This is my interpretation of the below article from the medium.
Why my own interpretation?
The mentioned article is discussing how industrialization started, and how it disrupted the market leading to the creation of value as pipelines. Then how it's disrupted by the platforms and finally how the protocols are becoming the future disruption.
Not sure how many of my readers understood the above statement. I faced the same problem. But I somehow got a feeling that there is value in the article. I read it, again and again, to understand what is it? Finally, when I felt I understood something, I thought of writing my own interpretation for the fellow readers like me who can't understand that in the first place. Especially software engineers.
Its the readers choice to read my article first then the original or viceversa
First, we need to be familiar with the 3 terms mentioned in the title.
Pipelines
What
- One producer to many consumers.
- Manufacturers set up assembly lines of production and a global supply chain to deliver goods.
- It is mostly linear from souring raw material, running a production factory, transporting to the consumer market, advertising, selling, and after-sale support.
- The producer is mainly responsible for finding and reaching out to the customers.
- If malpractice or hacking succeeds, only the producer and its consumers will be affected.
Examples
- Car manufacturing, Textile, Electronics, and consumer goods where producers reach out to consumers.
Platforms
What
- Many producers and many consumers interact within a centralized platform that verifies the transactions.
- Distributed production than centralized production in pipelines.
- The platform basically provides market infrastructure and matches supply and demand. Uses personal matching preferences too.
- Platform charges fees or makes use of producer and consumer data to make money.
- Less privacy as the platforms need personal information.
- A producer can become a consumer and vice versa quickly. eg: Yesterday I stayed on Airbnb, tomorrow I am listing my basement. I read and write posts on social media like Facebook, Twitter
- Platform decides the rules for producers and consumers and standardizes interaction.
- Internet is essential to sustain platforms though there were old platform models such as farmer's markets, and shopping malls that connect producers and consumers.
- Malpractice or successful hacking into the platform affects relatively a large population that is on the platform.
Examples
- eCommerce - Amazon, eBay, etc.
- Apple app store, Play store, etc...
- Social media & news - Twitter, Facebook
- Publishing - Blogger, WordPress, YouTube, etc...
- Transportation - UBER, Lyft
- Hospitality - Airbnb
Protocols
What
- Decentralized blockchain and smart contracts govern the transactions.
- Transactions verification and enforcement of smart contracts can be done by producers and consumers or third-party miners.
- The contract code is auditable by the market players than a document given by the platform owner.
- The protocol doesn't provide market infrastructure. Instead, it encourages players to set up by giving protocol tokens. Token value is directly proportional to the usage of the protocol.
- NFT (Non-Fungible Tokens) helps producers establish and transfer property rights. Consumers get verifiable asset ownership.
- Identity protection.
- Governments have less control except to identify a bad actor and request everyone else not to work with the bad actor.
Examples
- Metaverse. (Infrastructure will be provided by metaverse developers and device manufacturers where the value is stored and transferred using underlying blockchain and smart contracts)
- Financial protocols such as AAVE
- The NFT market such as OpenSea
What is the takeaway?
Now we understood some terminologies. Let us see what the article says.
During the pre-industrialization era, production was decentralized into small units without leveraging technology. Then the pipeline model came with the help of the steam engine followed by electricity. It revolutionized production. Then platforms came and won the market with the advanced technology of the internet. Often we can see when the company that follows the pipeline model competes with a company following the platforms model in the same business domain platform model is winning.
The future is of protocols. Protocols are expected to win when competing with the platform business models.
Should all businesses move to protocols?
I am not sure at this point. If there is a monopoly, you may continue your pipeline business model. Indian railway is the biggest monopoly I have ever seen. But they are also trying the platform model by inviting private train operators. That will help them compete better with the other means of transportation.
The same applies to the stock exchange which provides a platform for buyers and sellers. I am not aware of any protocol where I can buy actual Apple (AAPL) stocks in whole or as fractions without paying the brokers. Oh maybe having a look at Terra Luna Mirror protocol, may change our perspective. But still, traditional exchanges have a monopoly.
What does it mean to developers?
We are in the early days of platforms to protocol transition. Kind of how people were wondering what to do with the internet in the 90s. Below is my advice to fellow developers. This is applicable if you are not afraid of change, to be in the market to build great products and make more money.
- Learn how the protocols world works. Think about how it can be used in the real world. Get hands dirty with protocol code ie write smart contracts.
- If your company is still following the pipeline business model and platform competitors are coming to the domain
- Try to convince the company to transform into a protocol model skipping the platform model.
- Or at least to platform
- Move to a platform company, in case change is considered an enemy in your company.
- If your company is in a successful platform business
- Try transforming to a protocol model.
- Move to protocol business company, if the change is not welcomed.
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