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Spotify vs Apple – Lessons for Decentralization

You may have heard of the ongoing tussle between the music streaming service provider Spotify and Apple. Just a few days ago, Spotify filed a complaint with the EU against Apple, accusing it of anti-competitive behaviour in order to stifle the growth of Spotify. To get a sense of the gravity of the situation and to understand if Spotify is rightful in its decision to take Apple to court, we need to understand how Spotify and Apple transact bilaterally to offer Spotify’s music streaming service. All iOS apps are accessed by a user through the App Store, which has quickly become one of the most valuable platforms for developers as it provides them access to Apple’s loyal, deeply-entrenched user base. The iOS App Store is a platform for third-party developers to build iOS applications which can be accessed by Apple users. It is Apple’s responsibility to ensure the security of its users. Apple has therefore defined some rules and restrictions in place around how a third-party app can or cannot work on their platform. Given Apple’s large and loyal user base, third-party developers are extremely dependent on Apple to sell their applications and are often left with no alternative but to abide by the changing rules of the platform however detrimental it might be to them. There is a viewpoint, including among some regulators, that Apple wields a disproportionate amount of power through its App Store and sometimes uses it to strong arm hapless third-party app developers.

Spotify laments that Apple is tilting the playing field to Spotify’s disadvantage by imposing a 30% tax on all of its in-app purchases and thereby squeezing Spotify’s margins in what is an extremely competitive music streaming market. Apple’s proprietary music streaming service “Apple Music” is not subject to the same 30% tax that third-party apps pay, putting Spotify in a very unfavorable position versus its biggest competitor. Spotify also complains that Apple deliberately delayed its app updates and blocked out Spotify from Apple Watch and Apple Homepod. Spotify has even taken the battle to the internet, and has created a snazzy website that enumerates Apple’s abuses specifically targeted at Spotify. Apple has retaliated by justifying its 30% revenue share as rightful return for the access it provides to millions of IOS users.

Clearly there are echoes of the PC wars (and the browser wars) from an earlier era, again something that Apple was involved in.

What does this have to do with the Blockchain and decentralization? Looking beyond the cringeworthy mud-slinging between Apple and Spotify, one conclusion to take home is that centralized platforms are always self-serving and profit-seeking and force app developers to play the game by their rules, which at times might be straight up unfair and frustrating, and app developers who cannot match or fight Apple’s financial muscle should just put up with it as they lack an alternative.

Ethereum has quickly become popular with developers as it offers a level-playing field, censorship resistance, decentralized governance and pre-determined rules that cannot be changed unexpectedly to benefit the ‘owner’ of the platform.

On the flipside though, it seems like decentralized alternatives have a tough time in the initial stages, especially with the lack of standardization on the UX/UI front. Linux (Unix) was fundamentally perceived to be more robust, leading to enterprise adoption of these platforms. In the apple v android comparison, where android is technically the relatively more open-source platform, Apple has a slight edge in UX/UI arguably and is perceived to be the more secure system. In many cases, folks just want a good user experience, and are not really hung up on the underlying mechanism of the system, whether it is decentralized or not. Net net, our takeaway is that while decentralization is in general a good thing, it is a highly nuanced, subjective call, on a case-by-case basis, on how decentralization can help a specific industry. Because the centralized ‘rent-seeker’ entity charges a rent for providing the service, the entity is able to invest in a better product, and invest in attracting users to the platforms, which then leads to a virtuous cycle, making the platform better. Wikipedia was probably laughed at in its early days, but eventually went on to make other encyclopedias completely redundant. If the core value proposition is significantly better, the UX/UI disadvantages do not matter, that much seems to be clear, judging from the cases of both Wikipedia and Linux. For crypto and Dapp adoption, the corollary to this might be something to keep in mind. If the value proposition is not overwhelming better than the current centralized alternative, the UX/UI has to be on-par, at the very least.

Meanwhile in Crypto Wonderland….

“Inflated Crypto Trading Volumes” At least 87 percent of cryptocurrency exchanges may have falsified their reported trade volumes, a new study claims. According to a review of the top 100 exchanges by analytics company The Tie, most of the trading volume on the world’s largest crypto trading platforms is suspect. Manipulation of trading volume data by exchanges has remained an area of concern within the cryptocurrency market. Several factors can artificially grow volume, making it look like there’s demand for a particular digital asset when interest is actually minimal or non-existent. Investors are often lured to exchanges with inflated volumes as that tends to create an element of trust and an impression of liquidity.

“New Crypto Margin Trading Regulations in Japan” Japanese financial regulators have reportedly introduced new regulations for cryptocurrency margin trading. The Cabinet of Japan, the executive branch of the country’s government, has reportedly approved draft amendments to Japan’s financial instruments and payment services laws, limiting leverage in cryptocurrency margin trading at two to four times the initial deposit. The new rules — which are reportedly et to come into force in April 2020 — will require cryptocurrency exchange operators to register within 18 months of that date, which will purportedly enable the Financial Services Agency (FSA) to introduce relevant measures in regard to unregistered cryptocurrency “quasi-operators.”

“Huobi is Following Suit” Singapore’s  Huobi has unveiled a premium coin offering service, which will allow regular traders to invest in promising coins before they are listed on the main exchange. Known as ‘Huobi Prime,’ the new feature will provide selected users with the opportunity to buy select coins at a discount before they are released onto the open market. According to Huobi, featured coins will be chosen based on the quality of the product and team, the financial backing, as well as whether it was listed on any other major exchanges.

“U.K. Policymakers Shown Real-life Blockchain Use Cases”The U.K. Parliament has been presented demonstrations of real-world blockchain applications designed to educate policymakers. Organized by the All-Party Parliamentary Group on Blockchain (APPG Blockchain), the Monday event featured live presentations from four firms working in the blockchain industry: IOTA, Oracle, Everledger and Lloyd’s of London. Among the audience were members of parliament, government officials and industry leaders, according to a statement from organizers. The live demonstrations highlighted the potential of blockchain in real-life applications in supply chains for olive oil and diamonds (Oracle and Everledger, respectively), international trade (IOTA) and insurance claims and transactions settlement (Lloyd’s).

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