be about to change.
A common skepticism of the blockchain space is that it is a technology in search of use cases, in which the hype and speculation exceed applicability.
For some, like Metastable investor Naval Ravikant, the lack of broad consumer usage of decentralized apps reflects that the industry is still in an infrastructure development phase.
Others point to capital formation itself as the space’s first killer app. With proceeds from token sales outpacing seed stage venture capital in 2017, and 2018 totals already exceeding last year’s totals, the reasoning behind this argument is compelling.
Still, looking at usage stats for decentralized applications, it is clear that we’re still in a pre-consumer phase.
In that context, the question becomes: what use cases are most likely to be early breakouts, and why?
Faster Horses vs. Cars: A Tale Of Two Use Cases
“If I’d asked people what they wanted, they would have said faster horses” — Henry Ford (apocryphal)
Use cases for new technologies tend to fall broadly into two categories:
- “Faster Horses”: better, faster, cheaper versions of something that already exists
- “Cars”: categorically different opportunities enabled by new technology
When viewed in retrospect, use cases that fall into “cars” category usually have the most significant impact on business and society. That said, they tend to be enabled by “faster horses”, as companies use analogies to existing services (e.g. “the Uber for X”) to help users understand what value is being offered by the new product.
This is playing out again in the technology-context-du-jour of blockchain, with every app and utility token offering “a decentralized version of (one-of-today’s-services).” The “better” experience that most purport to offer has to do with the lack of centralized intermediary controlling the data, users, or function sets.
This argument may resonate with crypto-insiders who think in terms of centralized vs. decentralized. Average people, however, tend not to care about this philosophical debate. They are not inherently skeptical of the companies behind the products they use, and don’t worry about the possibilities of diverging incentives between a business and its users. For the average consumer, centralized vs. decentralized only matters insofar as it impacts more immediately apparent values of a service like how expensive, convenient or fast something is.
Blockchain Invisibility: “It Just Works”
Put differently, trying to force consumers to care about the decentralized nature of a product is likely to distract more people than it attracts. Users want experiences that provide more clear and present value — by being better, faster, or cheaper — without having to understand how the company delivers that experience.
By way of analogy, Uber didn’t decimate the taxi industry by teaching people about peer-to-peer mobile experiences. Rather, it focused on radically improving the taxi calling experience by giving people a big fat button they could press where a car would show up and automatically charge their card. As Steve Jobs might have said: ‘It just works.”
Taking this all together, if history is any indicator, the early use cases for crypto that break into the consumer mainstream are likely to:
- Be initially analogous to existing consumer experiences, even if they ultimately transform them
- Be strictly better than their non-blockchain equivalents in terms of the value they offer
- Not require consumers to understand crypto, blockchain or token economics to enjoy those benefits
eCommerce as the Breakout Use Case for Blockchain
At Public Market, we believe that online marketplace commerce meets all of the above criteria and is a likely the breakout consumer use case for blockchain.
Immediate and meaningful impact on the effective price of things consumers are already buying
Online commerce today is dominated by a handful of marketplace platforms who exert their power to take large and growing commissions and fees. These fees both increase prices for buyers and pinch often already razor thin margins for independent sellers. What’s more, price parity agreements ensure that those marketplace prices are the price consumers pay everywhere. Sellers who don’t have to pay transaction fees levied by centralized marketplace platforms can pass a portion of their savings on to consumers in the form of rewards that effectively lower the price of goods. Consumers don’t have to know the difference between Ethereum and EOS to know they want more value for their dollars.
Decentralized protocols expand what (and who) can be a store
The marketplace platform era of eCommerce created digital stores that, while having a rather expanded inventory of available products, still more or less took the offline store experience and put it online. When you transform key pillars of online commerce like inventory, reputation and protection into a decentralized protocol, you create the opportunity for new types of actors to act like digital stores. With Public Market, any influencer or publisher that curates attention could likewise curate a digital store that extends their brand — without having to ever leave their living room, buy or ship product, or conduct customer support. This would create competition at the interface layer, giving consumers the chance to select the storefront from which to buy their goods that makes them the best offer, curates the best products, or most appeals to their sensibilities in other ways.
Protocols are better suited than marketplaces to capture distributed attention
Consumer attention is radically fragmented across channels, publishers, and digital experiences. Even when conveniently organized, centralized marketplaces still force consumers to exit their current experiences to make purchases. A decentralized protocol-level architecture for eCommerce would allow more shopping behavior to happen in-the-moment in a diversity of digital locations where consumers spend their time, without sacrificing convenience or protection. Perhaps more importantly, incentivizing storefront creation throughout the internet deputizes customer acquisition to thousands if not millions of individuals site owners and applications — further expanding the distribution potential of products sold by independent sellers.
Decentralization & affiliate networks are a match made in heaven
Even now, eCommerce is shaped significantly by the power of affiliate networks. People and publishers often monetize digital attention (such as a large follower counts on Twitter) by participating in affiliate programs and directing their followers to online marketplaces. Tokens are a new asset with which storefronts can incentivize networks of affiliates and supporters that help get them in front of the right customers. When those storefronts are liberated from centralized platform fees, they have even more margin on their goods that they can use to incentivize those affiliates.
Rewards tokens are a zero-risk way for consumers to dabble with cryptocurrencies
While the average consumer may be primarily motivated by traditional types of value like cost and convenience, the hype around blockchain has captured people’s attention. For the segment of consumers who aren’t early adopters but who are watching the space with interest, getting reward tokens for online purchases that they would make anyway represents a lightweight, zero-risk way to start learning about and holding cryptocurrencies.
The technology and finance worlds are rightly alive with excitement about the possibilities for blockchain to disrupt existing industries and enable new opportunities entirely. Consumers, on the other hand, will only care when it actually becomes relevant to them. In many cases, even then, they’ll care only about the benefit they get — not how they got it.
Our belief at Public Market is that the benefits of a decentralized protocol for marketplace commerce are immediate to the end user in the form of lower cost and new types of competition for their patronage. Put simply, eCommerce protocols will be a breakout consumer use case for crypto, because consumers will enjoy their benefits without having to understand (or care) about the philosophical underpinnings beneath the technology.