“Skinny” Bitcoin

Early Bitcoin investors recognized, as we described in the previous Chapter, that Bitcoin is both money and a software protocol, and specifically an Internet protocol. One of the key characteristics of the major Internet protocols that allowed them to spread so successfully was that they were open-source. Yet one economic shortcoming of the Internet has been that companies such as the Internet monopolists discussed earlier managed to capture the vast majority of the economic value in the Internet by taking those free and open source protocols and then building exclusive databases and services on top of them.

As articulated by venture capitalist Joel Monegro in his Fat Protocols¹⁸³ thesis, Bitcoin appears to be the first case of an Internet protocol where much of the value is captured within the protocol itself (in the value of bitcoins). This is not to say that the second layers and third layers described in Chapter 8 won’t also capture value. I expect they will. Some people have argued that this time won’t be different from the past, when the Internet protocols became commodities that captured no significant value. Ten years into Bitcoin’s existence, it seems much more likely that Monegro is right and that Bitcoin will capture significant value.