When I left my rewarding career as a Deloitte partner, I did not expect to be announcing a startup in the blockchain space 15 months later.
After 10 years of co-building one of Australia’s most successful software engineering businesses, I wanted a (questionably) well-earned break. My wife had been presented with an excellent work opportunity, and I offered to take the reins at home with our three kids.
After a few months of adjusting to one of the toughest jobs in the world - raising children - I was ready to seek sanctuary and solitude in my first love: technology. Untethered from any actual users or problems to solve, curiosity was my guide.
Like many people in technology, blockchain had been on my periphery for the last decade. And like almost everyone both in and out of technology, I had been fairly quick to form an opinion and dismiss it.
A solution looking for a problem. Just a database. A haven for Ponzi schemes and scams. A phenomenal waste of energy. Far too slow and expensive for anything useful.
Despite this, the allure remained - the unique melding of computer science and maths intrigued my inner nerd. And it had been many years since I last looked at the space.
Perhaps things had changed?
What I found took me totally by surprise and ignited the passion that eventually lead to the announcement today.
Not your father’s blockchain
I read some blogs, fired up a new wallet, added some funds, and dove into some apps. I signed my first transaction and waited. To my delight, it was confirmed a few seconds later and cost me fractions of a cent. This reasonably pleasant user experience was not the one I was expecting.
What was going on?
When I read popular critical commentary on the blockchain these days, it is dominated by soft and easy targets:
- Too slow
- Too expensive
- Too limited
- Too wasteful
What I learned is that above all else, the blockchain you’re looking at matters. We are in at least the third generation of blockchains, and everything has changed.
- Generation 1 is Bitcoin and its direct derivatives. They introduced the technology to the world, but are absolutely guilty of the above characterisations. I am thankful to Bitcoin for the innovation it unlocked but have little informed opinion on its long term usefulness to society.
- Generation 2 is Ethereum, which introduced programmability and a path to less resource usage but did not solve for speed or cost.
- Generation 3 is Solana, Avalanche, NEAR and various Ethereum ‘Level 2’ scaling solutions that directly tackle speed and cost: the primary impediments to widespread usefulness and adoption.
With these last gaps closed or closing, the obvious criticisms of blockchain begin to fade. But one much more subtle and elusive one remains: why blockchain at all?
For me, there are four core reasons:
- Extend the lever (of software)
- Start with open (not closed)
- Value to users (not platforms)
- Embrace the bazaar (not the cathedral)
Extend the lever
Give me a lever long enough ... and I shall move the world
In 2011, Marc Andreessen argued in Why Software is Eating the World that “all of the technology required to transform industries through software finally works and can be widely delivered at global scale”, and as such software is poised to disrupt all industries.
This article’s prescience is undeniable - since then, the NASDAQ has outperformed the S&P 500 in all years bar one, and the 8 out of the 10 most valuable public companies in the world are focused on technology.
What’s not said but is implied by Andreessen’s argument is that the disruption will continue as more of the world becomes software-enabled. This is a dynamic phenomenon that grows with software’s reach.
The greatest example of this is the cloud. Enterprise-grade hardware, hosting, networks and platforms became available at the click of a mouse for a low pay-as-you-go cost. The hurdle to starting a business, in time, cost and risk, was reduced by several orders of magnitude.
And as a result, a whole generation of new businesses became possible.
Blockchain represents the single biggest increase in the ‘surface area of programmability’ since the cloud. For the first time, money, ownership and contracts could be programmed at a global scale, without being gatekept by intermediaries.
And once again, as a result, a whole generation of new businesses becomes possible.
But why would these businesses be different?
Start with open
I spent a good portion of the last few years of my career working on Open Banking initiatives. The premise here is straightforward: consumers should have control over their financial data and the ability to share that with companies they trust.
After many years and many hundreds of millions of dollars spent globally, the initiative has only had modest success. The standard requires regulation to push through, is not globally adopted, is severely limited in functionality, and often pushes against the moats and business strategies of the banks themselves. Stripe and others like Plaid have built whole businesses on solving this problem.
And this is just to get access to your own data!
The unfortunate reality is that most businesses benefit from starting closed, and getting more closed over time. This often benefits the business but comes at a cost to competitors (barriers to entry) and consumers (increased lock-in and reduced choice).
And trying to open up a business that is already closed is a difficult and often futile proposition.
But a blockchain native business is designed from the ground up to ‘live in the open’. Users always own their data, and a user is always free to move between offerings.
Removing the artificial barriers to competition or portability is a huge boon - it creates incentives to retain users based on the value given to them, rather than by removing their choice to leave.
But this is not the only way in which blockchain native businesses can drive value back to users.
Value to users
The largest technology businesses in the world rely heavily on the contribution of users:
- Google search indexes the content created by people all over the world
- Facebook and Instagram surface content created by the users of the network
- Spotify provides access to music from millions of (often independent) artists
Yet the users of these platforms capture almost none of the value created on them.
You know something is profoundly wrong with our economy when Big Tech has a higher take rate than the mafia.
-- Ritchie Torres, U.S. Congressman representing the South Bronx
And in many cases, the resulting power of these platforms (described brilliantly by Ben Thompson as Aggregators) also extracts the majority of the value from businesses hosted on them as well: CAC becomes the new rent and the value over time accrues to the ‘ad space landowner’.
By enabling simple, cheap and ubiquitous access to primitives such as tokens and ownership, native web3 businesses can create business models where ownership is shared by all participants in the platform, not just its owners.
And these business models are incentivised to maximise the flow of value to users - because the platforms are open and barriers to competition and user portability are so low.
But even if a blockchain native business does represent a far greater value proposition to the consumer - through increased ownership and value - how can they possibly get off the ground given the current power and reach of incumbents?
Embrace the bazaar
In Eric Raymond’s The Cathedral and the Bazaar, one quote always stood out for me:
Who would have thought ... that a world-class operating system could coalesce as if by magic out of part-time hacking by several thousand developers scattered all over the planet, connected only by the tenuous strands of the Internet?
One of the most easily dismissed yet most powerful aspects of blockchain technology is that you can just get started. There are no barriers beyond committing the time - no gatekeepers, no upfront costs.
And you’re never starting with a blank slate - not only is there an open and inviting community connected by the (far less tenuous these days) strands of the internet, but you also have access to all the existing contracts and data on the chain. It is there, ready to be extended and built upon.
Coupled with the extended lever of blockchain, the ability to empower users with economic incentives, and a community that works in the open world of the bazaar: small teams can do more with much, much less on the blockchain.
Time to build
But that is just a lot of words.
When I first started in blockchain, I must admit that I was not building toward the future that I’ve described. I participated in decentralised finance, generating income for myself and providing liquidity through the markets through nothing more than code. I marvelled at the power of a single engineer in blockchain, and at the magic of the technology that I was using. But given what I believed about the blockchain, I did feel very keenly that I was not doing enough.
And that leads us to here. We started Lab Eleven because we believe in the power of the technology, and what it can do to democratise value to users around the world.
So once again, we are bringing together a world-class engineering team, and putting our own efforts behind this movement. If this story has piqued your interest and you want to know more, my co-founder Ben wrote reveals what this whole Lab Eleven thing is all about.
We are thrilled to now be part of accelerating towards a web3 future. Join us!