Most people think of Bitcoin as a digital asset, but it can be thought of as something more general than that: a decentralized organization…
Years from now, Satoshi’s creation may be looked at as a catalyst for the slow death of the firm. The slow death of the firm may already be underway.
Why do firms exist?
Economists typically suggest that firms exist for two main reasons: to minimize transaction costs and to aggregate capital and people. Ronald Coase wrote about the firm’s ability to minimize transaction costs in 1937 in his famous essay “The Nature of the Firm.” Seventy five years later, Nicholas Vitalari and Haydn Shaughnessy wrote about the firm’s ability to aggregate capital and people in the Elastic Enterprise. In addition to the economic arguments, some argue that firms provide people with structure and stability (i.e. job security), which risk-averse humans inherently seek.
Firms have played an important role in society for decades for these reasons (and likely a variety of others). Despite their prominence, most people dislike them.
Bitcoin thrives with no firm
In January of 2009, Satoshi released software that combined cryptography and incentives to offer users a digital service (a ledger to store and transfer value) that persists over time without any central party behind it. There is no firm behind Bitcoin; there’s simply code (rules for organization) and incentives (the BTC token) that brings together many different participants who are all incentivized to contribute their time and resources to maintain the service.
Bitcoin relies on proof-of-work consensus to secure the network and align the workers in the network. There are three types of workers in the network: miners, developers, and users. The miners work is measured objectively and that work gets compensated directly from the protocol: hash power contributed to the network earns BTC. To be a miner, you just need electricity and an Internet connection and you can earn BTC. Miners are the only group of workers that get paid directly from the protocol and the other two groups (developers and users) work indirectly for the protocol if they own BTC. If developers and users add value through coding, holding, or marketing, they add value to BTC and the BTC they own appreciates.
This new organizational structure has resulted in close to $100B worth of value creation (today the total market value of Bitcoin is now larger than the market capitalization of Goldman Sachs).
Source/More: The Slow Death of the Firm – The Control
