Libraries vs. Networks

Library: a stateless code pattern/schema. The success of a library can be measured by the number of times it is copy/pasted, replicated, re-deployed, and custom tuned. This is the tested and true thing that open source does well. Examples: Linux, ERC721. But as the history of open source shows, monetizing a library is often done indirectly. Usually it comes from building commercial services on top. 

Network: networks are stateful, singleton, canonical – where the presence of those properties create network effects. Stateful networks have traditionally been closed. Examples: Facebook, Twitter. That’s because a company has been required to maintain the state, and there’s a cost to doing that. Crypto changes that because it’s now possible to incentivize independent parties to maintain state, because we can incentivize them with tokens!  That’s what blockchains do, and they are the obvious example of open, stateful networks. Their state is singleton (due to global consensus) and canonical (due to social consensus.) On top of blockchains, we can build stateful networks at the application layer too. Networks can be formed around the state in a singleton smart contract, or an application-specific rollup. An example is Uniswap, whose state is liquidity in a marketplace (tokens that are deposited to Uniswap’s smart contracts.) That state has network effects because the more state (liquidity) the better the pricing for exchange.

What is the point of this framework?

Building (and monetizing) open source libraries is a tested and true strategy, but crypto presents a new opportunity—to build open, stateful networks. In my opinion, that’s the exciting opportunity and where the most value creation will be. If you’re setting out to build something in crypto, ask yourself: is it a library or an open, stateful network? We need both, but the max interestingness and value creation is probably in the new thing: open, stateful networks.


Disclaimer: This post is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Variant. While taken from sources believed to be reliable, Variant has not independently verified such information. Variant makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This post reflects the current opinions of the authors and is not made on behalf of Variant or its Clients and does not necessarily reflect the opinions of Variant, its General Partners, its affiliates, advisors or individuals associated with Variant. The opinions reflected herein are subject to change without being updated.