CWC Newsletter #13 (February 3, 2020)
By Taylor Ryker, Analyst
What are the parallels between John D. Rockefeller's Standard Oil and Block.one's EOSIO source code? And what are some lessons that we can learn from Standard Oil when viewing the potential for EOSIO to impact the cryptocurrency, blockchain, financial technologies, and internet ecosystems in the 21st century?
From studying the history of Standard Oil, I see several parallels between Rockefeller's Standard Oil and Block.one's EOSIO source code: (1) monopolizing and standardizing the infrastructure of the next valuable commodity and (2) horizontal integration and horizontal scaling. These insights may provide a different perspective in viewing the value proposition of cryptocurrencies and especially the EOS token and the EOSIO source code.
Rockefeller and Standard Oil were deeply interested in the valuable commodity of oil. In the 21st century, the most valuable commodity is not oil but data. Cryptocurrencies and blockchain technologies essentially deal in the business of data security, transactions, and monetization.
Monopolizing and Standardizing of Industries
Rockefeller, through years of finding ways to profit from the oil industry, sought to own the oil refineries in the US, which saw the beginnings of Standard Oil's journey to monopolize the oil industry's most important infrastructure. The oil industry in the late 1800s experienced sudden booms and busts. Oil drillers would invest large sums of capital to discover new oil fields, which did not always reap new oil wells. Although the discovery of oil wells made those specific drillers rich, many others became bankrupt.
Rather than drill and explore for oil wells, Rockefeller turned his attention to acquiring the ownership of the majority of oil refineries and pipeline networks. By taking the risk out of drilling by owning the needed infrastructure to turn oil into useable fuel, Rockefeller could dictate the prices for oil drillers and the entire oil market. By the turn of the 20th century, Rockefeller and Standard Oil had successfully controlled and operated (read: monopolized) the valuable infrastructure of the burgeoning oil industry.
Block.one, the parent company of the EOSIO source code, aims to recreate the infrastructure and standards of the internet by creating a more efficient and secure database. The potential domination of EOSIO by offering a superior alternative to legacy infrastructure databases and internet architecture echoes the process by which Standard Oil controlled the infrastructure of the oil industry and dominated its market.
Block.one's CTO, Daniel Larimer, spoke about these future directions and plans for the EOSIO source code. This past week Friday January 31, 2020, the Government Blockchain Association (GBA), an international blockchain nonprofit, hosted a conference at the US Capitol. Called "The Future of Money, Governance, and the Law," Larimer's keynote address directly addressed the need for an upgrade of database infrastructures throughout all industries.
Rather than creating the latest payment token (e.g. Bitcoin, Litecoin, and Dash) or decentralized application (e.g. Chainlink, Siacoin, and Basic Attention Token), Larimer and his team of engineers at Block.one are committed to creating the most powerful platform so that future iterations of payment tokens and decentralized applications are incentivized to host their blockchains on EOSIO.
In a follow-up to his keynote address, Larimer elaborated on twitter more about the future direction of the EOSIO source code in terms of becoming the database standard for any future company on a public or private internet.
Larimer believes that, "By the time you do everything you need to secure a traditional database you will have built a blockchain. Since building a blockchain is hard, few apps will do it properly which is why apps use libraries. A blockchain like EOSIO is just a toolkit for app devs that want security."
Horizontal Integration and Horizontal Scaling
Standard Oil dominated the oil market initially through horizontal integration in the refining business. Standard Oil's horizontal integration saw the company merge and acquire rival refineries in order to consolidate their control over the refinery business.
Within the cryptocurrency space, the issue of scalability is a major topic of discussion. Cryptocurrency developers have been dealing with this issue for years, which has created large divisions, forked coins (BCH and BSV), and failed scaling solutions (Casper and Plasma).
However, horizontal scaling is possibly the future of blockchain platforms like the EOS mainnet. Larimer believes that the future blockchain space will not be a "one chain will rule them all" but rather, a multi-chain universe. An ecosystem based on one mainnet and a plethora of EOSIO-based sidechains and sisterchains, which looks more like a horizontal scaling solution.
Block.one's goal is to create a robust EOS mainnet that will act as the "glue" that connects the many different EOSIO-based sidechains and sisterchains, such as Telos, Worbli, Ultra, Wax, BOS, and Lynx. By leveraging EOSIO sidechains and sisterchains, the EOSIO ecosystem will be able in theory to process millions of transactions per second, which will rival centralized database ecosystems like Amazon Web Services and Microsoft Azure.
Conclusion: Final Thoughts on the Matter
If EOSIO becomes the new digital infrastructure database and allows for an ecosystem of many EOSIO-based blockchains, the future of the internet may rest in the development and adoption of this particular technology. By making global commerce and industries conform to a standard of a new architecture of digital databases, Larimer believes that, "Not adopting blockchain tech in the years ahead will be a bank not adopting SSL, and once the technology is widely available not using blockchain technology could, in my view, be considered negligence."
Similarly, if companies and governments did not follow the developments within the oil industry, they would have been at a big disadvantage relative to their competitors and enemies. It is no surprise that President Donald J. Trump and the US armed forces are still committed to fighting in the Middle East in order to dominate and control the global oil industry.
If the future untapped economies are digital, it would be best to begin to better understand how this new world will rely on new technologies, infrastructures, and regulations. And will you have any exposure to these new industries and markets?
Disclaimer: KJ Kingsley is not a financial advisor and holds the digital tokens or cryptocurrencies represented in the content above. This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this post constitutes a solicitation, recommendation, endorsement, or offer by myself to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of any of the author’s employers.