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Introducing the Convergence Ecosystem

March 2018

By Lawrence Lundy-Bryan

Today we are introducing the Outlier Ventures vision of the future and our refined thesis: The Convergence Ecosystem.

The Ecosystem sees data captured by the Internet of Things, managed by blockchains, automated by artificial intelligence, and all incentivised using crypto-tokens. The Convergence Ecosystem is open-source, distributed, decentralised, automated and tokenised and we believe it is nothing less than an economic paradigm shift.

 

Download the full paper

 

How We Got Here: The Outlier Journey

From Blockchain-enabled Convergence

In late 2016, we published a paper titled: ‘Blockchain-enabled Convergence’ outlining our investment strategy. The paper was the result of over three years’ experience researching, investing and building blockchain-based businesses. Our insight was that blockchains are not just a secure ledger for cryptocurrencies and other digital assets, but that they represented something more transformative: a decentralised data infrastructure. Infrastructure that could solve technical and market problems across a variety of emerging technologies like artificial intelligence, autonomous robotics, the Internet of Things, 3D printing and augmented and virtual reality.

 

In 2017, crypto-tokens proved they are the first digitally-native mass coordination mechanism

2017 saw a vast change in the cryptocurrency and blockchain markets to arguably the peak of inflated expectations as per the Gartner Hype Cycle. The ERC20 smart contract industrialised the token sale crowdfunding model, raising over 4 billion dollars in funding. Despite misplaced energy and too much focus on token prices, it is now clear, in a way that wasn’t in late 2016, that crypto-tokens are a critical missing component in decentralised networks – the first digitally-native mass coordination mechanism for humans, bots and machines. Recognising the underlying importance of crypto-tokens to create an ecosystem of converging technologies, we started investing.  

   

From IOTA, Botanic & SEED, Evernym & Sovrin, to Fetch and Ocean

Over the last year we have partnered with and invested in IOTA, a foundation building Internet of Things infrastructure with a new type of decentralised data structure. Botanic and the SEED Vault foundation it founded, creating a platform for developers to publish trusted software bots. Evernym, a company using the Sovrin Network and Protocol to establish self-sovereign identity. Fetch, a startup building an emergent intelligence protocol combining distributed ledgers with machine learning.  And most recently, Ocean Protocol, who are developing a decentralised data exchange protocol to unlock data for AI. Each of these investments have been strategically chosen because they are a complimentary piece of decentralised infrastructure required to create the Convergence Ecosystem.

 

Why We Need The Convergence Ecosystem

 

Centralised Web 2.0 has failed…

Centralised Web 2.0 digital infrastructure has failed. Too many hacks and data leaks. No individual privacy. Monopoly control over global information and communities networks. The Internet of Things is creating an unmanageable data environment, and artificial intelligence is giving those who control the most data more power than any company in history.  As Tim-Berners Lee, the creator of the Web, recently wrote;

 

“What’s more, the fact that power is concentrated among so few companies has made it possible to weaponise the web at scale. In recent years, we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data.

 

Something must change.

 

We are 10 years into the decentralisation revolution

It has been ten years since the publication of Satoshi’s seminal paper and the introduction of the first viable decentralised solution to the problem of double-spend in digital networks. Bitcoin sparked interest and innovation in other cryptographic and decentralised technologies including blockchains and crypto-tokens. We are in a rapid period of experimentation around decentralised technologies including consensus mechanisms, identity, data structures, crypto-economic designs and smart contracts. Taken together, we see the foundations of a new data infrastructure.      

 

Our Vision: The Convergence Ecosystem

Introducing the Convergence Ecosystem

We believe that future decentralised data infrastructure will come from the convergence of the Internet of Things (data production), blockchains (data distribution), and artificial intelligence (data consumption). The integration of these technologies will see markets become increasingly open-source, distributed, decentralised, automated, and tokenised.

 

The Convergence Ecosystem consists of four parts: governance, production, distribution and consumption. Each of these are explored in the paper, and we will be publishing further analysis into part throughout the year.   

 

Governance – How are protocols and communities governed and incentivised?

 

Production – How is data produced and enter the ecosystem?

 

Distribution – How is data authenticated, validated, secured and stored? How is it transported across databases and blockchains, and how is it exchanged?

 

Consumption – How is data turned into insight?

 

Winners will differentiate on values and trust

The open-source nature of the technology; ease of forking; almost zero costs of digital distribution; and interoperability protocols will mean projects will struggle to differentiate using technology in the long-term. Successful projects will differentiate through political values such as libertarianism, self-sovereignty and egalitarianism as well as through trust. This makes the Convergence Ecosystem structurally different from other markets in which value capture happens at friction points. With very few friction points and lock-in, we are unlikely to see the same market consolidation dynamic that has dominated previous digital markets. When technology and data are open and free, lock-in will come from brand and values. There will be as many protocols as there are value-systems and personal priorities.

 

There will not be one chain to rule them all. In a world of scarcity, competition is the optimal strategy. In a world of abundance, we must change our mental models. The Convergence Ecosystem drives collaboration rather than competition.

 

Outlier Ventures: VC for The Decentralised Future

 

The Convergence Ecosystem is our vision of the future. We expect the Ecosystem to support hundreds of communities that will over time outcompete their Web 2.0 competitors for developers and users using tokenised business models. This shift will not occur overnight. People will continue to focus on the price of crypto-assets and worry about the regulatory implications of public token sales.

 

But behind the scenes, a decentralised infrastructure is being built. Network by network. Protocol by protocol.

 

We want to invest and partner with tokenised communities to build decentralised economies. Join us to help build the decentralised future!

 

Download the full paper here.

Posted by Matt Law