Decentralized Disruption — Who Dares Wins? — Bittorrent Lessons for Crypto (4 of 4)
This is the last part of a series of four posts — the previous ones are here:
2 — If Your Not Breaking Rules You’re Doing it Wrong
3 — Intent, Complexity and the Governance Paradox
The Bittorrent ecosystem grew into a decentralized, slow-moving, almost ungovernable network. Yet it has remained strongly censor-resistant as hundreds of millions of users continue to share all types of media files online. BitTorrent Inc built a modest-sized business distributing two of the most popular Bittorrent clients (uTorrent and Bittorrent) and putting ads in front of their users. There were a number of other VC-backed companies which became involved in different parts of the ecosystem, all hoping to find a way to capture some of the copious amounts of value that had clearly been created for consumers. But if the objective of the game was to secure billion dollar exits and huge returns on capital invested, then every one of them failed. With the wonderful benefit of hindsight, here is what actually happened:
Bittorrent was surely successful in this: it forced the media industry to think harder. In the light of the Bittorrent ecosystem, it simply wasn’t going to be possible to charge users to re-purchase all their music in MP3 format the same way they taxed users who wanted to transfer from vinyl to cassette to CD. In spite of ever more sophisticated copy protection technologies, ‘revenue protection’ service offerings and showcase trials and punishments, what actually happened as a result of this grand showdown between entrenched interests and technology wielded by the masses was not the victory of one side or the other, but the emergence of something totally different and radically better. In short, the whole concept of “the file” disappeared from sight and we watched the rebirth of old media in a new and better form (e.g. Spotify and Netflix) and the emergence of new media (e.g. YouTube and Instagram) all with experience-oriented value propositions and business models.
Media everywhere stopped being about the file and started being about the experience. Consumers stopped fretting over ‘ownership’ of music or movies, and are now concerned entirely with access — the experience of just listening to what you want whenever you want, and watching great engaging shows and channels on-demand. Consumers don’t want to worry about where the digital file is, how long it will take to get, whether their device can play the file, or how often they can listen or watch. All these concerns are satisfied and the experience becomes a simple discovery mechanism and a play button. A similar story played out in software as all types of software (games and apps) have become increasingly experience-oriented rather than file-oriented. Almost everywhere now you pay to subscribe to the experience rather than paying a fee for a copy of the file.
The Bittorrent ecosystem was obviously not the only force at work. The relentless upgrade of internet bandwidth by ISPs, the proliferation of screens with powerful computers in every part of our lives and the emergence of rich new ways of interacting digitally, largely funded by ads from the emerging ‘data industrial complex’. What’s clear is that today the whole concept of ‘files’ is increasingly anachronistic. Files have been abstracted away almost everywhere and replaced with experiences. And I’m guessing the vast majority of us would agree that this is a great thing for just about everyone.
In spite of the scale and impact of the Bittorrent ecosystem, BitTorrent Inc never succeeded in capturing any meaningful part of the upside from all the disruption. Perhaps a better (or luckier?) team could have found more success?
There were many home-grown ideas but we were always held back from addressing the biggest problems in the Bittorrent ecosystem (like the horrible discovery experience) as well as the most voted-for user request (anonymity) by legal concerns which might have exposed the company to vast liabilities (up to $150k for every file copied — we’re talking $50 trillion of potential liabilities every month!)
Pushing the rule-breaking theme harder than BitTorrent Inc was prepared to led to nothing durable — for example there was but a short-lived explosion of popularity for Popcorn Time — a sort of combination of both torrent site and Bittorrent client into a Netflix-like experience for pirated movies. The Argentine development team was ‘leant on’ and the project abruptly disappeared as developers decided that an actual career in tech was more interesting than a lonely and one-sided battle against copyright lawyers.
So if the revolution was led by the Bittorrent ecosystem, there were no clear winners who emerged directly from that ecosystem. Although BitTorrent Inc was one of the key protagonists, its clear that neither BitTorrent Inc nor any other Bittorrent ecosystem participant succeeded in achieving a meaningful reward from its position. Perhaps one of the most far-sighted winners here was Daniel Ek — CEO and Founder of Spotify — who preceded his Spotify success with the sale of the uTorrent client to BitTorrent Inc. Although early versions of Spotify used a Bittorrent-like P2P protocol to try to save money on bandwidth, they quickly realized that the main point of Bittorrent had little to do with saving money, and decentralization of their architecture was actually counter-productive to their aim. Perhaps it was apparent to them way back then that leading a revolution is exciting, but it’s far better to build the thing to save incumbents from the unleashed mob.
And this is the main conclusion — decentralization may be great for disruption, but if the experience of Bittorrent is anything to go by it is not at all clear that it has a role in whatever comes next. Blockchain architectures are great for unleashing unstoppable rule-breaking mobs, but we shouldn’t mistake the rule-breakers for the winners. A prominent political scientist once observed that political revolutions are great at ‘state breaking’, but not so great at ‘state making’ or replacing them with something better. The same might be true for the type of rule-breaking disruption that is unleashed by decentralized architectures. As I look at the rule-breakers, I’m especially interested in what the reaction might be — what paradigm might change (like the abstracting away of files in the media industry) leading to a whole new way of doing things — for it is here that the biggest winners may emerge.
In summary, I realize that Bitcoin and Bittorrent are wildly different in so many ways, yet I’m struck by a number of similarities. In hopes of helping people avoid a repeat of history, I’d suggest that the following lessons from the experience of Bittorrent are relevant to new participants in the blockchain revolution:
This is the whole series of posts on Bittorrent Lessons for Crypto:
Why BitTorrent Mattered (1 of 4)
If you’re not Breaking Rules you’re Doing it Wrong (2 of 4)
Intent, Complexity and the Governance Paradox (3 of 4)
Decentralized Disruption — Who Dares Wins? (4 of 4)
Post Script:
I’ve had some interesting discussions in the course of sharing this series — one regarded the most compelling promise of crypto being the possibility of digital money without trusted third parties; another is a range of questions about my thoughts about the recently announced BitTorrent Token (BTT). I may write a little more on these subjects in the near future…
Decentralized Disruption — Who Dares Wins? — Bittorrent Lessons for Crypto (4 of 4)
Research & References of Decentralized Disruption — Who Dares Wins? — Bittorrent Lessons for Crypto (4 of 4)|A&C Accounting And Tax Services
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