Hive: A Flywheel Approach

6 Min Read
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This is one of the most interesting aspects to what is taking shape in the blockchain community. It is a business idea that long was sought but had varying degrees of success. These days, a couple of the technology companies are really making strides with it.

To start, what is the flywheel approach?

In physics, a flywheel is a device that rotates to generate energy by its momentum. That energy is then spun out to a motor, providing an effective form of power. The key is that very little energy is required to put in, once the disk is spinning, to get more output.

In business, it is a similar concept. Once a company is started to enter the psyche of consumers, very little effort is required to get them to expand to something new. This allows for companies to keep entering new arenas and leveraging their existing customer base.

Essentially, this looks like a chaotic approach. A company is going in many directions at one time, seemingly without a plan. The idea is that when there are breakthroughs, they are worth more as the ecosystem grows. With more offerings, the total revenue of the company, will skyrocket. Profits should move at a faster pace at some point since the cost of customer acquisition is lower.


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Amazon and Tesla are two examples of companies employing this strategy. Amazon went from an virtual bookstore to full-blown online retailer. They started adding new products, which only required another page added to their site, and they could leverage the customer base. Over the last 2 decades, this put them at the head of the retail category.

Tesla is another company that appears to be going in a dozen directions at the same time. It appears that every few months, another business is proposed, the latest being a Tesla restaurant. While this looks misguided, in the end, if it all comes together, this will really send the company's profits into orbit. The more people who buy their cars, the more that are eligible to use the charging stations, buy software upgrades, subscribe to gaming platforms, and, yes, eat at the restaurant. They might also by home energy systems from the company.

Hive is operating on a similar model. By being decentralized, sans a company leading the way, people are free to build and develop what they want. This is taking things in many different directions at one time. Each project is making its own progress which is pulling the entire ecosystem forward. When combined with a variety of projects, the total impact could end up being great.

Each new Hive account is a potential user for many different applications. This is where the Network Effect that was focused upon in Reed's Law comes into play. As one utilizes a single application, the likelihood of that person employing something else on the network is great. Thus, it take very little energy for a second project to benefit from the same person.

We saw this with Leofinance. People were using that application and, when Cubfinance was introduced, many got involved with that. Ultimately, the reverse will be true. As more people find Cubfinance, a percentage of them will move around that ecosystem, working their way back to Leofinance and, perhaps, then onto other Hive applications.


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This is why Hive's account management system is so powerful. If we think about what Facebook, Twitter, and Google were able to do, it is beyond just their own platforms. How often have we come across a site where it says "sign up with Google"? Those companies established themselves as account management systems in addition to social media platforms.

Hive has a somewhat unique account system. Unlike many in the blockchain world, there are no 32 character, autogenerated wallet names. Each person can create a unique username just like on any of the other platforms previously mentioned. This allows for people to easily remember their account (wallet) for future use.

For the moment, it appears that Hive is going in a million different direction, thus making no progress. A new tribe is popping up here and there. We watch the development of different applications discussed like SpkNetwork and HSC, yet see little evidence of that coming to fruition. There are a number of games, each which has a few updates, but nothing major. All of this seems like it is not moving things anywhere.

That could be an accurate assessment, especially taken individually. However, in totality, there is a different story. As each aspect experiences a bit more success, a marginal amount of growth, then we see things advancing, even if microscopic. That will not always be the case as development continues.

As a follower of Tesla, there is a similar situation there. Many look at that as a car company since that is where the overwhelming majority of the revenues come from. They do not look at the other stuff since it is, from an accounting perspective, basically a rounding error.

Nevertheless, if one delves deep, there is some progress being made. It might not be significant in terms of the overall numbers but that could change down the road. As things start to develop, that aspect of their business could face a massive explosion a year or two from now.

It is the same thing on Hive. While we are dealing with inches instead of miles, all of them do add up. The flywheel requires the most energy when it is stationary. To get it started eats up the majority effort. However, once it is going, each additional unit of energy output needs very little input.

For now, it is a lot of trudging on Hive. This might be the case for the rest of the year. In fact, it will likely be how things are. There will come a point, however, when we do see things accelerating. The development continues, bringing more exposure to Hive from different areas. While this is not evident to most, there is some penetration happening in certain arenas that could make Hive a viable player there.

The flywheel is a very accurate analogy. As we see things start to rotate at a faster pace, we will enjoy more success with a great deal less input. We simply are not to that point as of yet.

In other words, we are the train still climbing up the mountain. It is taking a lot of effort to advance even a few feet. There is a peak to this summit however and when we reach it, that is when things will accelerate.


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