As decentralized protocols are threatening traditional business models

Large holdings, as well as employees and managers of traditional companies to be wary: managed bloccano decentralized protocols gradually overestimate the established business model. The business model of the future very different, and, of course, they play by their own rules.

Traditional companies and decentralized protocols

Speaking in simple words, all traditional companies are organizations that charge their clients a fee (usually Fiat currency) in exchange for any product or service.

At the heart of any business is the desire to make a profit. Business owners want to reduce costs, improve efficiency and increase volumes to maximize cash flows.

The main participants in traditional business are customers, owners/employees of the company and the investors (financiers).

Managed bloccano a decentralized Protocol is a network based on cryptography technology, distributed registry, decentralization and consensus methods. Unlike traditional networking business models, the network is created using decentralized protocols is not structured.

Decentralized protocols are not governed by the need to create future earnings for participants. On the contrary, they are programmed to facilitate commercial interaction between people. Programme Protocol aimed at meeting the interests of users and the achievement of the minimum possible profits.

Key stakeholders of decentralized protocols are customers, the «experts of community» Protocol, and (sometimes) investors of the Protocol.

Customers

Clients benefit from the traditional companies they choose to interact. Paying the company established price, they get access to the product or service.

Likewise clients benefit from the chosen interaction Protocol. Protocol for a set price, they get access to the product or service.

Usually the protocols are managed utility tokens. For example, the fictitious Protocol PlanesProtocol provides long-distance travel in Tesla of the skies (aircraft-electric) for 1 PLN token. PLN token is a medium of exchange. A businessman from Seattle Nick needs to pay 1 PLN token for flights from Seattle to Miami. Aircraft operator receives the right 99 percent of the payment token PLN, and the Protocol PlanesProtocol gets the remaining 1 percent.

The owners and employees of companies

The owners and employees of traditional companies should receive for their work compensation. In the end, to pay for everything – for food, water and shelter. Company owners pay themselves a dividend to its employees for their work.

Since the protocols are decentralized, the concept of «business owner» are not applicable. Instead, the protocols developed by the participants who are called «experts of community». Whether or not to include the founder of the Protocol to the category «experts of community», defines the community.

Protocols can provide commercial interaction between people «at cost», if they get on the network commissions income sufficient to cover all the required terms of service. These costs may include, for example, centralized authority, guaranteeing customer satisfaction and hiring developers, project managers and other professionals necessary to maintain established network. Thus, the net profit of the protocols can be much lower than the earnings of most traditional companies.

If the «greedy» Protocol programmed to disproportionately high transaction fees, the Protocol can «fornot» (through the use of modified copies of the original open source code) and create a competing network with lower commissions. This will continue until, until the network reaches almost free equilibrium.

The founders of the Protocol may award themselves a certain percentage of all tokens produced during the creation of the blockchain. Similarly, «experts of community» on a regular basis are rewarded for their work through the tokens of the Protocol. These tokens usually have a price in Fiat and can be purchased on the public exchanges.

Note: Utility tokens are not a panacea. They face different challenges. Utopian-oriented tokens the future will not come overnight – it needs a lot of work for a long time.

Investors

Many owners of companies or entrepreneurs traditionally rely on accoustique investors with capital. In the sixteenth century merchants and mariners relied on financiers who provide support for their journeys. If trade was going well, the financiers have received the lion’s share of the income of merchants.

In 2018, the founders of Silicon valley startups pass control of their companies to venture capitalists (modern financiers) in exchange for seed funding. If startups are developing successfully, venture capitalists receive a profit proportional to their share in the company.

It is important to note that capitalism and traditional business models are functioning well enough and in a variety of industries, companies there are thousands of satisfied customers. However, in some cases decentralized protocols provide cheaper access to products and services, as well as more acceptable program for the participants of the campaign.

The founders of the protocols is the flexibility. As they create a new network, managed utility tokens, they can afford to circumvent the traditional debt/equity financing.

If the merchants of the XVI century and the first founders of the Silicon valley played by the rules their investors, the founders of decentralized protocols are free from such pressure. Protocols can raise capital with pre-sale tokens are accredited venture capitalists or, in some cases, to the General public. Protocols can also provide developers for their services tokens at a discount.

The basic idea: Traditsionnye of the company and protocols established are different and play by completely different rules.

A paradigm shift in the cost

So, what to look for value creation in the future? And how traditional business to survive in a decentralized future?

Heads and top managers of companies should understand the following:

  • Traditional business models should not be confused or compared with the protocols of the future.

  • Decentralized protocols Web 3.0 is not automatically deposed from the throne outdated business model. In some cases, traditional companies will not benefit from decentralization.

  • If your Corporation operates on the basis of artificial scarcity or «the Economics of intermediation», you are doomed to failure.

The majority decentralized protocols require certain aspects of centralisation, guaranteeing customer satisfaction.

A practical example: Uber Ride vs – dummy, decentralized Protocol for joint visits.

In 2018, the company Uber has 3 key benefits in the market of:

  • Traditional network: ~ 40 million active monthly passengers; ~ 1.5 million drivers.

  • Guarantee customer satisfaction: a centralized company can provide its customers with personalized solutions to the problems.

  • Brand awareness: Uber has reached a final status of «verb», similar to the verb «to Google».

  • However, in 5-20 years Ride will inevitably try to entice users and Uber drivers to their side. The company’s goal is not the creation of future cash flows for the participants of the Ride. Instead, the Protocol will be focused on the decentralized provision of transaction between passengers and drivers. The Ride program will be focused on the interests of passengers and drivers.

    As the Ride is not based on profit, it is not necessary to charge drivers about 20% of the cost of the trip. Instead, the Protocol can be extracted from users and drivers a fee for the transaction (by means of utility RIDE tokens) for the interaction in the Protocol. These transaction fees are used to support and protect the Protocol of the Ride.

    Protocol Ride will raise funds with the help of pre-sales of its utility via a decentralized token crowdfunding. The Protocol will provide a significant advantage over the Uber network with the right team of investors. Thus, the Ride will get a significant network effect, user base and brand awareness. Of course, minutes Ride will still have aspects of centralization to ensure customer satisfaction.

    So how do companies like Uber can survive in 2025?

    There are two options:

  • «Reverse ICO» or the creation of a decentralized Protocol for services.

  • Slow bankruptcy as the market share goes to competitors – decentralized protocols.

  • Decentralization is only one of several important matters required for discussion by the Board of Directors. Artificial intelligence and automation are developing every year. The decrease in profit, the dismissal of workers and re-qualification is also accompanied by decentralization.

    Now traditional companies presents an incredible opportunity to participate in the next evolution of business models and commercial relationships between people. To make a choice in favor of the future or fall victim to social Darwinism – the choice for them.

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