So What Are We Thinking Here?

In a nutshell: Identify the core components of what creates value and position yourself as flexibly as possible at all layers of the tech stack, ownership spectrum and maturity schedule to both participate and, more importantly, catalyze that value creation. This offers multiple benefits over taking bets on a single vehicle or layer that “may win”.

We’ve outlined our thesis on how blockchain is additive to the current world and creates value in Parts 1 and 2, here we want to outline our tactical strategy to participate in that.

First, we view the blockchain stack as having roughly 4 layers:

- Core open source protocol layers (Aion, BTC, ETH) - Middleware service providers (Infura, Nodesmith, Blockdaemon, Vault) - Layer 2 open source protocols (identity, mobility, gaming) - For profit dApps (games, brokers, service providers, insurance, etc)

Floating around all of this you have a bunch of lawyers, developers, marketers and advisors who work off-chain to support, for-profit, all of these activities. On top of this you have the end user and consumer. All of these layers and sublayers must be working together in an ecosystem to create a functional public blockchain environment. One with sufficient UX and security to actually drive the real adoption and network effects necessary to create the value outlined in Part 1 and 2. As a further wrinkle, all of these will, for the near and medium term have a multitude of ownership and governance structures (equity, convertible notes, utility tokens, security tokens, foundations, on-chain governance, DAOs etc).

This is where it gets super interesting. Let’s ignore tokens for a minute and think about current world. If you were relying on traditional market forces to make this ecosystem operate, it would either be:

Model 1: A series of competitive ventures, where each layer is trying to capture as many dollars as possible themselves with only the minimum regard for everyone else’s financial well-being (think Walmart squeezing its suppliers). This is the free market baby! Crowd sourced market forces are generally good, but this also extra discourages co-operation and encourages hoarding of market power, short term optimization, data moats, siloed thinking etc. All of which likely keeps the ecosystem operating in a sub-optimal way overall. You MAY be able to convince certain people with market power that it is better for them long term to encourage the health of the ecosystem at the expense of their short term profits………but good luck at quarterly earnings time……

Model 2: The ecosystem would end up being owned by one corporation who can try and centrally co-ordinate activity to maximize value for the whole stack and have that value go back to its shareholders as opposed to the individual actors within each layer (and big LOL @ passing value back to the consumer). In this situation, certain parts of the stack may be forced to earn less dollars individually in order to benefit the corporation as a whole. When parts of an ecosystem cooperate in this manner and the whole is ACTUALLY greater than the sum of its parts it’s known as creating synergies and it is the holy buzzword grail of M&A and strategy. However these synergies are incredibly hard to create or quantify. Further you have to hope that the single decision making body of the company is smart enough to know exactly how to centrally plan all the parts and shift value around to maximize the whole. Hopefully those “cost center” employees have equity in the company as a whole or otherwise they’re just a resource in the borg.

This is essentially how commerce has operated for hundreds of years, but let’s think about a third angle;

Model 3: what if you could get an ecosystem of independent, self-maximizing actors (service providers, technologies and users), to act in a coordinated way to maximize the value of an entire system, while directly participating in that value creation? If everyone held something like Ecosystem Bucks which rise in value whenever you do something that is good for the ecosystem then you could bridge this “cooperation gap” that has historically been solved with a merger in Model 1/2 above and actually directly observe these synergies in action. Even more interesting is that you can let the market create synergies rather than relying on an individual company or leadership team to recognize and execute on them! Let’s say an actor does something that is bad financially for themselves in the short term yet good for the ecosystem. The actual dollars they earn are less than what they could in Model 1 above, but the increase in the value of their Ecosystem Bucks would offset this and they would be economically indifferent. Most powerful is that now the end consumer, who also holds these Ecosystem Bucks, is brought into the value creation chain as well rather than being looked as the source of value that is divvyed up by the rest of the ecosystem (whattup ad-based social networks).

In the worst kept secret of all time: Ecosystem Bucks = the Coin of the protocol layer, in our case we’ve chosen to use the AION Coin and Aion interoperability protocol.

We’ll detail why we chose Aion and fight about what specifically is “good for the ecosystem” later but to sum up so far: there will continue to be a multitude of participants and players in a blockchain ecosystem governed by a huge array of ownership and governance structures. However you can get them all on the same page and start crowd sourcing synergies by seeding everyone with core protocol layer coins that appreciate in value as they do things that are of net benefit to the ecosystem powered by that protocol.

So to refine our position from an earlier post, we don’t agree with the Fat Protocol theory in that the protocol layer captures value at the expense of other layers, but we do think that at the core, the protocol layer coin should be used as the ground floor value sharing mechanism amongst all the various parties that are contributing to the multi-faceted ecosystem that gives a protocol its value.