Can blockchain subvert Internet monopoly?

Baozou Comment : When the Internet first appeared, it promised to liberate information and make the economy more democratic. However, the Internet only fulfilled the first promise and made some Internet platforms more monopolistic. Blockchain can solve the problem of Internet monopoly by establishing a trusted database without intermediaries and creating a shared economy. However, the real solution to this problem depends on whether blockchain can solve the problems solved by the monopoly Internet. At the same time, lower costs will attract users to use blockchain platforms.

Translation: Nicole

If you wanted to sell a box of comic books for the best price, there was only one choice: eBay.

If you want to sell a pair of skate shoes, an antique jewelry box or a used camera, there is only one place to sell these items: Ebay.

But reality runs counter to the conventional wisdom that capitalism is based on competition. I remember back in 1999, my friend said that Ebay wouldn’t be the best place to sell things because it didn’t work in the free market. But he didn’t understand how powerful network effects are, especially online.

German journalist Thomas Ramge, a contributing editor to The Economist, discussed the impact of network effects on internet monopolies in his TEDxHamburg talk, “Blockchain disruption: How bitcoin technology is creating a sharing economy.”

To explain how some sites dominate some markets, he cited a 1998 book, Information Rules: A Strategic Guide to the Network Economy, by Carl Shapiro and Hal R. Varian, which showed that the Internet supports these platforms and that people are best served when they can use the same platform for the same problem.

Internet pioneers did not predict this kind of monopoly.

Thomas Ramge

Ramge tells the story of how he first became fascinated with the Internet when he first saw it, in 1998, while doing research in a university library in the United States, using a primitive Mosaic browser, before returning to Germany to become a journalist. When he returned to Germany, he said:

“I’m reporting on all aspects of the digital revolution and I’m a fan of digital technology.”

He believes the Internet will fulfill its promise to liberate information, and has already largely fulfilled that promise. He says:

“I also believed that the second promise of the Internet would be fulfilled, and I wrote about it in my book with great enthusiasm, which was that the Internet would make the economy more democratic.”

But the second promise has not come true: Ebay dominates the market, Facebook dominates social networking, Google dominates search, and Airbnb seems to dominate home rentals. However, Ramge believes that blockchain technology (the distributed database that drives Bitcoin) can still disrupt these platforms.

Ebay is an example of why today's Internet economy is not so democratic: Ebay is not just a database of items for sale. The only way to access the database is to type Ebay.com into your browser. People who want to sell items often use Ebay because buyers follow sellers. If every possible buyer gathers in the same place, then the seller can sell the item at the best price. This also gives Ebay a powerful middleman status.

But “smart” blockchains make it possible to have a trusted but “ownerless” database. “That means you can have a platform without middlemen,” Ramge said. All the data points that go into running an auction (the items, their photos, the bids, and where the auction was introduced) can be put into a blockchain that can be embedded in tens of thousands of users’ computers. Founders can build thousands of different interfaces, all using the same shared database (just like Mediachain wants to do with credit innovation).

Ramge said (but not necessarily):

“I knew blockchain technology had the potential to do this.”

It depends on whether a decentralized system can solve the same problems that Ebay has solved while providing a low-cost platform for users.