Cryptocurrencies and the broader blockchain ecosystem are helping us change the status quo of our daily lives. With these emerging technologies, Web3 is being introduced as a permissionless, open innovation using middleware blockchain protocols. In this way, middleware protocols replace intermediary companies that provide software services by capturing higher levels of value.
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Creating Value with Middleware Protocols
With the advent of blockchain technology, the way we conduct our daily activities is changing. Whether through financial transactions, purchasing art, buying real estate or donating to charity, blockchain does so by providing a secure and reliable peer-to-peer (P2P) network between users. Now, instead of companies extracting value from users, developers extract value from protocols.
But how exactly is this possible? On the middleware protocol, developers can obtain the same opportunity to use the network during the pledge period by staking the native token of the protocol. The longer an application stakes and uses the network, the closer the cost will be to zero. After a few months, the service was essentially free. With a staking-based token economy, there are no monthly fees like SaaS fees.
Developers can unlock their original investment at any time, sell the native tokens of the middleware protocol they purchased on the secondary market, or sell to other developers. They can also stake it as a Saas node for serving application requests and earning more protocol tokens.
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Collaborative relationship
Each application-specific middleware protocol provides unique services at different layers of the stack. For example, Pocket Network is at the RPC layer, the Graph is at the index layer, Akash is at the cloud layer, Livepeer and Arweave are at the video transcoding layer, and Filecoin and Storj are at the storage layer. Because they are in different parts of the decentralized Web3 developer stack, these protocols are complementary and synergistic. For example, the following ETHOnline 2020/2021 Hackathon projects used both Pocket and The Graph: ERCgraph, Proxy Poster, LiFinance Bridge Aggregator Analytics and Balancer Chat.
We can see that The Graph's subgraph indexer requires a base-layer Ethereum archive node, which will be expensive to run and maintain. To save money, indexers can leverage the RPC endpoints of the middleware protocol, providing users with maximum uptime and zero single points of failure. The coordinator of Livepeer also requires a base layer Ethereum full node, which will also incur monthly operation and maintenance costs. Similar to indexers, coordinators can leverage the middleware protocol's RPC endpoints to save money. This in turn develops a two-sided market between consumers and suppliers.
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Disrupting SaaS
The Web3 Index tracks demand-side fees (DSF) incurred by service agreements at each layer of the decentralized developer stack. For example, Pocket generated $3.9 million in DSF in 30 days because it employed a novel deflationary payment model. This means that developers pay fees through dilution, while node operators earn through inflation.
The Graph, Livepeer, Arweave, Helium, and Akash generated gains of $6,460, $50,396, $171,406, $7,591, and $4,623, respectively. This novel economic approach has the potential to substantially disrupt SaaS while maintaining the “forever fair boot” mechanism that individuals in the crypto space seek when contributing to a growing community.
It also means developers get rewarded for their efforts without paying monthly fees to middlemen.
The information provided in this article represents the author’s personal opinion only, has nothing to do with Cointelegraph, and does not constitute any investment and financial advice. Readers are requested to establish a correct currency concept and investment philosophy, and invest cautiously.
Michael O'Rourke is the co-founder and CEO of Pocket Network. Michael graduated from the University of South Florida and taught himself IOS and Solidity to become a developer. He has worked at Block spaces, Tampa Bay's largest Bitcoin/cryptocurrency consulting firm, teaching developer Solidity.
