Market-Protocol Fit
* Article: Market-Protocol Fit. By Toby Shorin, Sam Hart, Laura Lotti, The Other Internet, April 17 2020
URL = https://otherinter.net/research/market-protocol-fit/ pdf
Contextual Quote
"The projects with the greatest value and utility today—i.e. Bitcoin, Ethereum, and a few other products of the ICO era—did not follow the traditional product development trajectory at all. These success stories started with the open source ethos and underwent a different journey: they began with a broad distribution of tokens, followed by permissionless product innovation which activated them in useful ways.
In Headless Brands, we called this market-product fit, a dynamic in which token holders generate many competing narratives and use cases, which they explore simultaneously. From our last essay:
How do projects, headless or not, find product-market fit in the Web 3 era? Well, in some senses they don't. In a highly decentralized system, these operations invert such that the community finds product solutions themselves: "market-product fit." Cryptoeconomic protocols are market frameworks looking for potential product applications. The work of exploring parallel narratives, discovering emergent use cases, and testing solutions is distributed among members of the wider ecosystem such that the rising tide lifts all boats.
To update our terminology, market-protocol fit is the most accurate language for this phenomenon. By distinguishing this market-first pattern from the startup playbook, we can clarify our thinking about the token protocol life cycle."
- Toby Shorin, Laura Lotti, Sam Hart [1]
Description
Toby Shorin, Laura Lotti, Sam Hart:
"In the realm of open source permissionless innovation, the traditional product development cycle shows its limitations, because cryptonetworks are not companies. While startups with focused teams can iterate toward product-market fit, decentralized protocols must rely on headless branding and cooperative incentive structures to evolve. We call this market-protocol fit and describe the phases of this challenging process. While product-market fit is concerned with building an agile team to find and fill market demand, market-protocol fit begins with a broad distribution of tokens, followed by permissionless narrative formation and product innovation which activates them in useful ways. We conclude by outlining strategies that projects are using to advance the expansion of their decentralized ecosystems.
...
Marc Andreessen's original formulation of product-market fit describes how startups move from minimum viable product to serving customers. Cryptonetworks instead start with nothing, apart from token-based incentives and narratives, mobilizing developers and contributors to spontaneously coordinate in ways that end-users will ultimately find beneficial.
Only a handful of projects have successfully bootstrapped themselves in this way, many others are still early in this challenging process. In this essay we describe the key phases of market-protocol fit, characterizing the changes that tokens and their underlying blockchains introduce to the innovation life-cycle."
https://otherinter.net/research/market-protocol-fit/
Characteristics
Toby Shorin, Laura Lotti, Sam Hart:
"Market-protocol fit can be divided into 3 conceptually distinct phases:
Promise distribution - A compelling idea is sold within a minimally codified open market framework.
Utility discovery - Early community members prototype new uses cases, some of which provide real utility, driving growth. Ossification - Network effects strengthen value and push the protocol to converge around specific functionality and narrative. The entire process can be visualized as a football-shaped curve which begins with an initial token distribution event and ends with protocol ossification. The curve width corresponds to narrative variation and experimentation with unique use cases."