a16z Crypto Startup School: Three Mental Models for Cryptographic Infrastructure

a16z Crypto Startup School: 3 Mental Models for Crypto Infrastructure

a16z crypto partner Ali Yahya proposed three mental models for cryptographic infrastructure: narrow waist, modular advantage, and network flywheel, providing a framework for thinking about the characteristics and potential of Web3 infrastructure. Understanding these models is crucial for those involved in the Web3 field, whether from a technical or business perspective. This Chinese version of the article is translated and published by TEDAO member Sissi.

Mental Model 1, Narrow Waist: “Narrow Waist” can promote the emergence of “multi-sided markets”. In the high-level architecture of blockchain, “Narrow Waist” naturally appears in the central consensus mechanism. The consensus mechanism connects validators and application developers, with validators providing computing resources and security while application developers build applications and deploy smart contracts to the blockchain. This creates a unified computing base in the blockchain, establishing bilateral network effects and positive feedback loops. Unlimited protocols can lead to the emergence of narrow waists and effectively decouple things, resulting in a flywheel effect. However, pursuing unlimitedness may lead to a certain degree of sacrifice in control, thus requiring a balance of different factors.

Mental Model 2, Modularization: The “unrestrictedness” of the protocol means providing as much freedom as possible for users to use the protocol or build functions on the protocol, while “modularization” means that the protocol or the architecture generated by the protocol can be divided into self-contained basic components. Sometimes, the modularization of the protocol may lead to higher unrestrictedness, but in fact, sometimes the degree of modularization must be reduced in order to increase unrestrictedness. Modularization can reduce costs and provide greater flexibility for users and developers. However, when building a modular system, edge cases must be considered, and specific interfaces and abstractions must be defined to partition different modules. This increases complexity and limits the flexibility to try different approaches, which may reduce fairness in some cases.

Mental Model 3, Network Flywheel: Tokens provide a solution to the cold start problem and can be used as incentive mechanisms to motivate network participants. In addition, it can enhance network effects by attracting funds and human resources, which leads to the concept of a network flywheel. As the protocol vision becomes stronger, the token becomes more valuable, and perhaps with the help of additional investment funds, it will create stronger incentives to encourage validators or other participants to provide more production capital for the network, improve network functions, and then encourage more third-party developers to build applications for end users. Tokens can play multiple roles, but one of them is to help start the multi-party participation market of the protocol, which is one of the most influential roles.

Reference: https://mp.weixin.qq.com/s/iK3LojJSqK3MA2FrhABrDg