Nostr: Engineered For Succes

nostr is designed to win

Nostr is frequently perceived as merely a social media app. However, the reality is it goes beyond that. It’s a decentralised messaging protocol, capable of hosting social media apps and much more. Once you delve into the depths of Nostr, you’ll realise its inevitable* success. Its simple yet innovative design aligns certain forces, acting as an invisible hand to assimilate a large part of the internet. In the process, rent-seeking and controlling centralised third parties will be eliminated.

Early Bitcoin adopters went through a similar process: Once the implications of Bitcoin became clear, it was evident that this open protocol, bearing similarities with Nostr, would revolutionise and dramatically change the world. This vision is unfolding as we speak. In this article, we will explain why Nostr protocol is engineered for success.

*While Bitcoin was vulnerable in its early years, it flew under the radar, preventing it from being destroyed before it became strong enough to withstand attacks. This article assumes that Nostr will follow a similar path. Currently, it may not be resilient enough to withstand a full-blown attack by powerful entities, but our highly likely base case is that it won’t be attacked yet, as it isn’t relevant enough at the moment.

In short: Why Is Bitcoin Designed To Win?

bitcoin is designed to win

A full lengthy article can be written to explain this, but we just want to make the point that understanding an open protocol and its properties can bring the conclusion that it will win. It comes from a simple recognition of a few facts about Bitcoin, and extending it to a logical conclusion:

The facts:

  1. Better / harder money will always win in a free market
  2. Governments protect their monopoly on inferior money, all attempted competitors are shut down through their monopoly on violence before they can compete
  3. Bitcoin can’t be hacked, stopped or shut down through it’s decentralised nature and people can’t be stopped using it because it is permissionless and accessible by everyone with an internet connection

The Logical Conclusion:

Bitcoin will win!

*Yes it’s that simple: When humanity is using inferior money forced by the government and a better money comes along that can’t be stopped, it will inevitably win. It is just incentives at play in an environment that is changed by the new rules of an unstoppable open protocol.

Why Is Nostr Designed To Win?

nostr will win

When you dive deeper into Nostr and you learn about the facts, you will come to the same logical conclusion. Later in this article we will explain the facts, but for now we just assume they are true.  Let’s lay it out!

The facts:

  1. The Network effect of Nostr takes place on protocol level: This means you need only one killer app to suck all other apps on the internet onto Nostr
  2. Nostr will be the best choice for new digital industries, and thus will almost certainly create a killer app in the coming technology wave lead by AI
  3. Nostr can’t be stopped by competing entities because it’s decentralised (?) nature

The Logical Conclusion:

Nostr will win!

*Again, it’s that simple: When applications of new and explosively expanding digital industries like AI launch on Nostr because it is the best option to start from scratch, the explosive growth of these industries will boost the network effect on protocol level and suck legacy applications into the Nostr protocol. Competition will not be able to stop it, because the permissionless and decentralised nature of the protocol. Again, It is just incentives at play in an environment that is changed by the new rules of an unstoppable open protocol.

Fact 1: The Network Effect Of Nostr Occurs At The Protocol Level

nostr network effect is on protocol level

Social media platforms like Facebook and Twitter possess a significant network effect. These platforms are difficult to compete with because people don’t want to leave them: Everyone else is still using them. The network effect is potent: despite many people expressing dislike for Facebook, they continue to use it purely due to this network effect.

The operation of Nostr, including identities (?) and message relay, happens at the protocol level. This positioning means the network effect also occurs at the protocol level, leading to intriguing consequences. All relays (?) and clients (?) on the protocol are interoperable. Therefore, a Nostr identity, including reputation, can be utilised across all clients. This interoperability implies that when Client A gains a new user, Clients B and C also benefit—even if Client A is a social media app, Client B is a ride-sharing app, and Client C is a marketplace. This dynamic signifies that any client on Nostr can benefit from the growth of any other client, which is a significant advantage!

The Magnetic Pull of a Single Killer App Could Make Nostr Highly Enticing

The unique model of Nostr is that all clients reap the benefits of the growth of other clients. This means that it only takes one phenomenally successful app to significantly enhance Nostr’s appeal. Once a client with a vast user base emerges, all other apps have the potential to access these users ‘for free’ by simply launching on Nostr or transitioning to the Nostr protocol. As more apps and subsequently, more users get drawn into the protocol, its appeal magnifies. This positive feedback loop acts much like a massive black hole, irresistibly pulling in other applications.

Nostr Clients Have the Edge

Apps such as Facebook outpace their competitors through the power of their network effect, reducing the incentive to enhance user-friendliness. In contrast, all Nostr clients gain from the same network effect, thus they must compete in terms of usability and innovative algorithms. This competition fosters a drive to develop user-friendly apps and customer-orientated algorithms. Within the Nostr environment, there’s an ongoing race to optimise user experience, unlike Facebook, which relies heavily on its existing network effect.

Additionally, the rise of AI has significantly complicated the process of identity verification. Deepfakes could potentially counterfeit ID checks, and bots may outperform humans in captchas. However, Nostr’s ID verification, based on public (?) and private (?) key cryptography combined with proof of work through NIP-05 verification (?), paid relays and zaps (?), offers a higher level of reliability.

Fact 2: Nostr is the Optimal Selection for Emergent Digital Industries

nosrt is perfect for ai

The rapid growth of AI and the concurrent evolution of markets for AI-related data and services necessitates a reliable platform for the exchange of digital goods and services. With the rising popularity of digital assets like stablecoins and securities, coupled with the increasing prevalence of digital forms of products such as books and audio, Nostr emerges as the ideal marketplace for these trades. It’s potential extends beyond being merely a marketplace; It can morph into a global order book.

Nostr has effectively implemented cheap, instantaneous and global Bitcoin payments through the Lightning Network, referred to as zaps. These zaps act as a conduit for the instant and trustless exchange of Bitcoin for any digital good. This paves the way for peer-to-peer trading of all digital goods on a global scale, with no need for trust between traders. The concept of streaming and splitting brings to the table a set of additional functionalities previously considered unachievable on the legacy web. Furthermore, the characteristic of Bitcoin as a bearer asset, facilitating micropayments and mitigating chargeback fraud, renders it a superior fit for AI.

Nostr As A Global Orderbook

Anyone, anywhere in the world, is capable of broadcasting a message to the Nostr network advertising the sale of any product or service. These messages are selected and relayed by relays optimised to serve marketplaces to the connected clients. Specialised marketplace clients rank these messages for the best price after selecting them based on criteria like reputation. Potential buyers can then respond to the most attractively priced message with a zap and receive the good or service in a trustless manner. This system in action creates basically a massive, decentralised global order book for any product or service.

Anonymity is optional for both buyers and sellers. While most digital goods and services can be swapped in a trustless manner, the delivery of physical goods requires trust. Verification of quality for goods or services also requires trust in your counter party. Systems relying on reputation and Proof of Work, both natively available in Nostr, can create this trust without the need for government ID verification. The necessity of such verification is not only invasive and risky, but it also becomes extremely susceptible to fraud in the age of AI.

Some Examples:

Digital Securities

The Liquid Network, a second layer solution for Bitcoin, has paved the way for digital securities. These securities operate around the clock and can be directly swapped for Bitcoin Lightning payments. The instantaneous verification through a node eliminates the need for trust. Security owners can broadcast a message indicating the asset’s availability for sale and establish a price. Specialised clients can rank these offers based on price, forming a global order book.

This functionality extends to any digital asset, from stablecoins and securities to BTC on different layers. Even shitcoins can be included if you want to play stupid games. The establishment of a global digital asset order book on Nostr has the potential to create a massive global, permissionless, decentralised exchange (DEX). This exchange promises to attract substantial liquidity that will eventually dwarf the liquidity of any legacy exchange. Different clients can compete using various algorithms, all while leveraging the same liquidity pool.

Data Vending Machines (DVM’s)

In the realm of AI, certain tools and data are highly sought after. A data vending machine is a program that delivers these data or services in exchange for sats. By setting up a Nostr client to display all the data vending machines for a service – for instance, ‘text to speech’ – and allowing users to rank them based on price or reputation (which equates to quality), you create a global order book for ‘text to speech’ services. This method can, of course, be applied to any other good or service. HERE is an example of DVM’s that already exist on Nostr.

Fact 3: Competitors Can’t Destroy Nostr

nostr cannot be destroyed

Nostr’s decentralisation affords it remarkable resilience. Competitors external to Nostr may become anxious and attempt to crush the competition by means of coercion or regulation. However, they will be thwarted once Nostr has reached a significant size. There is no mechanism to prevent someone from creating a Nostr ID (?), and if the private key is managed properly, it becomes impervious to hacking. Similarly, relays cannot be terminated indefinitely. If one relay is shut down or banned, others will spring up elsewhere. The same principle applies to clients.

The Logical Conclusion:

Nostr is set to expand, with more social media apps emerging and more users creating their Nostr IDs. However, it’s probable that the majority of these individuals will be early adopters, drawn by the principles and decentralised nature of the network. This group, though passionate, might not be large enough to trigger the network effect needed for exponential expansion.

However, products and services created by new technologies such as AI, digital securities and other digital goods are likely to find a home on Nostr. Its suitability lies in its less frictional environment compared to the often heavily-regulated, fiat-payment-based legacy systems. With reduced friction, prices will plummet, making Nostr the optimal marketplace for everyday consumers to purchase digital goods and services, given the ideal price-quality ratio.

As the digital world continues to expand rapidly, this will create a formidable network effect, making Nostr appealing for a broader range of goods and services. At that point, all commerce would be incentivised to migrate to Nostr, in order to freely tap into the entire pool of potential customers.

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