Money Legos
Issue #18
Each post will explain one reason why blockchain is awesome in 1 minute or less.
Last issue I discussed the power of permissionless building.
Building on a platform with no gatekeeper. No company in control to deny you access to their users. No company to change the rules on you and jeopardize your business.
But there's another massive benefit that comes with an open system: composability.
The ability to stitch projects together to make mega-projects.
Previously I talked about lending protocols. You put some asset up as collateral in the smart contract, and it lets you borrow another asset against it.
It's like a line of credit, except it all happens with autonomous smart contracts on a blockchain.
The real magic happens when you combine protocols together, building on top of each other like lego bricks.
Take Instadapp. 2 brothers from India built an application that used 2 other protocols.
They created a product that automatically moved money between two lending protocols, Compound and Maker, to the one that had the lower interest rate.
They built a bridge between them so people could pay back their loan on one as they simultaneously took out a loan on the other.
Instadapp didn't need to ask for permission to integrate. They simply saw they could use the protocols to create an additional service.
This means they can freely leverage Maker and Compound's user base, infrastructure, and functionality without costing them 1 cent.
They didn't need to pay them, they didn't even need to ask them.
Lowering the barrier to create new products means it's incredibly cheap for new projects to get started. Which means the pace of innovation is incredibly fast.
Each new project creates new functionality that every other project can then leverage, compounding innovation further.
The fact all these projects can permissionlessly interoperate is what makes blockchain applications so much more dynamic than traditional ones.