(2021-10-22) Brander Software Scarcity

Gordon Brander: Software scarcity. Software is is not a scarce resource. It costs nothing to copy. It is an anti-rivalrous good.

Cryptocurrency is a market, markets are for scarcity, software is not scarce, therefore cryptocurrency serves no purpose.
Perhaps! Nevertheless, the universe is non-teliological. Evolved systems don’t need to serve any purpose.

But there’s something else…

There are natural scarcities in software.

Names are scarce

Ideally we want names to be secure, decentralized, and human-meaningful.

Secure, decentralized, meaningful, you have to pick two. This is Zooko’s Triangle.

Meaningful names are scarce, and non-fungible

Trust is scarce

Trust is also entangled with status

One way to see trust is as the result of a repeated game.

Attention is scarce

Labor is scarce

The joke is that open source software is free-as-in-puppy. These very real costs are why. See Nadia Eghbal’s Working in Public for a deeper exploration of how these costs influence open source development.

Hardware has costs

The network has costs

Cryptocurrency is for software scarcity

Centralization offers a way to deal with scarcity in software. An authority accrues power or is granted power within a system, and uses this position to allocate resources.

Now, there is a second way to deal with scarcity in software: markets.

I suspect the most durable use-cases for blockchains will correspond with true areas of natural scarcity in software. Perhaps, if a cryptocurrency found a way to embody the real costs of one of these scarcities, it would have durable long-term value, since these areas of scarcity have real value.