We’re in an age of digital abundance. The cost of transferring and storing data is tracking towards zero. If the value of a digital product is the sum of its bits, then it’s practically worthless.
So all software and content businesses are doomed to fail, right?
One solution is to put a paywall around the content. This can work, but there’s nothing stopping someone from copying and sharing the content for free once they’re inside the paywall.
There are solutions which create true digital scarcity.
Google and Auctions
Google is the epitomy of digital abundance. They store exabytes of data. However, they’re also one of the most successful companies on the internet.
Google’s core business is advertising, and it works via an auction. People bid on keywords, and the highest bidder has their ad appear first in search results. An auction creates scarcity. Only one person can be at the top. They managed to turn something abundant (text on a webpage) into something highly scarce.
In-app purchases are an amazing invention. They underpin most of the successful apps on mobile. In the ‘old days’ software was purchased as a discrete item. You downloaded an executable and away you went. This put software in the same category as songs or movies. Once someone acquired it, they could copy and distribute it freely.
In-app purchases tie a purchase to a particular app instance. Your app instance. The core app can still be copied and distributed freely, but the in-app purchases won’t.
Some companies even have in-app purchases which are limited in number. In a space combat game, there might only be 10 of a powerful ship. Once they’ve all been bought, that’s it. That is true scarcity.
Check out this article about Eve Online, where one super rare ship was destroyed.
Bitcoin and the Blockchain
What does bitcoin have to do with this?
It’s just a currency, right? Well at its heart there’s the blockchain.
The blockchain is a shared record of ownership. In the case of bitcoin, the blockchain has a record of all the transfers made. The blockchain is distributed widely, so it’s robust against manipulation.
The blockchain isn’t exclusive to bitcoin. There are all sorts of applications where it could be used.
It allows digital goods to have an owner, and be traded. The implications of the blockchain are still waiting to be played out, but it could be the largest driver of digital scarcity we’ve seen.