Thread by @jessewldn

Crypto has a traditional business model.
Whats new is who benefits from it.

A good mental model is API microservices:

Stripe 💳 Pay per charge
Twilio ☎️ per SMS

dAPIs

#Bitcoin Pay per transfer
Ethereum 👩‍💻 Pay per function
Compound 💸 Pay per borrow
Uniswap 💹Pay per exchange

Stripe or Twilio shares are valuable because they capture a fee stream.

Most crypto tokens will similarly be valuable because they are backed by fees in a marketplace.

Whats new is that tokens can be distributed like packets, directly to users who make the service valuable.

Fees only make sense if you’ve got enough defensibility to charge them and still win.

In each of the dAPI examples given there are network effects at play.

Network effects create switching costs, which in turn, create an opportunity to extract a margin by charging a fee.

Distributing a fee stream to users via tokens entrenches network effects, generates more defensibility and further warrants the exsistence of a fee.

It is a virtuous cycle that allows for sustainable, community owned networks.

I wrote a longer blog post about the business model for crypto networks.

While familiar, building a business on this new stack offers founders and users a new tool to generate network effects—by sharing in the value they help to create.

a16z.com/2020/04/08/cry…