Blockchains are managed infra, paid for by users, via microtransactions

In the beginning, you would buy a machine to run your server. Then came AWS. You would rent out an EC2 instance, on the “cloud”. This was a game changer.

It lowered the barrier to entry in an unprecedented way. One could launch a startup from one’s bedroom, paying as one gained users. But you still had to do stuff on the EC2 instance. A lot of which, while fun, wasn’t really what the user problem that you or your startup was trying to solve. Herding instances, updating distros, all that jazz.

Over the years, things evolved to a much nicer place. In some sense it culminates in lambdas (aka serverless), where you would pay “per transaction”. The cloud provider would take care of everything behind the scenes for you.

Blockchains take this to the next step.

It works out exactly like a serverless, managed infrastructure, except instead of you it is the users who pay per transaction (using crypto!). So it is the epitome of micropayments.

Let’s break it down a bit:

  • The execution environment provided by blockchains like Ethereum is infinitely scalable, fault tolerant, tamper resistant. And there is a globally distributed ACID compliant key value store to go along.
  • It sounds too good to be true, but it is true. The catch is that it is expensive. Orders of magnitute more expensive than your own servers.
  • The orders of magnitude are going to reduce. L2 solutions, zero-knowledge proofs, and other human ingenuity.
  • But still, it will remain more expensive than running your own hardware, the same way as running your startup on lambdas is more expensive. The cost benefit calculus will become play out in a similar way.
  • So who pays for this expense? Users pay for it. For example, on Ethereum, users pay per transaction in the form of the Gas fees that they supply to run your smart contract.
  • Viewed this way, the purpose of Ether is allow users to make micropayments to use your program on Ethereum. This was the original intended purpose, indeed. Along the way, Ether has taken on many other roles, but the originally intended purpose still remains.

In this world, your code exists out there, in a genuine cloud. If the code is useful, then users will pay to use it. So in terms of the infrastructural investment, the only cost to launch a startup is just the gas fees one would pay to deploy the smart contract.

Blockchains are thus more cloud than the cloud. Managed infra, paid for by users, via microtransactions.