Trends

Crypto Startup School: Capturing value in crypto through network effects and mechanism design

Week three of a16z’s Crypto Startup School focuses on understanding how to capture value and design proper incentives within the decentralized framework. We learn how familiar ideas like network effects and mechanism design can hold unique power for crypto networks.

In the first presentation, Andreessen Horowitz crypto partner Ali Yahya discusses “Crypto Business Models.” Yahya explains that the consensus mechanisms of blockchains create trust among independent participants in decentralized networks.

andreessen horowitz choses michele korver as regulatory chief - the coin republic: cryptocurrency , bitcoin, ethereum & blockchain news

At first glance, this may seem at odds with the idea of capturing value, since none of the factors that allow companies to build moats in traditional industries — trade secrets, intellectual property, or control of a scarce resource — apply in crypto.

This leads to the “value-capture paradox” — how can easy-to-replicate, open-source code be defensible in a competitive landscape?

is bitcoin risky?

The answer is that network effects are just as powerful, if not more so, in crypto than in traditional industries. This is due to the economic flywheel enabled by tokens, which incentivize participants and coordinate all economic activities in crypto networks. Combined with the ability of developers to build on each others’ networks using autonomously executing smart contracts, this should result in winner-take-all dynamics, contrary to what might seem intuitive in open source, Yahya says.

SEO optimization-Pavitra

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button
%d bloggers like this:

Adblock Detected

Please consider supporting us by disabling your ad blocker