A platform is when the economic value... - Deepstash
Bill Gates

A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.

BILL GATES

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MORE IDEAS FROM Ethereum is the future of our economics

Why is Eth valuable?

How does more activity on top of Ethereum translate into a higher price for ETH?

Today, when you want to transact on Ethereum, you need to use ETH. There are currently around 116 million ETH. More transactions on Ethereum means more demand for ETH which means a higher price.

The Future will see Ether become triple-point money, which means it will be a combination of:

  1. Store of Value
  2. Consumable Asset: Any time something happens on Ethereum, gas needs to be burned, decreasing the overall supply.
  3. Capital Asset. Owning ETH represents a share of the Ethereum network, like owning equity in a company.

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A world computer & a settlement layer

Ethereum is a “world computer”: It lets people build apps & products with money baked into the code. If you believe that web3 is going to continue to grow, then you likely believe that over time,

Ethereum will become the “settlement layer” of the internet: All sorts of transactions (whether on-chain or even Visa) will turn to Ethereum to exchange funds and keep secure, immutable records.

Owning ETH is like owning shares on the internet. Demand for ETH will go up with increased web3 adoption, while upcoming changes will decrease the supply of ETH and let more value accrue to holders.

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Bitcoin is a database that does only 1 thing: track ownership of coins.  Ethereum adds the computational capabilities that makes Excel more than a database: 

  • Turing Completeness. It means that it can solve any computational problem. With the introduction of formulas, Excel became Turing complete. With Ethereum's smart contracts you can solve any reasonable problem. 
  • Composability. In Excel, “You can chain functions, passing the output of one function as the input to another, allowing for an enormous number of potential computational pipelines.” This is very similar to the idea of “Legos.”

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Robert Greer says that there are three asset superclasses: 

  1. Capital Assets are productive & generate value or cash-flow: equities, bonds, or rentable real estate. 
  2. Transformable/Consumable Assets: can be consumed one time, transformed into another asset, and their consumption produces economic yield: energy or commodities
  3. Store-of-Value Assets are scarce, cannot be consumed, just transferred, and their value persists over time and space: gold, currencies, art, or bitcoin. 

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Apple's AppStore fees can be seen as rent-seeking and the same can be said about all incumbent-run platforms. 

Ethereum is a true platform: projects that build on top of it are actually financially incentivised to support the value of the underlying tech in order to secure their project.

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RELATED IDEA

From Bitcoin to Smart Contracts

Bitcoin created a decentralized monetary system which can transfer money from one person to another. That only allowed for monetary transactions, there was no way to add conditions to those transactions: 

Alice can send Bob 5 BTC, but she couldn’t tell Bob that he will get the money only if he performed certain tasks.

These conditions are a smart contract: self-executing with specific instructions written in its code which get executed when certain conditions are made.

Say Alice wants to buy a house. The seller will receive the funds only if property rights are cleared and after the rights have been transferred over.

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Ethereum promise

Ethereum's initial success can be attributed to a few elements. Ethereum is programable, meaning apps can run on the Ethereum blockchain. This is what let to Ethereum being used in:

  • Decentralised Finance, or DeFi, meaning that apps like investments, insurance etc can be run without a central authority.
  • NFTs, tokens to prove the authenticity and ownership of an object (digital or physical)
  • The consensus in the network through proof of stake. New coins are created by putting guaranteeing your existing money. This incentives people to be good actors and decreases the money supply, increasing its price.

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The Proof of work concept existed even before bitcoin , but Satoshi Nakamoto applied this technique to the digital currency revolutionizing the way traditional transactions are set.

In fact, PoW idea was originally published by Cynthia Dwork and Moni Naor back in 1993, but the term “proof of work” was coined by Markus Jakobsson and Ari Juels in a document published in 1999.

But, returning to date, Proof of work is maybe the biggest idea behind the Nakamoto’s bitcoin white paper – published back in 2008 – because it allows trustless and distributed consensus.

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