As part of an on-going Tweetstorm Series, we showcase excellent Twitter threads on the most interesting topics in the industry and publish them here in blog format for easier consumption and sharing beyond twitter.
Today we explore Naval Ravikant's epic tweetstorm from almost two years ago in June 2017, a lifetime in the world of crypto. It is still relevant and meaningful today as we progress further in our understanding of how Blockchain networks evolve and mature into real-world markets.
Humans are the networked species. The first species to network across genetic boundaries and thus seize the world. Networks allow us to cooperate when we would otherwise go it alone. And networks allocate the fruits of our cooperation. Overlapping networks create and organize our society. Physical, digital, and mental roads connecting us all.
Money is a network. Religion is a network. A corporation is a network. Roads are a network. Electricity is a network. Networks must be organized according to rules. They require Rulers to enforce these rules against cheaters.
Networks have "network effects." Adding a new participant increases the value of the network for all existing participants. Network effects thus create a winner-take-all dynamic. The leading network tends towards becoming the only network. And the Rulers of these networks become the most powerful people in society.
Some are run by kings and priests who choose what is money and law, sacred and profane. Rule is closed to outsiders and based on power.
Many are run by corporations. The social network. The search network. The phone or cable network. Closed but initially meritocratic.
Some are run by elites. The university network. The medical network. The banking network. Somewhat open and somewhat meritocratic.
A few are run by the mob. Democracy. The Internet. The commons. Open, but not meritocratic. And very inefficient.
Dictatorships are more efficient in war than democracies. The Internet and physical commons are overloaded with abuse and spam.
The 20th century created a new kind of network — market networks. Open and meritocratic. Merit in markets is determined by a commitment of resources. The resource is money, a form of frozen and trade-able time.
The market networks are titans. The credit markets. The stock markets. The commodities markets. The money markets. They break nations. Market networks work where there is a commitment of money. Otherwise they are just mob networks. The applications are limited.
Blockchains are a new invention that allows meritorious participants in an open network to govern without a ruler and without money. They are merit-based, tamper-proof, open, voting systems. The meritorious are those who work to advance the network.
As society gives you money for giving society what it wants, blockchains give you coins for giving the network what it wants. It's important to note that blockchains pay in their own coin, not the common (dollar) money of financial markets.
Blockchains pay in coin, but the coin just tracks the work done. And different blockchains demand different work.
Bitcoin pays for securing the ledger. Ethereum pays for (executing and verifying) computation.
Blockchains combine the openness of democracy and the Internet with the merit of markets. To a blockchain, merit can mean security, computation, prediction, attention, bandwidth, power, storage, distribution, content.
Blockchains port the market model into places where it couldn't go before. Blockchains' open and merit based markets can replace networks previously run by kings, corporations, aristocracies, and mobs.
It's nonsensical to have a blockchain without a coin just like it's nonsensical to have a market without money. It's nonsensical to have a blockchain controlled by a sovereign, a corporation, an elite, or a mob.
Blockchains give us new ways to govern networks. For banking. For voting. For search. For social media. For phone and energy grids. Networks governed without kings, priests, elites, corporations and mobs. Networks governed by anyone with merit to the network.
Blockchain-based market networks will replace existing networks. Slowly, then suddenly. In one thing, then in many things.
Ultimately, the nation-state is just a network (of networks).
Thank you, Satoshi Nakamoto. And to all the shoulders that Satoshi stands upon.
Naval Ravikant is an entrepreneur and angel investor, a co-author of Venture Hacks, and a co-maintainer of AngelList. Previously, he was a co-founder at Genoa Corp (acquired by Finisar), Epinions.com (IPO via Shopping.com), and Vast.com (largest white-label classifieds marketplace). He also advised Bix.com, iPivot, and XFire, among others, and invested in many companies, including Twitter, FourSquare, DocVerse (sold to Google), Mixer Labs (sold to Twitter), Jambool (sold to Google), SnapLogic, PlanCast, Stack Overflow, Heyzap, and Disqus.
Follow Naval on Twitter for more insightful posts about technology, startups, angel investing, blockchains and cryptocurrency.