Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.This process applies more broadly than just to platforms, except the part about dying. Below the fold I discuss a recent development that provides an opportunity for you to take action to push back against it.
Tuesday, July 25, 2023
Technology markets, and others that share their strong economies of scale, naturally tend to evolve into oligopolies, if not outright monopolies. Brian Arthur described the mechanism in 1994's Increasing Returns and Path Dependence in the Economy. This tendency has been supercharged ever since Richard Posner and George Stigler of the Chicago School got the Reagan administration to hamstring anti-trust enforcement. We see the result in technology and many other markets, dominated by a few giant companies devoted, in Cory Doctorow's memorable coinage, to enshittification:
Tuesday, July 18, 2023
We think that willingness to absorb losses, even though USDT is fully collateralized and has an overnight liquidity buffer that exceeds most prime funds, suggests the token might be prone pre-emptive runs. Holders with immediate liquidity demands have an incentive (or first-mover advantage) to rush to sell in the secondary market before the supply of tokens from other liquidity-seekers picks up. The fear that USDT might not be able to maintain the peg may drive runs regardless of its actual capacity to support redemptions based on the liquidity of its collateral.Now Kenechukwu Anadu et al of the NY Federal Reserve have a deep dive into the events of May 2022 entitled Runs on Stablecoins. Below the fold I have some comments.