Joel Monegro

For a while, we’ve been arguing in favor of Bitcoin as a protocol, on top of which a new architecture for internet applications is emerging. Fred likes to compare Bitcoin to e-mail by remembering the way e-mail used to work before SMTP. 

In the 80s we had e-mail services like AOL or Compuserve Mail that only allowed you to send email to other users of the same service, similar to how today you can only send a DM or Facebook message to another Twitter or Facebook user. Then in the early 90s e-mail became interoperable thanks to the adoption of SMTP. Suddenly, AOL Mail users could now e-mail Compuserve users and vice versa, and new services were instantly compatible with the established ones. 

Because SMTP is an open protocol, there is no barrier to entry. Anyone can create an e-mail client and participate in the network, and nobody can shut them down in the same way that Twitter or Facebook sometimes cut off applications built on top of their platforms that threaten their business model. As a result, despite its shortcomings, we have seen a lot of innovation in e-mail over the past decades, and it is one of the most popular internet applications.

Bitcoin is like SMTP in that it can be the bridge between different financial applications. A Venmo user could send money (in fiat, even) to a Square Cash user if these applications adopted the Bitcoin protocol in the background like AOL and Compuserve adopted SMTP in the early 90s. And just like with SMTP, Bitcoin will enable a lot of innovation by making it easier to create new kinds of global financial applications.

This is the same thesis behind all other emerging decentralized protocols. They too can be the bridge that connects the applications together to both create collective value and foster innovation. OpenBazaar could connect different marketplaces together, Openname could bridge your identity across social networks, and a Canonical Content Registry could link our content across all the different channels it travels through.

What’s important to understand is that the collective value created by a network of networks is greater than any single individual network, and a decentralized protocol provides the perfect mechanism to make this possible. A Venmo that can send money to M-Pesa is more valuable than a Venmo that only works in the U.S.

I don’t expect many of the incumbent services to embrace these protocols like AOL embraced SMTP decades ago, for a variety of reasons, but we might get lucky with their successors. And there is always a successor. The challenge we’re still trying to figure out is how to get protocols adopted by the market. Looking at history we have found several ways, but not one definitive pattern. In the mean time, we’ll keep making bets on a more interoperable future.