The Cryptocoin Boom Could Choke Off On-Demand Services

Jon Evans at TechCrunch raises a troubling issue with cryptocurrencies: They are so popular that the underlying blockchain technology has failed to deliver low-cost transactions at scale.  The coins that have generated vast fortunes, such as the $59 billion in wealth Ripple XRP co-founder Chris Larsen realized on the rapid run-up of the currency he created, are swamping the blockchain infrastructure. Evans writes:

As a result, entire categories of cryptocurrency experimentation and innovation are on hold until the bubble bursts, or until / unless Ethereum finds a way to scale such that transaction fees plummet. Oh, people can still write and deploy code. But nobody will use it. Curious would-be users will be repelled by the nontrivial expense of mere experimentation, never mind ongoing usage.

The problem is not the coins, but the demands on the blockchain that supports BitCoin, Ripple, Ethereum and other currencies. A distributed ledger, blockchain allows the public recording of transactions. The promise of blockchain and cryptocurrencies was low- or no-cost transaction fees. Evans notes that the average fee for an Ethereum transaction is now $2.50. Every transaction, whether it is worth $0.01 or $1 million. Great news for cryptocurrency traders, perhaps, but bad news for developers.

At $2.50 per transaction, Ethereum is priced too high to support micro-transactions and less cost-effective than a credit card for values of less than $85. On-demand transactions, such as paying $5 for a meal delivery or $20 for an hour of a homecleaner’s work, are not feasible at $2.50 per.

Blockchain’s primary value proposition, after its anonymity, is low-cost recordkeeping and transaction processing. The cryptocurrency bubble is a disaster for platform marketplaces and developers of distributed logistics and transaction systems. High costs in blockchain cut off a promising direction for developers and business architects for the foreseeable future.

The article is worth a read, especially if you are bullish on blockchain as a platform for software development.

Changes to the Notebook in 2018

After three years of local on-demand research, including a year’s work launching Gig Economy Group, I’m making some changes to The Notebook. 

First, as noted, I am now writing from the position of a co-founder of a funded on-demand economy company. As such, I’ll be sharing the GEG team’s ongoing assessment of local on-demand opportunities for individuals, small business, and brands. In addition to the team’s views, my excerpts of useful news and research will continue to appear here.

Second, it is time to put an end to coverage of the baby steps phase of the on-demand/gig/sharing economy. There is very little value in tracking Uber’s almost daily embarrassments arising from its brosterous startup days. When Uber does something new, it will get coverage here. So too all the other companies and individuals contributing to the development of the next economy. It’s 1995 all over again, and the industry is growing up. We’ll focus on the maturing of on-demand here.

Third, it is time to focus more on people. People in local markets seeking to integrate their business with the world’s evolving supply chain to sell and service curated products and customer engagement are poised to transform their Main Streets into personalized markets. People are working to orchestrate and deliver great branded experience with intensely personal touches. People are working in on-demand companies to make the world a better place, often in the face of determined opposition. People are seeking to understand the world we’ve built and lead it to productive socioeconomic outcomes.

Watch this space for new features, too. Happy 2018, all.