Forget about the ‘Lean Startup’ Methodology and the alike, here is the "Nakamoto Methodology." Understanding how the original Bitcoin protocol works is required for people who wants to launch similar projects. But understanding the method used by Satoshi Nakamoto to develop its protocol is essential to identify what is going to be the framework for the future of work and organizations.
(NB: You can read the first part of this article here)
What I call the “Nakamoto methodology” is for crypto/altcoin/blockchain projects what a methodology like the ‘Lean Startup’ is for startups : a mindset and a set of common practices to follow without dogmatism. Below is a partial list of these practices often encountered in the crypto ecosystem.
✪ Protocols are open source The codebase is available to everyone simply by checking it on Github (example). This is among one of the major differences with traditional tech startups where the codebase remains private. This principle is a prerequisite considering that the blockchain is stored and maintained not on private servers but on everyone’s computers and the only way to acquire the confidence of potential miners is transparency (of the code).
✪ Each project has its own monetary system. Although a project may not necessarily be a cryptocurrency project (ex. Ethereum), bootstrapping a coin or a token is of course the norm. By creating their own currency and monetary system, compared to conventional technology startups, these crypto projects have a very different relationship with money. Starting with the fact that:
Money creation and compensation are the same thing in the crypto world.
✪ Searching for a good monetary and economic policy replaces searching for a viable business model. Here are some elements of the monetary policy of Bitcoin: 21 million bitcoins maximum. New bitcoins every 10 minutes for the exclusive remuneration of miners. Reduction in pay every 210,000 blocks … Other protocols have monetary policies where money creation does not pay only miners. The key example is the social network Steemit that pays a set of different actors around its ecosystem (miners, authors, users, market makers…) and is based on 3 different types of currency. In the world of crypto, since you can create as much money as you want,
Rules have changed. It is not about “making money” anymore. It is about giving to the money you have created a value. It is precisely the difference between searching for a business model and seeking good monetary and economic policies.
✪ Launch of a protocol with an ANN. (which stands for announcement) This is a necessary step during which entrepreneurs present their projects and their protocols particularly to find their first miners.
✪ Fundraising in bitcoins by making an ICO. ICO stands for Initial Coin Offering. In this ecosystem, to finance their development, it is common to see entrepreneurs selling their coins against bitcoins or ethers (that is to say, against cryptos that are already widely accepted within the community). Ethereum has launched its project this way. Keep in mind that a (blockchain based) crypto-currency should be seen as money, a commodity, and a security. This means that early investors will see their participation valued, if the project is successful. What’s interesting is that as for ‘public’ companies on the stock exchange (IPO), everyone can see the price performance of these projects, but with crypto, it is right from the start.
✪ Transparency. Transparency of the code, of the stock price, of the shareholder (you can see ‘how fair’ the coins distribution is with the ‘richlist’ of a coin. Pseudonymity of people is still preserved though). Transparency in the stats of the product (ex.: Steemit, you can see at any giving time how the product performs) and transparency in the monetary policy. In cryptoworld, the idea of a ‘public company’ starts to really make sense. The level of transparency expected and requested by the community is far more superior than the one of users and customers of conventional startups.
✪ Contributors can work while keeping their anonymity. Satoshi Nakamoto is the key example. The identity of a person doesn’t matter, it is only its contribution that will be closely scrutinized by the community.
✪ Contributors can work remotely. Gavin Andresen and Satoshi Nakamoto have never met before or during the development of the first versions of the Bitcoin protocol. They formed a one of a kind founding team. We had Steve Jobs/Steve Wozniak, Bill Gates/Paul Allen and now Satoshi Nakamoto / Gavin Andresen.
✪ Everyone can contribute. That is the advantage of an open-source project. Nevertheless, we must clarify that improvements must be accepted by the core developers of the project (each project has it own policy on this matter) and then by the miners who run the protocol.
✪ Bounty Economy. There is a well known practice in the world of hacking called the ‘bug bounty’ where people get rewarded for finding, reporting and correcting flaws in a computer system. This type of economic model is common in the cryptoworld. Instead of recruiting a dev to perform specific tasks, you can easily find tasks to do (development, translation, design…) rewarded with crypto. This model is interesting to study because it redefines the socio-economic relations of work: The project leader pays a person with money who really has no value. The contractor receives something that is at the crossroads of a payment in cash and a stock.
✪ A new way to consider human ressources and development strategy. The combine effects of an open source model + a bootstrapped monetary system lead us to rethink our relationship with money, labor, companies and ultimately people. In the cryptoworld, contributors are working if they wish, and without necessarily being selected and recruited (bounty economy + the principle that money creation merges with compensation allow this). Development strategy are also up to each contributor. Once again Steemit is a very great example. While the core devs of Steem work mainly on the protocol, the other devs take the initiative to develop a wide range of tools (applications, sites, apis, stats tools)
✪ Reappropriation. The key example, once again is of course Bitcoin where Satoshi Nakamoto has not participated in the development of the protocol since 2010. The development team has organically rebuilt itself around other developers. Of course it is not always the case, some project have ‘CEO’ some others like Bitcoin doesn’t have any.
Many observers have predicted that the ‘blockchain technology’ will disrupt the fintech. Truth is the level of disruption is far beyond what one can really imagine. By providing a way for every entrepreneurs to bootstrap a monetary system for any kind of service, Satoshi Nakamoto gave us something that may disrupt not only the startup ecosystem but also the role of governments and the banking system. In other words: The structure of the society itself.
In the third and last part of this article, I will show how important will be the role of exchanges. You can read the first part of this article here!
Nice! A bit complicated but still well done!
oh, thanks for this feedback even if it is short :-) I'll try to make my analysis a bit more compelling next time
I do not think it was "not compelling" at all honestly man. I think it was all very important information. Yes, multiple bullet points for each segment but lets face it everything you wrote was relatively foundational information for people just joining the crypto scene (which would likely be because of steem).