Aragon Total Addressable Market

User Molan_one asked about the TAM (Total Addressable Market) for Aragon in /r/aragonproject:

I thought it was a good question, because it’s very hard to answer. Aragon represents a zero to one, a technological and social leap that doesn’t incrementally innovate or builds upon existing rules of the game. It rather disrupts the game and creates new rules for it.

I will post a thesis on this matter soon, but I will jump straight into the TAM question.

TAM for the Aragon client

In a world where Aragon entities become de facto standard for operating organizations, the following markets are disrupted:

  • Law advise
  • Accountants
  • Other bureaucratic agents

The amount of value gathered by those entities is probably in the trillions of dollars, since the annual revenue for law firms in the US is about $275 billion.

Of course Aragon entities don’t intend to be as costly to maintain, and therefore don’t intend to capture all that value, but rather outcompete their traditional counterparties by being more flexible and better priced.

We would also have to factor in a new market: entities that couldn’t exist without Aragon, that can now exist. Those entities are crypto networks, sporadic partnerships, pseudonymous corporations… It’s hard to predict the market size for those, but we can foresee that crypto networks will be a trillion dollar market again.

Aragon entities are free to run and operate, and fully open source. They don’t require any token to be used, apart from the native token of the chain they run on. In the current case, it’s ETH. Therefore, there is a bull case for blockchain platforms that run DAOs, which today is basically Ethereum.

Now you may think: how can Aragon be disrupting a trillion dollar market yet not capturing value? That’s not fair! Well, read on.

TAM for the Aragon Network

When Jorge and I started Aragon, we realized that Aragon entities are just one side of the coin. These entities can exist by themselves, but would greatly benefit from services provided at a network-scale.

In the end, the world is now an interconnected mesh and entities don’t live isolated.

We thought about nation states and their services, which have made possible great progress for society. The fundamental services they provide are legal security and property rights.

That means that there is a legal framework that you can expect all network participants (or the nation’s citizens) to abide by. In turn, that creates certainty and makes possible to conduct market interactions.

Smart contracts also disrupt that, since for some interactions you can now just trust the code. However, we quickly realized that it’s impossible to encode all human subtleties in code. (And if it was possible, that’d probably mean that programming is so advanced that AI has already taken over)

That’s why the Aragon Court is the very first service that the Network will provide.

The Aragon Court will make it possible for pseudonymous entities to establish trust by attaching human-readable agreements to smart contract interactions, therefore covering all possible aspects of a market interaction. Both parts can provide collateral, in case one party doesn’t honor their part of the agreement. The Court then rules the winning party if a dispute arises. That provides limited liability, which provides certainty, which again is what makes market interactions possible.

So the Aragon Network is effectively a new legal system. In that regard, the current market for legal security and property rights is… huge.

As an example, the US is expected to collect $3.643 trillion in taxes during 2020.

But of course the same case as before applies with the Aragon Network now. The Aragon Network doesn’t intend to capture all that value, since it needs to differentiate with a new business model adapted to the new times. Since the market is a race to the bottom, new business models need to be less extractive to compete.

Then we have to factor in that the Aragon Network also services newer markets that didn’t exist before, such as open organizations where people can just buy tokens and participate.

Those organizations suffer from 51% attacks (read more), which makes them less viable long-term. Because that’s quite an issue for the success of Aragon entities, that is the very first niche that the Aragon Network will target.

I think it’s too early to set in stone how that business model will work. It seems like the very first initial implementation of the Court will just impose a fixed subscription fee per organization that wants to use the Court.

Then the total TAM for the first version of the Aragon Network would be amount of organizations subscribed * subscription fee.

In subsequent versions of the Aragon Network, it might be worth to try to find models where the subscription fee goes attached to the amount of funds being secured. This is because it may be proportionally more costly for the Aragon Network and the Court to provide legal security and property rights as the amount of funds goes up. In that model, entities with more funds would pay a proportional fee based on the amount that is being secured by the Court.

Hope that sheds some light into the TAM for Aragon, and I will post a thesis where all of this will be expanded soon. There is also a token primer blog post and more posts on ANT’s valuation model will be coming from @lkngtn.