1/ Blockchains β decentralized and permissionless ones β will ultimately allow orders of magnitude more business to happen in the world.
Here is a tweet 𧡠on why I think so:
Here is a tweet 𧡠on why I think so:
2/ Business interactions require some sort of a settlement mechanism.
3/ Not all business settlement mechanisms are equal. It's a continuum.
4/ Before the creation of sophisticated legal systems with strong rule of law, business was entirely relationship-based.
5/ Dunbarβs Number suggests that there is a limit to how many people you can build deep trust with. That number is somewhere between 5 and 15 people. en.wikipedia.org
6/ This means that you can only expect to reliably do business with about 15 people if your business transactions are backstopped by a relationship.
These are High-Trust transactions.
These are High-Trust transactions.
7/ Outside of the US, UK, and a few other jurisdictions, most countries do not have reliable legal systems. This means that most people in the world are limited to doing business with approximately 15 people.
8/ Building trust with someone requires an investment of time over a long-enough period of time. There is a quantitative, qualitative, and longitudinal component to trust. Itβs expensive to build and you have finite resources to build it (only 24hrs in a day).
9/ Arranged marriages have their origin in aligning families along political, property, & economic lines. These relationships are backstops for business, peace, etc. Blood is thicker than water.
But you can only have so many children and they can only be married so many times.
But you can only have so many children and they can only be married so many times.
10/ People who live in jurisdictions with a functional legal system are able to reliably conduct business with more than 15 people because such interactions are backstopped by a court of law.
11/ However, even if you have legal recourse in your business transactions there is a limit to how much business you can reliably conduct without building some degree of trust.
12/ Enforcing specific performance or the terms of a contract in a court of law is expensive and time-consuming. Even if you prevail, it could take a decade and cost millions β A Pyrrhic victory. en.wikipedia.org
13/ This means you must build some amount of trust or rely on reputation (a trust relationship that someone else has built) to reliably conduct business in this system.
These are Medium-Trust transactions.
These are Medium-Trust transactions.
14/ Enter blockchains. Blockchain transactions are backstopped by math (cryptography). They do not require building a relationship. They also do not require you to live in a jurisdiction with strong rule of law and a reliable legal system.
These are Trustless transactions.
These are Trustless transactions.
15/ Ultimately, this means there is no limitation on how many people you can do business with. That alone is an incredible breakthrough with far-reaching ramifications.
16/ Anyone, anywhere in the world with a connection to the internet can conduct and infinite amount of business on a blockchain.
17/ In summary, below are transaction settlement mechanisms & their properties:
-Relationship
(Requires High-Trust and limited to 15 people)
-Reliable Legal System
(Requires Medium-Trust and limited to your appetite to enforce in court)
-Blockchain
(Trustless and limitless)
-Relationship
(Requires High-Trust and limited to 15 people)
-Reliable Legal System
(Requires Medium-Trust and limited to your appetite to enforce in court)
-Blockchain
(Trustless and limitless)
18/ Curious to hear everyoneβs thoughts.
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