Chapter 5: New Business Model

[johnnuggie]

Content:

I. Background
II. Issues with Centralized Business Model
III. Potential Applications
IV. The Big Seven: Open network enterprises business model
V. Hacking your future: Business model innovation
VI. Conclusion

I. Background

Blockchain Expert, Dino Mark Angaritis has designed an airbnb competitor on the blockchain.

It looks more like a member-owned cooperative (Dapps, Decentralized application)
All revenue, except overhead would go to its members, who would control the platform and make decisions.

Warm up act prior to blockchain, Bittorrent

A peer-to-peer file sharing app, demonstrates the power of Dapps, Decentralized applications. It utilizes autonomous agent, a device or software system that on behalf of some creator takes information from its environment and is capable of making independent choices.

II. Problem with existing centralized business model

1. Single Point of Control
2. Vulnerable to catastrophic crashes, fraud, and security breaches
3. Inefficient, because they dont know what the market wants in real time
4. Have to make educated guesses that are always less accurate than what real-time markets demand

III.Potential Application:

1. Weather net

• the best weather forecast globally are coming from a network of smart devices that are measuring and predicting the weather all around the world.
• Distributed environmental sensors (*weather nodes) on utility poles, in peoples clothes, on roofs of buildings, travelling in cars, and liked to satellites are all connected in a global mesh network.
• Rather than communicating with a central database, they store their data on a blockchain. many are solar-powered and so they don't need the electrical grid, they can effectively operate indefinitely.

Blockchain handles a few functions:

1. Settles payments
2. Receives micropayments every 30 seconds for providing accurate weather telemetry at a particular location in the world
3. Stores all *weather nodes transactions
4. Smart contract assignments, encode the collective knowledge of management science and that their assignments and performance metrics would be transparent.

In theory, we could design a corporation without executives, only shareholders, money, and software. Code and algorithm could replace a layer of representatives, with shareholders exerting control over that code. the opportunity for prosperity is significant, nothing less than the democratization of ownership of wealth-creating instruments.

IV. The Big Seven: Open Networked Enterprise Business Models

1. The Peer producers

• Thousands of dispersed volunteers who brought you open source software and Wikipedia, Linux foundation, and Mozilla Firefox
• By enabling reputation systems and other incentives, blockchain technology can improve their efficiency and reward them for the value they create
• Companies tap into vast pools of external labor
• Information should be free, but your time should not.

2. The Rights Creators

• During the first generation of the internet, many creators of intellectual property did not receive proper compensation for it (Musicians, journalists, photographers, artists, fashion designers, scientists, architects, and engineers), all beholden to record labels, publishers, galleries, film studios, universities, and large corporations.

Start ups:

Ascribe

• enables artists themselves to upload digital art, water-mark it as the definitive version, and transfer it so that, like bitcoin, it moves from one persons collection to another.
• musicians, artists, photographers whose work could be digitized and watermarked as definitive copy could use this technology to transform their intellectual property into trade-able assets.

Verisart

• uses digital watermarks and cryptocurrency intrinsic to the blockchain for authenticating pieces.
• combining blockchain technology and standard museum metadata to create a public database of art and collectibles

• the art world is not broken, it just relies too much on middlemen to ensure trust and liquidity.

3. Blockchain Cooperatives

• The trust protocol supercharges cooperatives - autonomous associations formed and controlled by people who come together to meet common needs
• It translate peoples willingness to work together into a set of reliable accounting of rights, assets, deeds, contributions, and uses.

Harvard Professor, Benklet, "it's nonsense to call Uber a sharing economy company"

• Most so-called sharing economy companies are really service aggregators, they aggregate the willingness of suppliers to sell their excess capacity (cars, equipment, vacant rooms, handyman skills) through a centralized platform and then resell them, all while collecting valuable data for further commercial exploitation.

4. The Metering Economy

• Perhaps the blockchain can take us beyond the sharing economy into a metering economy, where we can rent out and meter the use of our excess capacity
• Your subscriptions, physical space, and energy source can now become sources of income, metering their use directly to a counterparty and charging them for it through micropayments.
• All you need is a decentralized value transfer protocol to allow them to safely and securely transact with one another

Use cases:

• Wi-Fi hot spots
• Computing power or storage capacity
• extra mobile minutes
• even our expertise

5. The Platform Builders

• Enterprise create platforms when they open up their products and technology infrastructures to outside individuals or communities that can create value or new businesses.
• advocating for Prosumers, customers who produce
• Common database makes for data transparency and portability, consumers and suppliers can cooperate as peers on the blockchain to create their own platforms, rather than using the capabilities of traditional companies
• Think a distributed skills inventory owned by no one or everyone.

6. Blockchain makers

• Manufacturing-intensive industries can give rise to planetary ecosystems for sourcing, designing, and building physical goods, marking a new phase of peer production.
• Blockchain is also a powerful monitor of provenance of goods and their movement throughout the supply network

Use Cases:

• The Food Industry, enable comprehensive tracking of livestock and poultry so that users could link an animals identity to its history
• Using sophisticated DNA-based technologies and smart database management, even the largest meat producers could guarantee quality and safety.
• Transparency lets companies with superior practices differentiate themselves, the brand could evolve from marketing notion of trustmark into a relationship based on transparency.

7. The enterprise collaborators

• Commercial collaboration tools are beginning to change nature of knowledge work and management inside the organization
• Social software will become a vital tool for transforming virtually every part of business operations, from product development to human resources.
• To attract talent, firms need to show integrity and respect their employees security and privacy

Use cases:

• The attention market, you could receive compensation for agreeing to view or interact with an advertisement, or for feeding back in detail about a new product pitch or just about anything else, such as transcribing CAPTCHAs or scanned documents.
• "You pay for publishing, companies pay for your attention".

Start up:

https://basicattentiontoken.org/

• Radically improves the efficiency of digital advertising by creating a new token that can be exchanged between publishers, advertisers, and users
• a wide range of advertising and attention-based services can be obtained on the Brave platform (https://brave.com/download/)

• The new Brave browser blocks the ads and trackers that slow you down, chew up your bandwidth, and invade your privacy. Brave even lets you contribute to your favorite publishers automatically

Section Summary:
the open networked enterprise show profound, even radical potential to supercharge innovation and harness extraordinary capability to create food value for shareholders, customer, and societies as a whole.

V. Hacking your Future: Business Model Innovation

1. A corporation should shrink until the cost of transactions inside are less than the costs of transactions outside its boundaries

2. No need for corporate library, information specialists, HR search specialists, or the myriad other professionals involved in acquiring pertinent information to run a business

3. Smart contracts would radically reduce the costs of contracting, policing contracts, and making payments. No longer paper.

4. The cost of coordination of all these resources outside the organization could be trivial, measured in the energy to power the server hosting the enterprise software.

5. The cost of establishing trust would approximately zero. trust does not rest with the organization, but rather within the functionality, security, and auditability of the underlying code and the mass collaboration of the countless people securing the blockchain.

VI. Designing a Distributed Autonomous Enterprise

1. Conviction : a belief about the world and what needs to be done to create value or change things

2. Purpose: its reason for existence, why are we creating this enterprise int he first place?

3. Constitution: outlines the overall objectives of the enterprise and the rules by which it will create value

4. Modus Operandi: how it will fund itself through crowdfunding, traditional early-stage investments, how it will acquire resources

5. Division of labor between humans and technology: for the foreseeable future, perhaps human should be in charge

6. Application functions: How the enterprise will sense and respond to changing conditions

7. Moral guidelines: "Google promises to "Do no Evil" is not going to be good enough. it needs some clear guidelines about what is and isnt acceptable behavior

VI. Conclusion

Thinking behind these new entities can inform your business strategizing today. With the rise of global peer-to-peer platform for identity, trust, reputation, and transactions, we can finally re-architect the deep structures of the firm for innovation, shared value creation, and perhaps even prosperity for the many, rather than just wealth for the few.

Smart companies will work hard to participate fully in the blockchain economy rather than play its victims. in the developing world, the distribution of value creation (through entrepreneurship) and value participation (through distributed ownership of the firm) may hold a key to reconciling the prosperity paradox.