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Why Investors Should Care About the Protocol Economy
Over the past decades, economic power has been concentrated in the hands of large corporations that own and benefit from controlling data and information. Decentralized blockchain networks, like Bitcoin and Ethereum, are changing that.
Created in partnership with Franklin Templeton, this graphic offers visual insight into the emerging protocol economy and what it means for investors.
What Is the Protocol Economy?
We have predominantly been living in the era of the platform economy. In the platform economy, data was owned and controlled by the platform owner (e.g., Amazon, Meta Platforms, etc.). Users had little input (if any) and transparency measures were decided upon by the corporation.
The protocol economy, enabled by blockchain technology and cryptocurrencies, offers an alternative route. Unlike its predecessor, this model emphasizes open participation, decentralized ownership, and community-driven governance that shifts the power to users.
What Are Protocols?
In networking, a protocol is a set of rules for formatting and processing data—like a common language for computers. Protocols are responsible for functions such as governing network participant behavior, maintaining network harmony, and discouraging malicious activities.
Though this network structure is relatively new, protocols themselves are not. Over the past few decades, advancements in protocol technologies have been a significant driver of economic shifts. In fact, they have been instrumental to technological development since the advent of the internet.
Investing in the Future
As the world transitions to the protocol economy model, technologies and systems that operate based on emerging protocols—such as cryptocurrencies and blockchain networks—could benefit. As a result, investors exposed to cryptocurrencies are poised to benefit from the paradigm shift.