How Crypto Will Change the Number of Clouds in the Digital Sky

tl;dr: Blockchain-based programs provide a powerful layer for innovation that cannot be matched by closed software models. The digital sky will change from just a few big cloud providers to thousands and millions of cloud providers.

I saw a wonderful video a few years ago by Steven Johnson called “Where Good Ideas Come From.”

One of the scenes that I remember most was that idea that the Enlightenment happened because open-minded thinkers from many different walks of life came together in the coffeehouses of Britain to exchange ideas.

Those ideas, in our terms, were “open-source.” The participants frequently used a perspective of one one person in another field to help build their own work. Sometimes this is referred to as ‘knowledge arbitrage.’

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We have seen the benefits of “encoded knowledge arbitrage” over the past few years as open-source software has become the dominant model on the Internet and for the world.

When I worked at Microsoft from 2002–2008, open source was the enemy. Closed-source, proprietary software was the only way to go. Today, Microsoft’s renewal comes in large part from its embrace of open source software.

Open source software has won…at the foundational layer.

The reason why open-source tends to outperform over time is because, as Denis Nazarov writes in “What coms after open source?”

Software is the ultimate environment for combinatorial innovation, excelling in all dimensions at an unprecedented scale: The internet is the ultimate connectivity network. Open source culture continuously refines modules of code. And billions of users with interconnected devices present an unprecedented addressable market.

In open-source, developers meeting in virtual coffee shops can take the ideas of other developers (represented as code) and then combine it with their own to make something better. This process, repeated over and over again, yields better quality work than a small team that is isolated from the outside world in terms of what they can integrate.

What makes blockchain so full of potential as it relates to combinatorial innovation is that every layer of innovation is protected for future generations and future iterations.

In today’s web, while Facebook, Amazon, and Twitter are all built on open-source software, the rest of their program is closed. So, too, are their data stores.

What this means, in practice, is that if one of those companies decides they want to change a policy unilaterally, then can. The impact is that thousands of businesses, developers, and users will see their hard work disappear over night.

Don’t believe me? Check out what “Facebook famously did to Zynga and Google did to Yelp.” (source).

In a decentralized world, we “put the programs on the blockchain” as Roham Gharegozlou said in his recent TedX talk in Vienna, Life is Non-fungible: The Evolution of Ownership, Assets, and Us.

For him, when a program is guaranteed to live forever outside of anyone’s control, the opportunities for ongoing combinatorial innovation are limitless.

This is why Chris Dixon, one of the world’s leading venture capitalists, wrote in Wiredthat:

the blockchain and cryptocurrencies can do for cloud-based services what open source did for software.

By having online software (e.g. services) with guaranteed availability, a clear model for incentives and payment (e.g. crypto), and be in a position to benefit from combinatorial innovation, we are going to witness a transformation in the quality and security of online services.

From the singular centralized cloud to many clouds in the sky.

How Crypto Will Change the Number of Clouds in the Digital Sky was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.