Software-Based Economies: The Real Reason They Can't Compete

in LeoFinancelast year

The world is changing rapidly. We are seeing advancement across many parts of society. The next 20 years will see a host of innovation that will completely change how we do things.

One of the major changes is blockchain and cryptocurrency.


With all the hoopla about regulation and controlling cryptocurrency it is best to step back to look at what is taking place.

Simply put, technology eats whatever gets in its way. There are very powerful industries that are being transformed before our eyes. This is not being done, for the most part, by the same companies that dominated for so long. Instead, it is ones that are entering from the outside that create the disruption.

The same holds true for completely new technology. Much in the same way there was no blending of streaming with video cassette rental, we will not see the marriage of decentralized finance (DeFi) and the traditional system.

Software Based Companies

Take a look at this list:

  • Apple
  • Amazon
  • Facebook
  • Google
  • Microsoft

These are some of the largest companies in the world by market cap. In fact, they occupy 5 of the top 6 spots. If we look at the linked list, we see that technology companies hold 8 of the first 10 spots.

Another thing that stands out is these companies are all based around software. Even the #7 company on the list, Tesla, is investing heavily in software development. It seems Andreeson was correct.

Ultimately, we are watching code take over more of our economy. In the United States, this has grown in the last half decade and held steady.

n 2020, the United States tech sector contributed around 1.99 trillion U.S. dollars to the country's overall gross domestic product (GDP), making up approximately 10.5 percent of total GDP. Since 2018, the tech sector's yearly percentage of total GDP has remained relatively consistent.


A fair portion of this, more than half, comes from the information technology sector. This is where software and information processing equipment are located. It is also a sector that is seeing acceleration.


Can anything seriously believe it can stand up to that?

From Atoms To Bits

This entire process of converting to software, i.e. code, means we have an economy that transitions away from atoms to bits. It is why we see so many improvements in efficiency. Here is where things also get cheaper and move quicker.

For example, think of video and music. Also consider information as well as communication. All of these areas once physical in nature. Today, that is no longer the case. It is why all those areas got less expensive along with increases in speed.

Cryptocurrency does the same thing. Coupled with blockchain, this is laying the foundation for more aspect of our everyday lives to suddenly "disappear". Part of the transition is from the visible to invisible.

Ponder what a digital wallet does in relation to banks. For the majority of the population, people use a bank to send, receive, and store money. That is the bulk of their interaction. A digital wallet does exactly the same thing. Thus, we see the ability to replace tens of thousands of bank branches around the world.

Now let us expand this a bit further. Consider what decentralized finance (DeFi) can do. It essentially will codify most of our financial services. This moves us from an atom-based system to one driven by software. There is no need for local offices, corporate headquarters, or anything else associated with the behemoths that dominate the industry. In the world of bits, it simply operates based upon what is programmed in the code.

Of course, speed is the true difference maker. Software upgrades can occur in a matter of few weeks or months. Entire platforms can be redesigned in that time. Try to do that with a traditional company. It takes years because of the physical, as well as real, layers. Software does not suffer from corporate bureaucracy, out of touch managers, or political power brokers who seek to maintain their position. It simply runs when it goes live.

Decentralized Autonomous Organizations (DAOs)

Eventually, many traditional companies are going to get eaten by DAOs. The reality is they simply cannot compete.

Let us take a look at the Decentralized Hive Fund (DHF). Here we have a DAO that provides funding for development and other tasks associated with the Hive blockchain.

It is an entity that runs 24/7. There are no meetings, directors, or offices. Each individual can place a vote (or remove one) at anytime. All results are instantly updated based upon the stake that is behind the vote. The payouts occur daily without human intervention. Occasionally there are updates done when the community decides more features are required. Outside of that, the DAO just keeps running.

Now let us compare that to Venture Capital firms. These organizations are centralized in nature, with a few people making the decisions. Meetings are held and people are constantly pitching their ideas to them. We see updates, reports, and further evidence of activity from those who do receive the funding.

In short, these firms cannot compete with a DAO in speed and efficiency. The decision-making process is slow along with being cumbersome.

Take this concept and extrapolate it across many different industries. Focus upon the financial industry as an example. While they did well to embrace technology, consider how much more efficient (and less costly) things are in the Defi world. This is the major appeal.

Email crushed "snail" mail because it was less costly and much quicker. It really was that simple. Decentralized finance offers the same advantages. Historically, most advancements that provided these benefits ended up succeeding.

All the different aspects of cryptocurrency is in alignment with a much larger trend. There is no doubt that want Andreeson forecast more than a decade ago is occurring. We are not going to see too many industries which will not be affected.

Blockchain and cryptocurrency are becoming part of the foundation that will mark this transformation. Some call it Web 3.0 while others use Industrial Revolution 4.0. Whatever the term, it is all feeding into the idea of the long-term push towards the Metaverse.

Essentially, the capabilities of the Internet are expanding. We now have 25 years of evidence what happens to an industry when the Internet shows up at its door.

The results tend not to be good for those who are standing in the way.

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I totally agree. This had happened before. Look at Bayer for example, they had been just a company for coloring textiles with a connected research and development department for chemicals called IG Farben (IG colors) and than they became one of one of biggest pharma company.

Can't imagine when the whole world is connected via the Internet. Each person would use hundreds of apps on daily basis. Developers and Digital Artists will own the world since they would create the key components of the Metaverse. The question is, will the software become a part of our biology? That'd be interesting.

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Isn't software already becoming a part of our biology? wouldn't surgical implants that collect data or pacemakers kind of fall into this category? I mean, I know those require hardware, but it's still running software from within, and for the benefit of, the host body.

Or do you mean you think maybe someday we'll be able to use waves and frequencies to remote influence cellular activity with intent and have what amounts to Bluetooth access to our own physical body?

but the man made software we can attach to our bodies looks in a very low level compare to the "software" which rules our body

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For now. I'm not convinced mankind is driving technological advancement. Life does its own thing.

Ummm , havent thought about it yet , good point

Well , would you say that blockchain did appear for a natural reason?

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I don't have the expertise to argue it but for the sake of discussion it seems to be inline with the natural progression of of all living things.

Forests have networks of roots and fungi, bacteria (probably), etc..., that allow them to communicate (what we consider) primitive (chemical(?) signals.

Why wouldn't such a complex system be considered a decentralized, distributed network?

At this point I may argue there's no indication that data is actually stored in this network to the degree we may need to be comfortable comparing the two, but we do know we don't yet know everything and there are countless questions we still don't even know to ask.

Watching human behavior and comparing to everything else, it seems the underlying driver is life creates a useful tool or method to enhance something’s ability to survive or thrive, then, eventually weaponizes it against it.

Blockchain will be no different. This will boost civilization to new heights but you’d be hard pressed to convince me someone isn’t already using it to oppress and subjugate.

Neither an expert , so not really have many arguments or data for a serious discussion

Why wouldn't such a complex system be considered a decentralized, distributed network?

good point , agree with you

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I don’t really have arguments either. I just like to ponder the mysteries of life. 😊

That is true. Just look at the brain. For all our advancement, we still have no idea what is going on there.

We are so smart yet know so little. Perhaps a great deal more will be answered once we enter the quantum age. It might be that is required to end up pushing into a realm of understanding that we do not have now.

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right , the brain or a single plant growing from seed are far more complex that any software I have seen

We are far for fully understanding it ( as far as I know , not really an expert on genetics)

But at the actual technology development is like :

I can change a couple of lines of code using a language I dont even know why the language was created for or who created it

I would say that nothing we can do on purpose will take as close to the point to have a genetic SDK or similar

And at this point I think as @sinistry , no human directed effort will give us that skill , just nature or need or cosmic whatever

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I think we’re kind of in agreement. I don’t know that man will achieve that but I have no doubt AI can given a long enough timeline.

It’s been years, but I recall seeing an article once about a lab that was growing fiber optic cables. That sounds like primitive cyborg tech to me.

Yes I’m definitely not debating the difference in complexity between natural software vs manufactured, I’m saying there’s no solid evidence anymore that this will always be the case.

There is a case made as you describe. There is also a line of thinking the says that biology is truly code and that we are just beginning to figure it out.

Either way, we are going to see a continued blending of our biology with technology. How that looks remains to be seen.

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Over the last few years I’ve really found myself subscribing to the “everything is data” school of thought.

And if that’s true then all this info is being collected and stored somewhere for some purpose, if none other than simple organization.

That would essentially make the universe as we know it, and possibly beyond, one big ass decentralized organ… like a squid, maybe, with each element kind of doing its own thing and accidentally manifesting existence for us and who knows what else…

If everything can be broken down into data then what else could it say about the underpinnings of the entirety?

There are now over 5 billion with the rest likely to come online in the next 3 years or so.

We have that time to really get the foundation in place for Web 3.0. That will really create an environment where a great deal of distributed wealth will be created.

It will be fun to see how this all rolls out.

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Here there are already about 2 million with a private wallet that is not from a bank, with the legalization of btc as legal tender, bank branches are already running out, and it is the BTC ATM's that today have queues soon That will happen and there will no longer be anyone in the banks because there will be no need to go to one.
Well, let's hope that bureaucratic regulation does not get in the way, because as someone says, wall street, does not want main street to take control of its decisions, but we are already a thousand light years away from what the law can do, the important thing is that we are here in the front row to enjoy and try as much as possible to see these small changes that are happening.
Best regard.

I hope things are rapidly advancing in your neck of the woods and keep fighting the good crypto fight with everyone you come across.

It is important that we battle back against the FUD.

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Yes things look ant-colored but here we go, slowly or perhaps not as slowly as we go around here.

Interesting thoughts

I agree bank system is collapsing , in Spain street offices are closing very quickly and banks are used by people mainly to government related transactions

But not sure about DAO evolution . I have been expecting DAOs to grow faster than it is actually doing

I wonder whether there is a software limit we dont see right now , and may need a new kind of more advanced software coding , something like the the "genetic" software all plants and animals use

Great article again!

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I wonder whether there is a software limit we dont see right now , and may need a new kind of more advanced software coding , something like the the "genetic" software all plants and animals use

If not now, likely at some point in the future. We have no idea where advancement (and need) will take us a few decades from now. You could be correct, we might require a lot more advanced coding. I wonder what quantum will do and how that programming will look.

But not sure about DAO evolution . I have been expecting DAOs to grow faster than it is actually doing

Be patient. It seems to go in phases. We were looking for DeFi before 2020 and during that year it exploded. This year is seeing NFTs.

DAOs in 2023?

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Hope you are right ! Looking forward to see DAOs explode !

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Banks are already eaten by software, but so many of their employees are refusing to see it and start doing something about saving their skin. Paperwork is going to be eaten by tech and automation will replace the need of actually having a clerk and physical offices around the world. Cryptocurrency does all of that even better than banks are currently doing it.

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What will happen when quantum becomes mainstream? Do you think crypto will start being on the sidelines and we build something similar on the quantum network?

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