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History Is Rhyming: Fitness Functions & Comparing Blockchain Tokens To The Web
The Future of Cyrptocurrency
At the end of 2013, I wrote a blog titled: In The Future, Everyone Will Have Their Own Cryptocurrency. It was based on the premise that because we can easily create cryptocurrencies, we are going to see tokens minted for almost all networks of value, including every person. It started a multi-year rabbit hole towards designing the technical infrastructure for tokens (e.g. I worked on dogeparty, scrypt altcoins & I was a key contributor to the ERC20 standard) & the economic design of them.
The reality is:
Blockchain tokens have reduced the cost to tokenize coordination by orders of magnitude, and thus we are likely to see the effective tokenization (and by extension, the introduction of markets) into almost everything.
The reason why is quite simple: blockchain tokenization decreases the cost to coordinate by orders of magnitude. Coordination systems are utilized when the cost to run them are less than the benefits they provide. New coordination systems will come to exist because we’ve substantially lowered the costs to implement them:
Value of a coordination system > cost to coordinate.
We’ve seen this before: the web decreased cost to share information by orders of magnitude.
Value of information shared > cost to share that information.
Before the web, when you received a letter with some photos of loved ones far away, one might’ve wished to extend gratitude back immediately, but it wasn’t within our frame of reference that it would ever be possible to forward something as low bandwidth as a “like” back: which is now just a double-tap whilst you are lying in bed at night.
It was possible to do Twitter before the web, but good luck getting someone to use Twitter where we have to send it all through mail.
“Dear Donald Trump.
I hope this tweet finds you well. I think you are a terrible president. #carpediem
Yours in lulz,
Information systems today just didn’t fit into the context of the pipes that was available before the web. It was too costly, and unreasonable to do them. It’s why newspapers were bundled: they ALSO had a market (classifieds) in them, because this channel was already open. The hard work of distribution was done. But then… we began to program & automate information.
In the same vein, the modern limited liability, joint-stock corporation, (which everyone could create one), is about ~160 years old. Before then, you had to get a royal charter to allow access to tradable ownership and limited liability.
There are many coordination systems today that are being invented as we speak and that are going to be invented that just does not fit into the pipes of a corporation. A modern corporation succeeds because we have systems of law & systems of enforcement to enable them. In order to do so, we essentially rely on the massive cost of a nation state to enforce them. But now… we can now program & automate coordination.
I don’t think we can ultimately fathom how ground-breaking this is. Tokenized coordination systems that exist on scales we’ve never imagined. Like your great-grandmother not even pondering about the existence or need of something akin to sending a “like”, we haven’t even scratched the surface. We should absolutely be asking where this fits in, and where this could help. The result of which will create massive amounts of wealth.
The reason is that like information systems before the web, they under-fit the potential of information systems. We didn’t have Twitter, Facebook, Instagram, Wikipedia, Medium, etc because they couldn’t fit into the channels that were available. We could build substantially more granular information systems, making them fit more for specific niches and needs. The modern corporation, as great as it was, only allowed us access to certain kinds of coordination systems.
Fitting information systems more appropriately led to more information sharing: as low bandwidth a ‘like’ is, it’s likely more ‘likes’ have been shared (in size), than all newspapers in history.
If we are going to fit tokenized, coordination systems more appropriately, the result is simply: more wealth creation… Perhaps greater than anything we’ve seen before. Perhaps greater than giving access to the joint-stock corporation to everyone in society.
Do you think it would ever have made sense to en-masse create ownership in just a song? Tokenizing attention? Tokenizing a contract directly? Tokenizing memes? Tokenizing people? Tokenizing this blog post? Tokenizing public goods? We invented something as low bandwidth as a ‘like’. How granular does blockchain tokens go? What’s the lowest bandwidth coordination system blockchain tokens allow? 10 second organizations? Idea derivatives? Meme derivatives?
Much of these coordination systems might seem overkill, but you also have to remember that much of our information systems are just machines talking to each other. The liquidity of say tokenizing a contract and effectively trading it is costly for humans. It’s likely much of these coordination systems will be primarily exploited by machines to offset inefficiencies in the markets to our collective benefit.
We’ve opened the Pandora’s box. We are on the multi-year path to tokenizing almost everything.
To combine the aphorisms:
Past performance doesn’t predict future results, but it sure rhymes.
PS: I’ve been busy writing a substantially longer blog post that puts it much broader context, including the history & theory of the firm, corporate legal innovations over time, systems and complexity theory, meme & curation markets, prediction markets, graph markets, history of collectibles & multi-disciplinary research from other fields that explains it all. Coming soon.
Disclaimer: I’ve drunk the Kool-Aid. I’ve held cryptocurrencies since 2011.
Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.
Disclaimer: The views and opinions expressed are solely those of the author. They do not necessarily represent the views of Futurism or its affiliates.
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