...by Daniel Szego
"On a long enough timeline we will all become Satoshi Nakamoto.."
Daniel Szego

Wednesday, March 30, 2016

Notes on infrastructure reversal

I heard today a great and genial presentation from Andreas M. Antonopoulos about Bitcoin and he used an analogy that is pretty much existing: that is infrastructure reversal at appearance of a new emerging technology. He used three examples for demonstration: 

Automobile industry: well nowadays it seems to be trivial that driving by car is much better than riding a horse, however at the appearance or invention of the car the situation was much less trivial. Most of the roads were "optimised" for horses and the lack of petrol stations actually implied that driving a car was less effective, slower, more complicated, more expensive than riding a horse. From pure economical point of view the automobile industry did not have the chance: there were no need for better asphalt streets and more petrol stations because there were not enough demand : people who drove care. There were no demand for more cars, because due to the lack of infrastructure the it was actually worse than riding a horse. Despite slowly the infrastructure has been changed, giving place for asphalt roads and petrol stations provided a better infrastructure to the cars, but allowing riding the horse as well....

Electricity: a similar process can be recognized by making light and heating with electricity. As actually infrastructure for gas provided both the infrastructure and technology for heating and lighting houses, actually there were no need for electricity. As there were no infrastructure for electricity, it was not very much logical to use electricity, on the contrary as there were not too many customers for electricity there were not very much logical to invest in the infrastructure itself. Despite a couple of 10 years later there only electricity used for lights and sometimes for heating as well...

Internet: imagine the heroic age for internet, you use the classical telephony network that is highly optimized only for voice transfer with modems to transfer data. It is actually a big fight, the network is optimized for voice transfer, having to filter only a couple of Kbytes, so transferring data is not easy. From a supply - demand perspective it is not very much logical that the situation changes: there is not really a good transfer for data, so it makes not really sense to invest into the technology. On the other hand there is not enough people who uses the internet, so there is no sense to invest into the infrastructure. Despite only a couple of years later, there are practically only digital transfer possibilities optimized for data and even voice transfer is released on the top of digital transfer....  

After that I would have just three questions...

Microeconomics:  Why did supply and demand model not work in these examples ? Or did I learned only bullshit from this subject ?

Cloud ?: Do we have the same effect with cloud ? Will we have in 5 years something like on-premise infrastructure or just special parts of the cloud ?

Blockchain ?: Do we have the same effect with Blockchain or Bitcoin ? Do we have in 10 years something like national central banks, or just special implementations of the Blockchain ?