- ORIGINAL TITLE: Build It Right: Open Networks = Interoperable Businesses
- SPEAKER: Pablof7z
- CONFERENCE: BTC Prague 2024
INTRODUCTION
In this keynote speech highlighting the benefits of using open networks, Pablo addresses the complexities of building open networks and interoperable businesses in the digital age. He discusses the tension between creating censorship-resistant platforms and those with sleek user experiences and explores how advancements in technology can bridge this gap. Through examples like Coinbase and Bitcoin, Pablo illustrates the pitfalls of compromising core values for short-term gains. He advocates for leveraging freedom tech to achieve both functionality and profitability, emphasizing the importance of building trust with users and avoiding the pitfalls of traditional centralized systems. This is a transcription from Pablo’s keynote at BTC Prague 2024.
THE TENSION AND TRADE-OFFS IN BUILDING TECHNOLOGY
I wanted to talk about the tension between building things the right way and building things the wrong way, which I think is going to be increasingly of utmost importance.
For the longest time, we’ve had this dichotomy of building things to be censorship-resistant or optimizing things to have a sleek UX and be able to monetize a product, which is absolutely fundamental.
You have to either build something like SimpleX, which sacrifices the build to be censorship-resistant but barely works sometimes, or build something like** Blue Sky**, which isn’t really censorship-resistant but has a very sleek UI. Users, when they use Blue Sky, don’t know what’s going on, but it works in the way they expect it to work. Things work fast, things load, they don’t fail, obviously because it’s super centralized, so there’s almost no tension there. They sacrifice the entire thing.
THE POSSIBILITY OF ACHIEVING BOTH GOALS
But I’m here to say that we can build both; we can have both now. What I observe is that this tension is not really a core tension in building things; it’s a tension that exists because of a lack of good enough technology. And I think we now have good enough technology. I think Ecash is one such technology that enables us to explore both of these things within the same product. And I think nostr, which is fundamentally very similar, also allows us to build things that are both permission less and awesome and profitable. It’s very important to be profitable—no margin, no mission.
CONSEQUENCES OF WRONG TRADE-OFFS
What happens when you build things the wrong way, when you start making some tradeoffs? You end up with something like Coinbase. Let’s give the benefit of the doubt to Brian Armstrong. I don’t know if he deserves it, but let’s give him the benefit of the doubt. He might have said, “I’m going to give in on this small tradeoff.” But sometimes trade offs are a slippery slope, and you end up building something that goes strictly against your values.
When you give in on enough of those trade-offs, you end up building what you were fighting. If we think that Brian Armstrong wanted to bring Bitcoin to the masses, and now he’s doing chain analysis, he’s working basically for the state. You could think that his hero journey brought him to the opposite of where he started, and it all started with making certain tradeoffs that he could not go back on.
THE SHIFT FROM DICHOTOMY TO QUADRANT
I think where we are now is not the dichotomy, the yin-yang we had before. It’s more like a quadrant. I really can’t put anything that requires KYC out of the red box of doom because KYC sucks. No matter what you do, we can fundamentally agree that KYC is important. Just the experience itself of KYC is horrible, it’s horrendous, it’s demeaning.
A product that requires KYC can’t ever escape from this red box. On the other side, we have products like Tor. We have protocols like Tor, like SimpleX, like Hypercore. They are decentralized, they are censorship-resistant, but they are not quite functional. I mean, anyone that has synced a Bitcoin node only doing IBD wants to kill themselves after two weeks. You know what I’m talking about.
THE TREND TOWARDS KYC HELL
I think what’s happening in the world, what happened with Samurai, and what’s happening just everywhere—what’s happening with Twitter—means that the world is moving in this direction (KYC hell becoming Status Quo). You were able to stay in the status quo, in the blue box, in the past and in the present, kind of, but momentum is taking anything that is here, anything that is not censorship-resistant, towards the red box. Things are getting worse. Things will require more and more KYC and more and more overreach.
I’ve seen this, I’m from Argentina, many of you probably know. I’ve seen this. When the state is fighting, when the state is kind of dying, it starts to fight and it starts to create all kinds of ridiculous pressure. In Argentina, for example, the state demanded that they ban foreign books. Why? They said that foreign ink on books was toxic. So, this is just like, it’s such a stupid thing, but things will get worse because the state is fighting for salvation.
THE FUTURE OF KYC AND STATE CONTROL
Maybe some of you have seen this video of this lady that wanted to buy groceries and something like that, and she needed to KYC. The KYC required opening her mouth. This will become the norm; this will continue to work this way. If today you make the tradeoff of “I’m going to build in a way that allows me to position myself to capture my users,” this is probably in store for your company. Maybe you don’t care about the censorship-resistant parts and all those components, and it’s fine, but your product will become this. It is very likely that your product will be trending in this direction.
So, it’s important to realize that if your product depends on being in the path, if your product has to work in order to work, if your business, in order to work, requires holding users’ data, holding users’ funds, this is your future. This is what you’re building. You might not realize it, you might not want it, but this is what you’re building.
ADVANTAGES OF FREEDOM TECH
Now, that was the stick part. On the opposite side, building exclusively on freedom tech gives you a bunch of things, really cool things, for free. Many of you might be familiar with this. This is PagerDuty. It’s a service that sends you an alert when your services are down—your backend, your database, whatever it might be, your website is down, your app is not working. You receive this in the middle of the night.
Now, if you’re building on freedom tech, if you’re building on Bitcoin, Bitcoin doesn’t go down. Like, what would it even mean for Bitcoin to go down? nostr doesn’t go down. There are so many relays, there’s so much redundancy distributed organically that you get this—you get all the nines uptime, you get 100% uptime for free. It’s absolute insanity. How much money does Twitter spend to have the uptime that they have? How much money does Google spend? Bitcoin has uptime always, constantly. It’s irrational to think about downtime.
If your product depends on a centralized server, or on your own network, if your network goes down, your product goes down. You are not here. What does that mean? It means that if your network goes down and your product goes down, it means that you’re keeping users’ data hostage. You could be and you will be pressured to censor. If Alex Jones or whoever might come and use your product and you have a button to turn them off, you now become a target. And you don’t want to be a target. If you build it right, you are not the target. It’s so, so easy. It’s just, from a personal perspective, it’s a better life.
NETWORK EFFECTS AND COLLABORATION
Building on open networks gives you this for free—network effects to the power of use cases. When **Primal **builds a really cool product, a really cool offering, it benefits my product, it benefits my users, it benefits my network. If you build and really lean into building something that is not trying to capture your users, then you can tap into this.
And we’ve seen within nostr, we’ve seen the opposite of this. We’ve seen Minds.com, for example, where they kind of did the nostr integration, not really, sort of. It went absolutely nowhere. So now they are continuing to build their own network effects, they have to do their own sales, they have to build an entire business and just go head-to-head against Twitter, against Facebook. So, it’s a really bad idea. Again, it’s a bad life. It’s a life that I don’t want for myself because you are competing against the world by yourself.
KYC-FREE MONETIZATION
This is a small one but important: leaning into building open networks means that your monetization is KYC-free, actual cash monetization. So, it’s kind of nice to be able to just tap into that and not have to reinvent Apple Pay, Twitter Pay, Venmo Pay, whatever it is—pay.
And with regards to building on open protocols and really leaning in, when you need to bootstrap your own network effect, you are isolating yourself. You are fighting against Twitter, Facebook, nostr, whereas if you just build on nostr and Bitcoin, you are leveraging everybody’s work.
AVOIDING ISOLATION THROUGH OPEN NETWORKS
So, if you decide to—because I’ve had this conversation with a few developers—make a small change which essentially forks them off of Bitcoin, forks off of nostr, it becomes a competing protocol. It might be 99% the same. I mean, obviously, whoever has been around for a while has seen the fork wars and how that ended up panning out—not great.
So, it’s not the best protocols that win; it’s the protocols that have the right momentum. And you might have to agree that the existing protocols that we have are not ideal. You might want a nine-minute block time instead of ten. It’s probably not good enough of a reason to just say, “Well, I’m going to run my own Bitcoin.” It’s going to be very expensive to compete, and you will probably not make it.
MONETIZATION WITHOUT USER CAPTIVITY USING OPEN NETWORKS
And the argument that I see a lot is: that if you lean into not capturing your users, if your business is not harvesting their data and forcing them to stay there or else, like Facebook does, then how in the hell am I going to be able to monetize? How am I going to defend? Where’s my moat, bro?
To me, that’s thinking based on fear. It’s sort of like, if you think of a relationship, “If I don’t force my spouse to stay with me, she’s going to run off with the first guy that comes by.” I mean, have some respect, man. You can build something that is valuable enough that people want to stay with you; they are not forced to stay with you. When you go to buy a tomato, you are not forced to buy a subscription for tomatoes for the next 12 months. You buy a tomato, the tomato’s good, you go back the next day. It’s just the same way.
BUILDING USER TRUST AND LOYALTY
I think the fact that you can choose to change bitcoin wallets because you control your 12 seed words and your output script, or you have control over you nostr **nsec **and you can just go to another client (nostr app), makes some people think or say that they will never be able to create or defend a moat by building businesses on open networks—this is overplaying how much people are willing and looking for change. We see a lot of products that just have enough momentum, and although the product kind of sucks, people stay there because it’s familiar, it’s what they know, they’re already familiar with where the button is. They don’t want to think so much.
So, the pain to abandon a product that people are used to and that they kind of like is quite high. You can build a very defensible business, and it aligns your incentives with the incentives of the user because if you abuse them enough, if you hurt them enough, they will leave. Do you really want to build a business that is based on not abusing your users enough? Just if you provide enough value, they will stay.
I think this comes out of fear. Just have self-confidence, and you can build profitable businesses that are value-aligned with your users.
Q&A SESSION: CURRENT STATE OF PROFITABILITY
Audience Question:
“Which profitable businesses do you have right now on nostr, and in terms of monetization, when did you switch over, and what was the fall-off from users?”
Pablo’s Answer:
I’m happy to announce that I just received 10,000 satoshi’s just now (via Bitcoin Lightning micropayments over nostr), so it’s the first profitable business on nostr. The economy on nostr is so freaking small that there will be no profitable business for the foreseeable future. It’s just the nature of starting something new. So, obviously, there is none. I have none. There is none. Someone yesterday told me that it’s already paying for hosting (Zaps over nostr), so the sats are everything. But we need to be mindful that we are comparing nostr with, in the current state, obviously, in its infancy, with networks that are well, well, well-established and capitalized.
And we also need to understand that when we compare the future of these open networks, we shouldn’t compare them with the current status quo of fiat, of Twitter, of platforms. We need to compare them with where they are going. Fiat is dying, so when we think about where Bitcoin is going to be in five years, we don’t compare it with fiat of today; we compare it with fiat of five years ahead. Fiat in five years will be quite different from fiat today. Facebook and Twitter in five years will be very different from the platforms of today. So, long answer, none. Alright. Okay, thank you guys. Thank you!
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- Also read: Bitcoin vs. Bank Failures: A Path To Financial Security
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