See what I did there -- how I juxtaposed "narrow" with "fat"?
Just shut up and drink your wine. 👇
A theory is just a plausible principle offered to explain phenomena.
"The market cap of the [base] protocol always grows faster than the combined value of the applications built on top, since the success of the application layer drives further speculation at the protocol layer."
- Is $BTC valued more than apps on top? ✅
- Is $ETH valued more than apps on top? ✅
- Are all other protocols with apps valued more than their apps? ✅
I know, fucking awkward right?
So how can we refine our theory?
Do we mean their token values?
Do we mean the market caps of the companies developing apps?
Do we mean applications in the sense of software apps?
What about apps like decentralized lending that create value but don't necessarily capture it?
What about broader economic or societal value?
Are mining companies like Bitmain "applications"?
What if those companies have other revenue streams unrelated to blockchain?
So let's treat these questions as rhetorical for now.
Instead, let's discuss *why* such a theory might be correct.
Here we encounter a few other theories that I'll only briefly touch on:
1. Fat monies theory
2. Utility hypothesis
3. Store of economic security
If we consider base layer protocol tokens like $BTC and $ETH as "base monies", then it follows that the value of base money could be enormous.
In fact, I think "fat monies" and "utility" are not mutually exclusive and that $ETH is an example of a token that straddles both.
...but that's a whole other discussion.
1. Clarify what we mean by applications
2. Clarify what we mean by value
3. Attempt to explain why this theory may prove correct
- Are emergent commodity monies wrapped in tech
- Their tech is evolving
- The tech around them is evolving
- They have emergent cryptoeconomic properties that are subject to extra-protocol forces (such as access to hardware and cheap electricity in PoW)
The open-minded will adapt their thinking based on new evidence.
The close-minded will deride and be forgotten.