This is the first post in a series of posts on ThreeFold, in which we will talk about the internet, blockchain, tokenomics and so on. We are a group of individuals based in Ghent and are building on top of ThreeFold. Through these posts we would like to share our knowledge (from a business point-of-view). We are young and still wet behind the ears, but are eager to share our findings.
About one year ago we founded our company (naiein) and last month we joined forces with another start-up in Ghent. Thus ROOT was created. We just make the net-work.
We see in ThreeFold the emergence of a global autonomous internet infrastructure and technology. Imagine an internet infrastructure that goes beyond politics and countries, an internet infrastructure that stands alone, as a nervous system on which data and workloads move according to the activities of its users – self regulating – and redistribute when hardware goes offline – self healing. An internet infrastructure free from and for everyone.
Through this series of posts, I will never use the words centralised or decentralised as this technology (and blockchain technology in general) differentiate itself from all other existing technologies on a much more fundamental level, but I will elaborate on this in another post.
What follows, is an interpretation of the Proof of Capacity and Proof of Utility and how these algorithms could be implemented in a business model to develop a business roadmap and milestones as well as integrate the phenomenon of ‘tokens’ into a financial plan. Furthermore, the tokenomics could allow (provided some adjustment) to build a business with an economical model that not fully depends on token price or the existence or non-existence of a global Market.
Market - Point of Absoluteness
(the state of being absolute, i.e. the state of not being subject to anything outside itself - autonomous)
The formulas within the Proof of Capacity and Proof of Utility are linear functions. Let’s take a look at how they relate to one another. In the attachment you will find a spreadsheet with an example of a network build out of 12 servers with 24 vCPU, 128GB RAM, 2.000GB SSD, 16.800GB HDD and an average bandwidth use of 2.000GB each (you can change the value of these variables, i.e. the Cloud Capacity provided by your network per month, in the spreadsheet attached).
In the spreadsheet you will see both algorithms displayed on a graph. At one point, these two linear functions intersect, but what does this mean? Three distinct situations can be derived from the graph: (1) before the intersection point, (2) the intersection point itself and (3) after the intersection point.
Imagine Bob is a cloud provider and owns a network as described in the spreadsheet example above. Any entity, business(es) or individual(s) can use this network and thus the Cloud Capacity (tokens) generated and provided by this network.
We will distinguish two types of cloud users: direct and indirect cloud users. The former are cloud users who have direct contact with the cloud provider, in other words they buy Cloud Capacity (tokens) directly from the cloud provider with VISA or other means of payment (OTC). There is a direct link between the Cloud Capacity (tokens) and the cloud provider as the Cloud Capacity (tokens) produced (and thus provided) is consumed within the same network. Whether the tokens are managed by the cloud provider (as users are not yet familiar with the idea of tokens) or transferred to the wallet of the cloud user, is entirely up to the cloud provider, cloud user and the services provided.
(Note: the tokens and blockchain are (just) one of the essential elements of this technology, mainly addressing double-spending within a system which is a fundamental flaw whether we talk about currency, water, electricity or data. A blockchain embodies the state or condition of a system. In this case, it could be considered as an internal mechanism in order to enable an autonomous internet infrastructure and technology.)
Indirect cloud users have no direct contact with the cloud provider, in other words they buy Cloud Capacity (tokens) from the market through an exchange, or with VISA or other means of payment from other cloud providers. There is no direct link between the Cloud Capacity (tokens) and the cloud provider as the Cloud Capacity (tokens) produced (and thus provided) is consumed within different networks.
Let’s go back to Bob and his network. In the example a part of Bob’s network is used (by direct or indirect cloud users). At this point a (stable) Market is not yet established. In situation (1) Bob provides less than 24% of his network to direct cloud users, and is not able to consume (or sell) all the Cloud Capacity (tokens) produced through its network. As there is no other way to consume (or sell) Cloud Capacity (tokens), Bob can not maximise his profits.
In situation (2) Bob is able to provide 24% of his network to direct cloud users and to consume (or sell) all the Cloud Capacity (tokens) produced through its network. The intersection point indicates the Point of Absoluteness. At this point (in space and time) Bob generates a maximum return with the set up of his network through direct users. It is important to note that Bob’s business model does not depend on the existence or non-existence of a (stable) global Market, i.e. token price (or indirect cloud users) in order to be profitable. This allows Bob to develop a business roadmap and milestones as well as integrate the phenomenon of ‘tokens’ in his financial plan.
(Note: from the spreadsheet the ROI can easily be calculated if the cost structure is added and so on.)
In situation (3) Bob is able to provide more than 24% of his network to direct cloud users and to consume (or sell) all the Cloud Capacity (tokens) produced through its network. Bob is even short of Cloud Capacity (tokens). Bob can take two approaches to this situation. On the one hand he could buy Cloud Capacity (tokens) from other cloud providers. Bob’s constant demand would give rise to (and activate) a stable global Market. On the other hand Bob could expand his network (extra investment) and so produce (and thus provide) more Cloud Capacity (tokens).
From this graph and three situations, different methods arise for any entity, business(es) or individual(s) to develop a business roadmap and milestones as well as integrate the phenomenon of ‘tokens’ in their financial plan. Furthermore, a strategy arises to activate a global Market (although this is or should not be a necessary prerequisite to build a viable business).