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88 lines
4.1 KiB
Markdown
88 lines
4.1 KiB
Markdown
---
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description: Thrive in the open data economy by closing the loop towards speed and value
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---
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# The Data Value-Creation Loop
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<figure><img src="../.gitbook/assets/data-science/data-value-creation-loop.png" alt=""></figure>
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### Motivation
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The core infrastructure is in place for an open data economy. Dozens of teams are building on it. But it’s not 100% obvious for teams how to make $.
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We ask:
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> How do people sustain and thrive in the emerging open data economy?
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**Our answer is simple: ensure that they can make money!**
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However, this isn’t enough. We need to dive deeper.
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### The Data Value-Creation Loop
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The next question is:
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> How do people make money in the open data economy?
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**Our answer is: create value from data, make money from that value, and loop back and reinvest this value creation into further growth.**
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**We call this the Data Value-Creation Loop.** The figure above illustrates.
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Let’s go through the steps of the loop.
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- At the top, the user gets data by buying it or spending $ to create it.
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- Then, they build an AI model from the data.
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- Then they make predictions. E.g. “ETH will rise in next 5 minutes”
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- Then, they choose actions. E.g. “buy ETH”.
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- In executing these actions, they data scientist (or org) will make $ on average.
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- The $ earned is put back into buying more data, and other activities. And the loop repeats.
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In this loop, dapp builders can help their users make money; data scientists can earn directly; and crypto enthusiasts can catalyze the first two if incentivized properly (e.g. to curate valuable data).
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### The Data Value Supply Chain
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**If we unroll the loop, we get a data value supply chain.** In most supply chains, the most value creation is at the last step, right before the action is taken. Would you rather a farmer in Costa Rica selling a sack of coffee beans for $5, or Starbucks selling 5 beans’ worth of coffee for $5?
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Therefore, **for data value supply chains, the most value creation in the prediction step.**
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To the question “How do people make money in the open data economy?”, the “create value from data!” almost seem like a truism. Don’t fool yourself. It’s highly useful in practice: **focus only on activities that fully go through the data value-creation loop.**
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However, this is still too open-ended. We need to dive deeper.
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### Which Vertical? How To Compare Opportunities
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There are perhaps dozens of verticals or hundreds of possible opportunities of creating and closing data value-creation loops. How to select which? We’ve found that two measuring sticks help the most.
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**Key criteria:**
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1. **How quickly one can go through the data value-creation loop?**
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2. **What’s the $ size of the opportunity**
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For (2), it’s not just “what’s the size of the market”, it’s also “can the product make an impact in the market and capture enough value to be meaningful”.
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We analyzed dozens of possible verticals with according to these criteria. For any given data application, the loop should be fast with serious $ opportunity.
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Here are some examples.
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- **Small $, slow**. Traditional music is small $ and slow, because incumbents like Universal dominate by controlling the the back catalogue.
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- **Large $, slow**. Medicine is large $ but slow, due to the approval process.
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Small $, fast. Decentralized music is fast but small $ (for now! Fingers crossed).
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**We want: large $, fast.** Here are the standouts.
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- **Decentralized Finance (DeFi)** is a great fit. One can loop at the speed of blocks (or faster), and trade volumes have serious $.
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- **LLMs and modern AI** is close: one can loop quickly, and with the right application make $. The challenge is: what’s the right application?
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### Project Criteria
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We encourage you - as a builder - to choose projects that close the data value-creation loops. Especially loops with maximum $ and speed.
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We follow our advice for internal projects too. Predictoor, Data Farming, and DeFi-oriented data challenges are standout examples.
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### Summary
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To sustain and thrive in the open data economy: make money!
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Do this by closing the data value-creation loop, in a vertical / opportunity where you can loop quickly and the $ opportunity is large.
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