At Service Ventures, we believe blockchain and the general distributed ledge technology will shift the largest one-time value in the history of the internet due to several underlying technological and societal drivers converging in the broader innovation cycle. The key drivers are: 1) Eroding of consumer trust in governments and large corporations, 2) Peer-to-per networks unlocking novel ways of carrying out financial transactions and incentivizing human behavior in appropriate ways and 3) Software disrupting foundational concepts of economic transactions. At this critical juncture, a single-source-of-truth, open, distributed transaction database with permission-less, censorship-resistant, trust-minimized computation are going to reshape many sectors of the global economy. Distributed ledger and blockchain will bring profound shift using open networks bound by cryptography and free-market economics, incentivizing human behaviors without any a-prior trust assumptions.
We expect the following three blockchain themes to play out in the coming decade with the addressable market in the trillions of USD. The common denominator underlying these themes is creating immutable transactions among trust-less transacting parties. The modern economy is built on compounding layers of trust that we take for granted, but trust is a ‘BIG’ assumption. We trust tech giants, banks, insurance companies, the government every minute and we don’t even recognize them as assumptions anymore. And given the current societal complexities, preventing abuses of trust is more difficult than ever before (Facebook + Cambridge Analytica, Marriott/Target hacks, Equifax hack, etc.). By enacting a world with fewer trust assumptions, Blockchain can reduce systemic risk, create agile, efficient, and more productive economies and societies.
Decentralized Finance/DeFi
Although large and mature capital markets are generally efficient today, they are still nowhere close to being universally accessible, especially developing economies. We believe that Blockchain will modularize and un-bundle various units of complex financial transactions across county boundaries leveraging standard finance protocols (SW codes) on which specific financial services/applications will be built by participants, just like how numerous email applications are built on a set of open protocols such as SMTP, TCP/IP, and HTML/JS. A financial service or application will stitch together multiple such underlying blockchain protocols to provide a trust-minimized, seamless services to users to carry out financial transactions. The key here will be the lower level blockchain protocol layers at the infrastructure level as opposed to higher level SW applications themselves. Imagine how cloud computing commoditized HW servers, enabling a step change in innovation in large monolithic large SW applications. Similarly modularizing complex financial transactions with minimal assumption on trust will enable a step-change improvement in the rate of innovation in financial services. By making units of value—stocks, bonds, real estate, currencies, etc.—interoperable, programmable, and composable on open ledgers, capital markets will become more accessible and efficient. Unlike current financial services, the next generation of crypto based financial services do not need to be trustworthy at the core as the underlying Blockchain based protocol layer will take care of all negative consequence that might arise from a trustless system.
Decentralized Web/Web 3.0
Existing Web 2.0 applications bundle data storage and application logic to a very high degree and the large internet monopolies use consumer data against the best interest of the users (e.g. unauthorized sharing and selling of user data or pervasive web surveillance). Furthermore, data monopolies prevent innovation by limiting the types of applications that can be built on top of these valuable datasets. Centralized platforms like Google and Facebook extract value from their respective ecosystems using the captive customer data.
We believe that the time has arrived for a decentralized web that will unbundle data and applications i.e. Who owns the data/Where data resides will be separated from Who owns the SW application/Where the SW applications resides. Web 3.0 will be about self-sovereign ownership and control of data. There will not be a major IT company owned central server that hoards and controls user data. Instead, users will own and control their own data and provide access selectively. In this paradigm, users own their own encrypted data on architecturally open distributed networks based on Blockchain and interact with one another (peer-to-peer) directly using cryptographically signed messages on smart contract platforms that act as open, programmable ledgers. Once users own their own data, data monopolies will crumble. The corresponding second and third order effects will create massive new opportunities. In the same way that no one could accurately forecast the compounding rate of SW innovation built on top of operating systems in the 1980s, or the emergence of web applications composed of dozens of cloud services in 2009, breaking down data silos will empower the greatest developer coopetition.
Global Transaction Currency/State Free Money
There is a massive opportunity for a trust-minimized currency for border-less transactions - a natively digital one bound by technology, math, and free-market economics rather than government institutions. That currency will be the global, state-free measure of value, of anything. Modern blockchain tokens such as Bitcoin are superior to gold as such digital assets are infinitely divisible, globally transportable, their supply schedules are 100% auditable and transparent. Many people live in countries with more than 10% annual inflation and cannot physically store their wealth in gold, and generally do not have access to capital markets such that they can purchase claims on gold in a vault. Unlike gold, which offers no yield, blockchain-based currencies guarantee perpetual, positive, risk-free rates (via staking in proof-of-stake networks.
The Open Finance and Web3 ecosystems will unlock trillions of dollars of economic activity on blockchains. We believe that at least some of this will flow into the native tokens that power these blockchains. Facilitated by open networks built on free-market assumptions and bounded by cryptography, participants can, for the first time in history, coordinate on a large scale without introducing any trusted intermediaries potentially prone to abusing that trust. Time has come to revisit all our preconceived trust assumptions in many sectors in the economy and create incredible amounts of economic value. The transition from a trust-based economy to one of self-sovereignty will be behind one of the largest value shifts in human history.
/Service Ventures Team
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