Money-as-a-Product and the discovering of new market niches

by Gustavo Segovia

We already have some hints about what the As-a-service economy looks like. It is a relatively new paradigm to fulfil Business and Customers demands in a more efficient way, enabling companies and people to carry out their software. Infrastructure and business processes needs in a on-demand basis. Proving that is actually more convenient to rent out these platforms, infrastructures or Software as a Service from specialised providers, rather than having these products on their own. According to the old paradigm based on archaic assumptions that would tell us that is better and cheaper to own a product instead of renting it out As-a-Service.

Breaking out these paradigms were only possible with the evolution of technology.

Cloud Computing for example was the key enabler of the As-a-Service economy, allowing companies to virtualise their IT infrastructure (racks, servers, and other physical Network Elements) which would be hosted by an off-shore specialized provider (like Amazon with AWS or Microsoft with Azure).

These type economies are still expanding (see https://searchcloudcomputing.techtarget.com/definition/XaaS-anything-as-a-service ), we are already seeing MaaS (Mobility-aaS) approaching the consumer market challenging the traditional car-ownership approach by demonstrating that renting it out on-demand basics will be more economically beneficial than acquiring a vehicle and afford the Total Cost of Ownership.

With the arrival of blockchain to the new technologies landscape, not only Business Models will be disrupted but also whole systems such as the economical or monetarial systems (not to mention the potential such technology has to disrupt politics and the society itself) leading up different players to set up their Money-as-a-Product initiatives, despite if they’re coming from the public or the private realms. As a matter of fact, the first practical and successful application belongs to the currency space whether a distributed accounting system powered by game theory and clever cryptography provides the trust needed to create a new monetary system totally independent from the traditional currency issuers such as Central Banks and Governments, who are the only institutions so far with enough infrastructure and resources to provide the consumers with such a needed asset as cash itself is.

Let’s face it, money is a big need, it is the blood that runs through our economic system, it is what allows industries and markets to exchange their goods and services that provide wealth to our populations.

Money is that reference system that solves the “coincidence of needs” problem that has the only alternative way of exchange: the barter, and not only its unit of account and transferability characteristics have made it predominate over the barter, but also as a store of value so it can be predictable useful in the future.

The main challenge about money issuance seems to be that suppliers should be tremendously capable of building up the proper monetary policies to guarantee a maximum performance in its three characteristics:

• A good Unit of account money is the one which is widely accepted as reference of value, and any good or service can be priced on a certain amount of such units of money. The more people accept it as a unit of value the better it will perform as an Unit of account. Stability affront the market could also be considered as a good metric of performance as it is highly expected that a sample of any product or service in the market (e.g. a piece of bread) will cost the same amount of units of money through time.
• As a medium of exchange, money shall be used to buy/sell any product and service from/to any other market agent and in order to have a right performance on this matter, a low transaction cost shall be guaranteed.
• And of course, money shall be a way of storing value, so its holder can save it and use it in a future time, it’s a oneself purchasing power transfer from the present to the future, it’s very valid to assume that the more predictable the transfer of outcome the better performance money will have, at least as a store of value. Of course if user predictions are speculative, the best store of value will be the money which value increases through time.

Besides these three pillar characteristics, money can be portable (it can be carried around), fungible (the ability to exchange one unit of value for another one), partitionable (divisible units of value) and in many cases, anonymous within an economy. Let’s analyse the performance of some of the forms of money we’ve known so far:

• Gold (and other metals): pretty good unit of account in term of weight, although hard for certifying and standardizing its purity. At its time it was a very useful medium of exchange, even-how high transactions costs when used to pay across long distances. to this day it’s still considered an excellent way of storing value.
• Fiat: in its forms, whether it is as cash, or digital, they are a good unit of account, a cheap medium of exchange (although there are hidden costs of issuance that are paid through inflation) but generally a bad, or even terrible way of storing value.
• Cryptocurrencies: the are a good and trustworthy unit of account although their current volatility makes from it an awful reference regarding the market. It is a very good medium of exchange although transaction cost may vary depending on the technology and volume of transactions, while as a store of value, there’s still a lot to be proven, evenhow, transparency and predictability in their supply policies are granted, which provides a good level of information for speculators to hold their currencies for the future.

The exclusive right of supplying money has been in the government’s hands for more than 2.500 years by a minting process in which the main task was to certify the proper weight and purity of the metal (gold, silver and copper mainly), these coins were regarded as proper money only if they carried the stamp of the appropriate authority. An activity that was very useful to the markets so coins would be then uniform, recognisable and trustworthy, but very profitable to governments as well. By having the monopoly, they were the ones who established by themselves the fees that covered the cost of minting, and eventually, started to diminish the quality of their products (minted coins) by decreasing the gold or silver content while mixing it with other metals, a very common practice during the Middle Age, with the result of adding inflation to markets so decreasing people’s purchasing power.

The issuance of money activity by governments is clearly no longer about certifying weight and purity, but to determine deliberately the quantity of money to be supplied, having at the end of the day, the same effects as all monopolies: people shall use it even if its unsatisfactory, and the prevention of the discovery of better methods to satisfy the same need.

The arrival of Bitcoin (and blockchain with it) is a monopoly breaker in the issuance of money which represents a whole new world of possibilities to both private and public sector, for the first time in our history it is possible to certify the authenticity of money independently from the traditional authorities, adding new capabilities into industry and markets that allows new players to compete, if they want to (and if they are not coerced by governments), with the traditional monetary system.

We are still in an early stage to predict how the future will be, but there are already tons of initiatives to create a new form of money willing to establish some position in the markets. Bitcoin at the helm of the cryptocurrency space, Monero willing to lead in the anonymity field, movements as MakerDAO already building up a decentralized governed stablecoin, IOTA as ad hoc currency for the Internet of Things, and plenty of others that are flourishing. There is still room for innovation and for the discovery of new niches and use cases where to create value in the industries and markets, it is a matter of technologists, economists and products and service designers to get together and evaluate wherever the solution to a need will be or not in the issuance of a new type of currency. Wherever new challenges will appear such as selecting and developing the right technology, as well as establishing more appropriate protocols and monetary policies (inflationary, deflationary, mining and burning rules, even interests rates where applies) . Last but definitely not least, targeting and/or building up the communities that would operate with the supplied/demanded trust on such a new currency with clear benefits over traditional and other competitive currencies.