Embracing Thin Protocol

Licho, 2023-09-09

The notion of a fat protocol was introduced in the article from 2016. Since then, it gained a lot of popularity in the blockchain space. The rough idea is that unlike in other web protocols, that are thin, most value is not captured within the application layer, but in the protocol layer.

It means that Bitcoin is more valuable than all of the applications and companies built on top of it.

This isn't the case for the so called thin protocols, which are all the other protocols besides blockchain, like TCP, http or morse code, that "just" enable the economic activity.

Fat protocol is a design mistake

A protocol being fat only means that it's not as useful as it could have been. It means that no signifficant activity is happening on top of it. Imagine if ssl certificates in total were worth more than all of the websites. If Bitcoin was to become a valid p2p electronic cash, the companies built on top of it would be worth massive amounts of money, since using as cash would be profitable. What we see instead is genuinely innovative businesses closing the door every other week, because they aren't profitable enough. Most of the OG bitcoin-accepting places no longer exist, unless they have found a different business model, stopped accepting Bitcoin or moved on to instantly exchanging payment processor. Because Bitcoin is not good for doing business. It's not good for much, to be honest.

Thin Ergon

Ergon market cap is tiny compared to many conventional cryptocurrencies. For it to grow in market cap it requires massive hashrates working on it. The signifficance of proportionately rewarding the miners extends to the entire protocol. Since there is no point anyone gets disporoportionately rewarded, "early investors" (investing in coin) also don't get the advantage of buying it orders of magnitude cheaper. Every single Ergon unit has to be worked for, earned or bought with hard earned money. Early investors (in businesses), adopting Ergon, do have one advantage - no competition yet so better margins, on top of what all business investors get from Ergon - the freedom.

Not being granted for free to any party makes Ergon much more scarce. It creates the incentive to get creative in one's pursuit to get it. It's a fuel for economy. This economy will outgrow the total market capitalization of Ergon by orders of magnitude, placing Ergon the thin protocol category.