Friday, May 25, 2018

A Note on Blockchain and New Currency


Blockchain, and its starchild, cryptocurrency, stand out most in two ways:
 1) Their potential impact on society, and
 2) The general lack of understanding about them.

I want to share some thoughts and impressions as Fire enters the tech arena.

Blockchain can (and in most cases probably should) be used for anything requiring a secure, trusted, distributed knowledge (data)base/ledger. Examples are many, but include the internet itself. Blockchain also empowers the speed and reliability of a network, making this technology, at least in part (if not fundamentally), the perfect platform for mission-critical digital communications and wealth exchange.

The question foremost in my mind (and perhaps others') is where the value of digital currencies comes from. The fact that a currency exists, can only make its denominations so palpable. The first-to-market digital currencies did benefit by virtue of their existence - during a time when using blockchain for currency was still novel, a common exchange without jurisdictional oversight was itself a source of abundance. Since then, speculation from all (mostly affluent) corners of the globe has increased the stakes of every pioneering (and tag-along) currency.

As blockchain becomes commonplace, where is the value of new coinage coming from? Proof-of-work, or 'mining', requires running difficult calculations in exchange for some allowance of a currency. These calculations could be an injection point for value into a blockchain system, but only if they serve a common purpose, akin to SETI for something useful. Heavy expenditure of energy is otherwise not a feature of blockchain or a source of wealth. Other strategies include incentives, stipends, and gamification. Bitcoin for example, was seeded and nurtured by the in-game economy of the MMO Second Life, imbuing the market with a sizable commonwealth and diversity of goods. There are also social networks leveraging "content views" as a source of value to back some new currency.

On a basic level, in an age of fiat, money is worth something by common exchange.
On a basal level, the source of all wealth is time invested in creation or maintenance.

So, start by trading time for subsistence. In a healthy marketplace, minimal wealth affords comfortable subsistence (increasingly so with the efficiencies of industrialization and automation). The usefulness of a currency will be tied to how readily basic needs can be satisfied by its exchange. Any new currency without a close relationship with physical supply-chains is either built on inherited inefficiencies, or fantasies. Valuable digital currencies can be leveraged to contribute back to the health and wellness of communities, empowering individual well-being, and the sustenance of human rights. From this foundational perspective, I suspect regional federations of digital currencies will emerge amid a global marketplace, based on shared logistical concerns and local values. Anyone with a bit of time to spare will be able to participate and thrive.

Whatever course blockchain and blockchain-assisted currencies take, I am looking forward to the possibilities.