On Metanet and the Information Market
A note from the author: This post was originally intended to be a response on Twitter in this thread: https://twitter.com/MZietzke/status/1113866683469291520
As I was writing it, I realized there is enough content here, and the subject is important enough to be explained to a more general audience, that it was better to turn it into a shareable article.
What follows is a near-stream of consciousness explanation of the economics of Metanet and the information market that will arise from its development.
I do not promise that this article is error free, rather, that it is educational and covers very important concepts that must be understood in order to understand Bitcoin itself.
Without further ado...
I believe that most people in the cryptocurrency space (rather, most people in general,) fundamentally misunderstand the nature of markets, treating them in an almost one-size-fits-all way (like in Econ 101 classes,) while an understanding of metanet and how it will work requires a much more mature understanding of economics.
That is where we will begin our exploration of this issue.
Consider the market for Big Macs. How many producers of Big Macs exist?
Is the market for Big Macs a "monopoly" then.
Yes, it is, by the definition of "monopoly."
But somehow you can get Big Macs cheaply, quickly, and it's apparently decent enough quality that millions of people buy them.
Why? Because it exists in a larger market for fast food burgers (which McDonald's competes with itself in providing, with Quarter Pounders, Fish Filet sandwiches, etc.)
There are also other firms that compete with McDonalds in the fast food burger market, such as Burger King, Carl's Jr, Wendy's, In-n-Out, etc.
But the fast food burger market exists within a larger market of fast food, with firms such as Subway, Chipotle, Taco Bell, etc. competing.
And the fast food market exists within a larger market of restaurants, which includes many different cuisines, each containing sub-markets, each containing firms, each holding a "monopoly" on the sale of a single good.
And the restaurant market exists within a larger market of all food production, which includes grocery stores, the milk man, your grandma and her fresh baked apple pie, etc.
So the question is, on what level does Metanet operate? What level of market is the "information" on the blockchain?
It is not, and I think this to be quite obvious, on the level of the Big Mac. Nor is it on the level of fast food, nor on the level of restaurants. I suggest that "information" is on the level of "food," and it will have just as much, if not more, structural complexity than the market for all food production will when it exists on chain in Bitcoin (BSV, of course.)
Now... How do we move from this understanding of Metanet information into understanding what producers of access to that information (nodes, for example,) will do? Why will they do what they do? What specific niches within this large market will they choose to "monopolize" (as per the Big Mac example above)?
First, let's define what "information" actually is - after all, if you don't understand what good is being produced, you can't understand what the producers are doing, or why, nor can you understand why consumers would buy it.
I suggest that information is data that is useful to someone in solving some sort of problem or informing their decision making processes. In short, it is people's willingness to give something of value up in order to gain information that makes it information as opposed to just random numbers.
So, this establishes that producers, those who do ongoing work to create something of value, will be unlikely to produce that which is not valued, that which is not information, unless there is some other reason for them to do so than to produce information.
If something is not valuable, they will not be likely to keep it.
Some will take this to mean, going straight into Metanet concepts, that we cannot trust that someone will keep archival copies of all the data ever uploaded onto the chain.
But they are forgetting that these producers require information in order to make their decisions, and their information comes from their specific cost and revenue structures - their business model.
It is quite likely that businesses will position themselves as archival node services to provide access to any information on the blockchain, storing all of the data for as long as they are capable, on the off-chance that someone somewhere will be willing to pay to access every piece of it at some point.
They use probability as their business model - the probability that someone values the information that someone paid to upload to the chain. All in all, when you put it that way, it seems like a pretty fair assumption.
Now, to make that viable, they need to make long term storage as low cost as possible, which generally implies slower access. But remember, this business is built around the model of providing access to even that information which is rarely accessed. Why would that information require fast retrieval if it is so rarely used?
Let's step back again for a moment.
There are many fast food burger firms, but not many fast food salad firms. These firms together produce a far greater quantity of burgers than they do salads. It would seem for whatever reason that fast food burgers are more valuable at the prices the market has set than fast food salads. To create more fast food salad options would reduce marginal revenues, resulting in reduced profits.
Profit is the signal that directs firms to invest in producing specific goods.
In the fast food case, fast food burgers are more profitable at a given level of production than fast food salads are, which is why there is more production of fast food burgers than fast food salads.
Look now at information. Let's say that weather information is extremely valuable, but birth and death certificates are less valuable. Firms focused on producing access to weather information will have to compete over a far greater pot of potential revenue, and more resources will therefore be invested in the weather information market than in the birth and death certificate market.
This implies that access to weather information will be faster than to birth and death certificate information, though that does not necessarily need to be the case (perhaps weather information is extremely difficult to process in a way that is valuable to consumers, thus slowing access to what is really valuable in that information stream.)
At this point, I hope it is becoming clear that information itself is a truly massive set of market opportunities, and specialization within this market will lead to an explosion in the number of nodes operating within the system. With this scale comes immutability, redundancy, efficiency, and above all else, a market for information itself that has never been possible before, and that will direct resources more efficiently thanks to the pricing mechanism.
That this is coupled with necessarily sound money that cannot be co-opted thanks to this massive scale and value that is only possible within this system is an incredible development. In fact, I believe it is impossible for such a thing to exist outside of a sound money system, as the price of information (which prices are themselves,) would break down given the application of monetary distortions.
These are merely some of the reasons why Bitcoin is immutable, efficient, and extremely valuable, and why I am so incredibly confident that added scale leads necessarily to added resiliency and security of the system as a whole.
Thank you for reading, Matthew Zietzke https://twitter.com/MZietzke
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