I have spent much of the past six months trying to understand the world of Bitcoin, Ethereum, alt-coins, crypto currencies, crypto commodities, and crypto tokens.
If history teaches us one lesson, it is those who adapt will survive, and those who fight tooth and nail for the status quo will flounder when the world invariably changes. If many smart people say that something “is the future”, it is generally worthwhile to try to figure out why.
If you are brand new to all this, A Letter to Jamie Dimon, by Adam Ludwin, is a great primer blog post. There are countless other blogs, podcasts, and books, but Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond is an extremely well written book that I thoroughly enjoyed.
Broadly, crypto currencies (like Bitcoin) function as digital money, crypto commodities (like Ethereum) provision scarce digital resources (like distributed computing power), and crypto tokens (99% chance you’ve never heard of one) are more of a flexible combination of a currency and a commodity. Altogether, we call these crypto assets.
Within the world of crypto assets, most of the attention is paid to the biggest crypto currency, Bitcoin, and the biggest crypto commodity, Ethereum.
Often overlooked and in their nascency, crypto tokens could be the most exciting crypto asset.
Crypto tokens have potential far beyond being the “internet of money” – they can reshape how businesses form and operate.
As a means to help individuals band together to create and capture value—crypto tokens could be the greatest innovation since the joint-stock corporation.
I will attempt to illustrate this potential below.
Disrupting the Two-Sided Marketplace of Web 2.0
Businesses that are two-sided marketplaces, built around network effects and transaction fees (Uber, Lyft, eBay, Airbnb), will be especially vulnerable to disruption from businesses built around crypto tokens.