Do Blockchain Business Models Imply A New Business Playbook?

A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

What does a blockchain-business world entail?

As more startup are springing up on Blockchain technologies, it is normal to see the proliferation of Blockchain protocols that promise to disrupt any industry. Just like when the web started to become mainstream, thanks to technologies like search engines.

We saw the birth of many search engines that made the search market fragmented; up to when Google became so dominant to tame most of the search market share.

Are we assisting also today to a similar phenomenon? In part. However, to understand the Blockchain Economy and the business models that will spring from it we’ll need a slightly different business playbook!

Business models in the internet era

The internet gave rise to a whole new set of business models. Not by chance, the term “business model” has become widely adopted throughout the spreading of IT tech companies:


There is one critical point to notice. Where the internet allowed new companies to emerge. That created the rise of business models that before were not possible. One trivial example is Netflix delivery of streaming content via the internet, with a subscription-based business model. 

Today that model has become the standard. However, when you start thinking about how value has been created and captured in this internet era, one word comes to mind: data.

When you scroll the Facebook feed, what makes it so addictive is the ability of its algorithms to tap into behavioral data of its users to give more and more “meaningful” suggestions that only make people wanting more.

When you keep watching Netflix, its algorithms learn more about your tastes and preferences to create a stickier experience, that over time makes you wanting more.

Those algorithms learn through data, which might be classified as interactions you have on the platform. All that data is stored and handled by massive databases, called graphs. The access to those graphs isn’t open; it’s proprietary.

Indeed, that data is the main asset of those tech companies. It is what makes them monetize their business models, create unique experiences for their users and retain value in the long-run.

Therefore, even though initially the internet era paved the way for hundreds of new business models. It also created a winner-take-all effect. Where those companies able to capture network effects, would eventually gain a massive competitive advantage.

For instance, according to the Venture Capital Funding Report by CB Insights and PWC, the venture capital deals have increased substantially in 2018, compared to 2017:



However, as pointed out by venture capitalist Fred Wilson, these deals were “fewer and larger.” In short, in the last years of the internet era, investors and existing players are consolidating toward larger deals that are creating more consolidation, winner-take-all effects, and high barriers to entry.

It is true that as of 2019, new internet companies can be born and become the next Facebook or Google. Yet, it might not be as true as it was a decade ago. The tech players dominating the market might use their cash at the bank to buy them up.

In short, the internet seemed to have produced more open business models compared to the past (initially it did). Consolidation kicked in, and new “conglomerates” have formed in the marketplace.

While this process might be normal in a world where applications powered by proprietary data took over, ti might not be so in a blockchain economy, let’s see why.

A blockchain economy based on fat protocols and thin apps

Web3 describes a version of the internet where data will be interconnected in a decentralized way. Web3 is an umbrella that comprises various fields like semantic web, AR/VR, AI at scale, blockchain technologies, and decentralization. The core idea of Web3 moves along the lines of enabling decentralized ownership on the web.

Joel Monegro, from USV venture capital firm, pointed out a compelling theory about value creation in a blockchain economy. This is the “fat protocols theory:”

Here’s one way to think about the differences between the Internet and the Blockchain. The previous generation of shared protocols (TCP/IP, HTTP, SMTP, etc.) produced immeasurable amounts of value, but most of it got captured and re-aggregated on top at the applications layer, largely in the form of data (think Google, Facebook and so on).

In other words, the protocols that allowed the web to work in the first place didn’t manage though to capture economic value, which instead went through applications. In a blockchain economy, the opposite happens. Applications become marginal compared to the protocols that make them work (think of Bitcoin or Ethereum).

Joel Monegro  – argues – it happens for two reasons:

  • Shared data layer: in an internet-based business model most of the value is in the data captured from a platform or application. That data is proprietary, so the access to it will be restricted so that the company (think of Facebook, Twitter or Google) can monetize it. On the other hand, in a blockchain-based business model, data can’t be closed, it will be shared. This will reduce the barriers to entry, and will allow new players to come into the market more easily
  • A cryptographic “access” token with some speculative value:  in short according to Monegro, this aspect creates a token feedback loop, where interest in the token creates speculation and increases the value of it, which in turns only attracts more attention. This phenomenon, in turn, makes the value of the protocol grow way faster than the value of the applications built on top of it

This theory has important implications, as it points out how we need to change our way to think about business. That also might imply a new business playbook!

Do we need a new business playbook?

If we want to succeed as business persons in a blockchain economy (when and how it will prove to work), we need to change our playbook then.

In an infographic by you can appreciate, how tech players that were dominant by the late 1990s have become marginal today:


For instance, back in 1998, AOL and Yahoo represented the Internet! Most of the web traffic went through those portals. In 2018, Verizon, which had created a business unit called Oath (which comprised Yahoo and AOL acquisition) wrote them off for approximately $4.6 billion!

Twenty years from now, who will still be on that list?

New business models might emerge at the protocol level

When Google announced its IPO, back in 2004, the world wanted to know its numbers. Everyone knew Google was a profitable company. Yet when it finally Google opened up the hood, the reality was even better than imagination:


Google made over three billion dollars in revenues and about four hundred million dollars in profits! The web wasn’t just that bubble that burst during the dot-com era. It proved to be a whole new world. Business people took notice.

If a blockchain economy might prove sustainable in the long-term, understanding of how the web evolved and how tech companies became successful will be critical.

However, we’ll need to look at this phenomenon with different eyes. We might want to keep our focus on those protocols that will eventually dominate the blockchain economy as value captured might subsequently be there.

The blockchain as a new business model toolbox

When the web kept growing at an exponential pace, new companies and innovative business models sprouted up. On this blog, I have spoken at length about the innovation introduced by Google Business Model and why I believe this is what made it so successful.

The paradox though is that what seemed an innovative business model a few years back, it seems has become an accepted and standard business model today. Another paradox is that as those tech giants have taken it all, many business people assume that this is the way it was supposed to be.

When you think about the hidden revenue generation model of Google and Facebook through advertising. This model has worked exceptionally well in the internet era, as Google and Facebook could retain the ownership of the data generated by billions of users around the world.

Another business model would have been too difficult. That is also why managing this data from massive, centralized data centers makes sense.

The blockchain might change that, as it allows finally to control data at the decentralized level. Each user might be able to retain the ownership of the data, while the company will make money based on its protocol.

A few examples and use cases of Blockchain business models

Below a few examples of blockchain business models, as analyzed on FourWeekMBA by using the VBDE framework

Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.


The Graph is an ERC20 Utility Token (built on top of Ethereum) to enable consumers to freely query the blockchain through a fully decentralized database kept by indexers, incentivized by the payment of tokens (called GRT). The network is also ministered by curators and delegators that help maintain a high-quality index.


In 2012, co-founders Christian Larsen and Jed McCaleb created Ripple, a technology acting as both a pre-mined cryptocurrency called XRP and a digital payment platform enabling monetary transactions. Where Ripple is the tech company, XRP is the decentralized ledger.


In 2014, Jed McCaleb – which also played a key role in the development of Ripple – created a cryptocurrency to provide fast, reliable, and affordable money transactions. The same cryptocurrency has considerably grown seven years later. It is now one of the most stellar cryptocurrencies to provide a real-time platform that links banks, payment systems, and people. Meet, Stellar!


Monero is one of the cryptocurrencies recognized for its privacy-oriented features. When it initially launched in April 2014, Monero was called BitMonero with the symbol XMR which translates to Esperanto.


In 2014, Jed McCaleb – which also played a key role in the development of Ripple – created a cryptocurrency to provide fast, reliable, and affordable money transactions. The same cryptocurrency has considerably grown seven years later. It is now one of the most stellar cryptocurrencies to provide a real-time platform that links banks, payment systems, and people. Meet, Stellar!


In early 2019, a joint project between TRON and BitTorrent Foundation called BitTorrent Token came to fruition. BitTorrent Token launched to tokenize in-demand file-sharing protocol and enhance content delivery and bandwidth accessibility with blockchain technology.


Chainlink is considered the most established decentralized oracle network. As an ecosystem housing several decentralized oracle networks running simultaneously. As a decentralized oracle service built on Ethereum, Chainlink has the power to support the development of blockchain solutions for both traditional businesses and enterprises.


Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.


In a Blockchain Economy, a good chunk of value is at protocol level. Therefore, you will have a Blockchain Protocol (in this case Steem is the protocol) which has a set of underlying rules. The Steem protocol reaches consensus, and it follows a proof-of-stake (contrary to Bitcoin where there is a proof-of-value mechanism). On top of the Steem protocol, several applications can be freely built. Those applications will be decentralized, as they will be based on a decentralized network in the first place. In the Steem Blockchain context, Steemit is among the largest and most important (Steemit was the first application launched as a use case for the Steem Protocol).

A key takeaway and the Blockchain “killer app”

What I find most striking of the new Blockchain protocols that are getting created is that those allow the experimentation of new business models that challenge the old ones created during the web era.

Those business models though might be skewed toward protocols, rather than apps! One thing is clear so far. The blockchain killer app is “decentralized trust.” Where tech companies have proved pretty bad in handling our data (see the Cambridge Analytica scandal).

You won’t have to trust anymore a central authority, driven by business incentives with your data. You will trust a mathematically driven decentralized network. Of course, we don’t have to fall into the “utopian trap” where we think innovation is better than existing ones.

The Blockchain Economy might also allow new centers of power. Also, existing tech companies (Facebook is one) are also investigating a potential way to integrate it into their existing business models!

Read Blockchain Business Models Book


Read Next: Blockchain Business Models Framework Decentralized Finance, Blockchain Economics, Bitcoin.

Read Also: Proof-of-stakeProof-of-workBlockchain, ERC-20, DAO, NFT.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"

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