This is the second in a series of posts about the Audius protocol architecture, detailed in our whitepaper.

In our last post, we introduced the dual-token architecture underpinning Audius. Here, we explain how that architecture allows Audius to unlock increased efficiency and value for all protocol participants. We go on to explain using first principles how public, permissionless blockchains[1] could upend the way groups do business, not just as a means of value transfer, but as a means of automation.

As engineers, we often get to work on innovative products at great companies. It’s rare that we get a chance to innovate on the concept of a company itself.

How Blockchain Increases Efficiency

We at Audius are very excited about our dual token architecture. If you are not up to speed, you can read more about it here. But let’s zoom out to grasp the bigger picture. What we have done, at the very core, is to make the Audius microeconomy much more efficient by creating permissionless, open marketplaces to fulfill the needs of a network without human intervention.

In 1976, Jensen and Meckling aptly defined a corporation as a nexus of contracts[2]. In other words, within a given organization you can expect to find shareholders, directors, employees, contractors, suppliers and even customers all connected to each other and governed by a set of legal contracts. There are also entities that lie outside a conventional organization such as legal counsel, accountants, stock brokers and the stock market itself, that are also governed by such contracts[3].

Blockchain technology at its core is a way of increasing efficiency by executing these contracts in software. Even in edge cases where human input is required, a smart contract can be drawn such that there’s an economic incentive for anyone (with the necessary skills) to perform the required function without actually being part of a core organization.

Figure 1: Org Chart of a Typical Technology Company

Figure 2: The Audius Protocol Economy

To illustrate this point, consider the org chart of a typical technology company (Figure 1). Now consider an equivalent chart for Audius (Figure 2). What blockchain technology and smart contracts allow is to collapse the org-chart into one blob, the Audius Protocol, which creates open markets for the various services typically done by employees at a corporation. When a decentralized protocol can verify that service providers are doing work correctly, anyone can contribute work without permission from a centralized authority, creating open markets around the services required by the network. This is where blockchain technologies shine as a mechanism for decentralized coordination.

Another way to understand this rather abstract point is to think about where Audius, the company resides in Figure 2. It’s very important to note that the Audius Protocol is not the same as Audius, the company. Audius the company occupies the position of the protocol developers (i.e top right node in figure 2). As far as the Audius Protocol is concerned, Audius the company is simply a “contractor” that supplies it a required service. Once the Audius Protocol is launched, other individuals or groups may also provide engineering services to the protocol. At that point, Audius as a company can cease to exist but the Audius Protocol will continue on.

5 Predictions About The Future

It’s clear that these simple concepts will have far-reaching implications beyond Audius, and could augment the way we all do business in the future. Here are some of our predictions of its potential outcomes:

Proliferation: More startups will adopt blockchain architectures similar to Audius and perhaps even improve on it. Standardization: It doesn’t make sense for every protocol to have their own stable payment tokens. It might make sense for groups to come up with their own price-stable programmable currencies whose supply is controlled algorithmically (eg: USDC[4], Basis[5], Maker[6], or a multitude of other stable token projects). These should grow more resilient as their usage (market cap and liquidity) increases, and most dApp companies (Audius included) would use one or more of them at that point. Dynamism: It seems likely that public markets of the future will be dealing in tokens with smart contracts determining their properties and life cycles, not static stock certificates. Efficiency: Open, permissionless protocols will replace some types of corporations simply because they are more efficient at doing the same work. Accordingly, consumers should see a lower cost of certain goods and services. Automation: As AI technologies improve, they may replace humans that currently occupy many of the edge nodes in blockchain systems. For example, within the Audius ecosystem, arbitrator decision making could be automated. This is a fascinating point for discussion but unfortunately beyond the scope of this particular post. We will get back to this topic in the future.

Conclusion

In summary, if the reader should carry one thing away, it is that blockchain is nothing more than one in a long line of technologies that have served humanity to improve the efficiency of its economy. By being able to verify that work is done correctly in a decentralized manner, anyone can contribute to the Audius economy without permission from a centralized entity, unlocking efficiency by making opportunities equally available to all people. And extending this line of thinking, where machines can do the work that humans are doing, they can immediately participate in permissionless protocols like Audius, reducing the market price of these services for everyone.

If you’re excited by working on problems like this, and having a lasting positive impact on the world, please reach out at careers@audius.co - We’d love to chat!

Special thanks to Roneil Rumburg, Ranidu Lankage, and Julian Baker for their help with this post.

Influences

[1] A Next Generation Smart Contract & Decentralized Application Platform | Vitalik Buterin

[2] Theory of the Firm | Michael C. Jensen, William H. Meckling

[3] The Firm as a Nexus of Smart Contracts? How Blockchain and Cryptocurrencies Can Transform the Digital Economy | Christian Catalini

[4] Coinbase and Circle announce the launch of USDC — a Digital Dollar | Medium Blog

[5] Basis: A Price-Stable Cryptocurrency with an Algorithmic Central Bank | Nader Al-Naji, Josh Chen, Lawrence Diao

[6] Maker, The Dai Stablecoin System | Rune Christensen, Nikolai Mushegian, Daniel Brockman, Kenny Rowe, Andy Milenius, Ryan Zurrer