You have the ability to create the product. You have the ability to bring in new users. You have the ability to create authentic market value. Yet you can lose everything because your concept was correct but someone else controlled the space needed to reach your value.
Platforms began their dominance of this area twenty years ago. Platforms established themselves as intermediaries who connected suppliers with demand partners and creators with audiences and investors with market possibilities.
They established a system that allowed users to connect but they maintained complete control over it while generating revenue through user data which they used to develop more effective methods of gathering user information. The current system shows signs of collapse because a different organizational system has emerged.
The new system enables organizations to function through software while establishing trust through transparent operations and eliminating the need for central authorities to approve value transfers. The protocol serves as the fundamental framework which establishes new standards for digital power distribution.
Core idea
The internet now moves from its current state which relies on platforms to operate its networks toward a future which uses protocols as its primary network framework. The system requires complete operational redesign which creates the need for new value delivery methods through its various components.
Platforms establish their worth through their ability to assemble users while they manage the settings which determine how users will interact with one another. The network belongs to them because they establish the operating regulations which enable them to acquire most of the revenue that passes through their system. The protocols function as systems which let users interact with each other through shared operational regulations while building their own systems which use those regulations.
The two elements of this distinction function as vital parts of their respective systems. The platforms generate revenue through their control over everything while the protocols generate revenue through their active participation. The platform model enables users to access his system which somebody else controls. The protocol model enables users to access a system which operates as a joint infrastructure. The shift may sound subtle, but its implications are massive.
Why this shift matters now
The existing platform model brings operational restrictions which become more evident through the ongoing transformation process. The revenue extraction process became the main focus for platforms after they reached their full development stage which caused negative effects to users and developers and prevented future advancements.
The ecosystem moved toward stricter controls and increased fees while it became less accessible to outside users. The new technologies which emerged from decentralized systems made it possible to achieve coordination without needing to depend on a central controlling organization. The financial industry has now expanded its initial innovations to various other business areas.
Digital finance now shows a trend where open systems take over both trading and lending and payment processes. Social networks now start to create separate identity networks and content networks which exist outside the platforms that host them. The current battle in artificial intelligence centers around control of the infrastructure layer which enables connection between models and data and computing resources. All domains exhibit the same consistent pattern.
Systems become more resilient and extensible and defensible through their connection to shared infrastructure. The transformation requires this fundamental shift to take place. The process involves establishing a new foundation which replaces the existing application with another system.
What actually changes
The platform era granted power to those who controlled access to resources. The owner of the gateway held power over all user movements and data transfers and transaction processing. Platforms used their power to set conditions which enabled them to charge fees while their network effects maintained their power by keeping users within their systems.
The protocol era shows that power now moves from control to systems which enable people to work together. The system now requires users to become so integrated with their digital stack that their existence becomes essential for operation. The user experience can change through application replacements and interface updates and user preference shifts.
The process to remove widely used infrastructure becomes very challenging after it gains public acceptance. Organizations now face a different way to compete. The systems compete to establish themselves as essential components which all other systems require. The customer relationship itself now serves as the base which controls business relationships.
The economic shift
The process of value extraction in digital systems is undergoing transformation due to the ongoing structural changes that are currently taking place. Centralized business models generate their income through the operation of their primary platform. The company takes all financial benefits which result from customer interactions while charging customers for all their interactions.
Network protocols enable value distribution to all users within the network. All system participants who provide liquidity or validation or development or usage capabilities can participate in the economic activities which the system produces. The system creates an open access structure which anyone can join but this creates higher operational difficulties for all users.
Multiple parties across different layers of the system now hold the power to control value distribution which used to be restricted to a single location. The markets still need to resolve this basic issue of network ownership because no single entity controls the entire network. The implementation of the protocol together with user acceptance and its capability to produce substantial economic output determines the answer.
Certain protocols attain essential infrastructure status which enables them to acquire substantial value through indirect means. The rest of the companies will face problems because they need to protect their business and will end up turning into regular products.
The reality check
The process of disintermediation has created a situation where middlemen still maintain their presence. The process of middlemen existing in their current form needs to undergo transformation because their role has decreased. Users will not need to contact the system’s basic components because they will use the existing system components, which include interfaces and brands, to access their intended experiences without any particular difficulties.
The difference is that these intermediaries can no longer rely on control as their primary advantage. The competition requires organizations to provide customers actual value through improved user experience and enhanced trustworthiness and better design and increased community involvement. The era where people needed only to own the gateway system to succeed is approaching its conclusion.
The intermediaries that succeed most in this contemporary setting will use their ability to control protocols instead of treating them as competitors. They will create their own systems while using shared systems to establish their market identity at the point of customer interaction.