Banking With Bits

Production Value, Consensus Labor & Digital Economics

Sep 29, 2018 · 26 min read
This is a long read | Enjoy the rabbit hole — Reach out to PonderJaunt to discuss the contents of this article.

To seek the true value of the individual within a rapidly changing financial system, I will try to comment on the following: how might technologies such as blockchain impact economic policy in the near future?

What role will labor and the perception of human value in production continue to play in global fiscal and monetary policy? Which role does humanity take in a value-exchange system that increasingly does not require humans?

Furthermore, in this piece I only wish to express my own observations on some pathways to a world that embraces a new form of banking using blockchain and Distributed ledger Technology (DLT). Consider this a stream of consciousness exploring possible systems, rather than a piece attempting to convince you of their potentiality.

Establishing Bias

As a precursor, Plato and his republic would despise me. I am a son dependent on the wealth of his father, my skills derivative of a public education based first in achievement and culminated upon by complacency.

Currently, I simply exist in this world and ponder the workings of humanity and the systems it creates. I tell you these things because the bias it creates is imperative to understand if you wish to see a potential future of the global economy as I see it.

Such a future relies on each of us understanding how currency is impacted by the various forms of production seen around the world, and how we as laborers interact with the systems of production. The focus of this writing will be on new concepts of consensus labor, while also commenting on classical ideas towards the objectification and alienation of labor in digital and traditional economies.

Before I explain this potential future, I wish to further explore the idea of consensus — which is important to me surely , but may be even more important to you eventually; for you may base your ideology tomorrow on my writing today, and over time as we come to view the same concepts in the same way, we remove the various bias that would normally prevent us from truly interacting.

This affirmation could continue for each reader until we have all come to some sort of general agreement regarding my worldview in relation to that of yours and those around you. Once this ‘consensus’ in a network has been established, and is trusted by all actors within that network, incredible things can happen. So, as I write of labor of consensus I mean more: the act of coming to agreement around value, which should clarify things further on.

Now that we understand the basic definition of consensus, my personal relation to the global economy is something I wish to discuss in more detail. How you perceive my value is imperative to how others perceive yours, as we explored above. This is the idea of a value of consensus and is the precursor to a new layer of digital interaction which is fundamentally intriguing to me as a political scientist.

Essentially, if our value can be perceived by another to be inherently lower than their own value, while we simultaneously perceive that effect to be compounded in all economies, and the consequences split along geopolitical boundaries based on traditional definitions of labor and civil rights; we must then assume that all markets that currently exist under such perceptions must be inherently biased. They exist to abstract the worker from the value of their labor and to profit on that abstraction.

Biased markets are limited in their functionality as soon as monetary policy begins to blur the lines of class utility within the economy. We see this concept played out in social class revolutions, or between old and new wealth in economic epochal shifts, but does this phenomena translate to digital spaces as well?

These are the kinds of questions that should be explored in the design and development phase of these blockchain technologies, as we have the opportunity to study the impact they will have on the world as adoption increases.

It is my own personal theory that we are in fact exploring these concepts in real time through a sort of living experiment within economics, I’ll explain further down, but first:

Establishing Bias: Continued

What mechanisms exist to allow me — a dependent, a philosopher, a man in a machine of modern monetary policy that can live on subsidized education — access to loans and equity from the government to pursue my education, while another across the globe can struggle to maintain adequate health standards for their family while working nonstop to exist in a rigged labor economy without any financial assistance from their government?

Furthermore, how can we ever hope to interact as two extreme economic examples within the same global economy without abstracting the true value of either of our production efforts?

While yes, blockchain is a technology that brings us closer together as global citizens, we still do not share the same concept of value as producers in the global economy. Because, if we can exist in the same ecosystem and create the same valuable contributions in different forms, that does not automatically mean that we share the same potential value for the production at any given time.

This is due to costs of production for the labor, and the cost of access to technology and networks in some parts of the world, where near constant use of digital tools is limited or impossible.

External network constraints like taxes, wages, and local economic issues like weather and even politics all play a part in determining the value of labor within a traditional economy. By decreasing the value of labor, or increasing the costs to access to the centralization of production, the value of the labor is centralized to the owners of the means of production.

But why does the value of labor matter in terms of global interoperability? It allows markets access to greater liquidity. And why should it not be centralized? Because labor is abstracted and its value is taken by those who control access to the markets.

Cost of Production

As long as access to production technology is controlled by those who would enrich themselves by their use, the concept of digital labor will fall into the same socioeconomic pitfalls of the previous generations of humanity. We will be forced to reward labor disproportionately based on the infrastructure of the past.

Where the labor of the population is undervalued based on the scarcity of access to technology, and control of the means of production by a centralized few, economic progress for the populous is undermined.

Consensus towards the true value of the labor produced in these markets is impossible until the the production can be assessed organically. This must be accomplished without bias extracting value before production has even commenced.

In order to exist in an age where labor is considered equal in terms of potential value, we must embrace a new architecture that gives all the labor performed within it the ability to be valuable before the point of production.

Online engagement is a great example; for instance, I can read an article and pay for the author as I scroll through the content. I can stream a song by the byte and pay each artist individually.

The author does not have to wait for me to reach the end of their writing to extract the true value of their words. The musician does not need a label to extract the value of their art.

And neither should the reader expect to pay for a service they wont fully utilize the preservation of words on paper, or a listener pay for the production of a physical disk.

In this rewarded phase of pre-production, the author and artist can receive compensation in real time based on their labor. Not the result of their labor after its been abstracted by other means.

The value of the book lies in the words not the binding. So to does the value of the labor lie in the production not the result.

While, the reader is rewarded by receiving valuable content for a reasonable price, and the listener is rewarded by getting access to music on their devices without sacrificing storage.

None of the parties expect a full labor contract to be completed before either of them receive the value the inherently got from this perceived interaction.

How can I find value from a book without reading it? How might I know if I like a song without hearing it? It’s an organic value transaction that only needs to be tracked in consensus in order to be realized truly, without abstracted value deflation.

When I think of engaging in digital economies, I know my actions to be inherently valuable within that digital space, regardless of how much labor I’ve produced in the present. By existing in a digital space I create value.

Therefore, I should be able to realize the value from my engagement at any time as long as the actual labor is eventually performed. This is where my primary argument for ‘Consensus Labor’ resides:

Consensus Labor is the idea that a task or contract exists in a perpetual state of dynamic value as agreed upon by the consensus of free market which remains unobstructed by the sociopolitical bias in which the network participants independently reside. This labor’s value can be realized as production commences because the perpetual state of dynamic value can be adjusted at any time during production.

In light of this concept, I argue that there must be forms of my labor which are left unrealized in my current economic system. Where my value as a digital denizen is misrepresented by a restrictive economic process of evaluating the total domestic value of production without taking true labor into account.

In this abstraction, the value of the individual laborer is lost by being held to the combined value of all potential individuals laborers within any operational economy; they are awarded with cash connected to artificial monetary inflation that the laborers themselves cannot control.

This is why iPhones are made in China, and yet the factory workers who manufacture the product find it hard to afford an iPhone themselves.

The value of the product of their labor has been abstracted by the bias of their inherent national economic policy. The production of the phone, has more value for the centralized controllers of that production, then the phone has for the external economic market participant.

In this scenario the laborer becomes a commodity. Not the phone. The phone is the result of production, but it’s value pales in comparison to the value of the laborer. Which reveals the true transaction is in labor not the goods that labor produces.

If someone can transact within global markets without being affected by the bias of those markets the transaction has a higher value inherently as we’ve laid out. This is also reflected in the stability of economies affected by war and other domestic disruptions like natural disaster.

If the markets of that specific economy are taken offline, then new markets must be sourced before the gap in production ripples through the global economy. But it is not the raw goods that must be replaced, it is the raw labor.

Blockchain replaces human digital labor with automated processes. It also sources global markets for the transaction of goods and services, and does it without the bloat of managing the flow of capital around the world by human means which extracts value artificially. Embracing blockchain technology will continue to erase the abstraction of the value of production.

And yet, it is not the economic policy towards raw goods that affects global costs, its the policy that affects the labor which produces those goods and services which can affect costs the most. The ineffectiveness of tariffs in modern economics is a great indicator of this flawed concept.

Labor holds the true value in the economy. Proliferation of goods and services means nothing if the lower cost of those same goods and services comes from the increased human cost of the labor. Because in that objectification the true value of the laborer is actually lost.

To understand it, let’s return to how I personally exist within the economy. Perhaps after which, you can relate it to how you exist within the economy and further strengthen how it relates to your personal experience within this developing global economy.

For example:

I am a student of political science, I study the world and its people. To do so I subsist on subsidized student loans, on the borrowed value of others worth — a beggar of time and space. In this role, I can choose to labor and to learn, or do neither. I can choose to produce and extract simultaneously, or not. In this role I have become a dependent of society. Essentially free to be free, if only by the means of others.

This existence reeks of worthlessness to the old world, and is at the same time of unlimited potential to a new economy; How can I be worth enough to be loaned money to educate myself to the same value of worth of the loan?

If I do not produce, I have no worth; and yet to be lent such vast sums of cash implies I have worth. This worth without labor is a fundamental benefit of consensus labor. It is an agreed upon contract of worth based on potential labor in a free market.

This consensus of value is also proof that my academic production holds more potential worth than any other labor possible in my economy. For control of the means to access that form of production, a university degree, has now been taken over by the United States Government. They value my education production more than any commodity production in the American economy because I do not have access to commercial loans with the same ease or limiting conditions.

Labor Production

To further explain the concept of potential labor we must look at the various forms of labor in the past: in the old world I could extract knowledge from a collective system of learning spanning the entire world and its people through time, while also producing something for that world to use in return through a trade or skill — this is labor production.

The creation of something-from-something: turning a stone into a statue, a book into a dissertation, or plant oils into art. The additional creation of social classes allows the low cost labor market to exist; there must be makers and takers in an exchange system which values the labor of each independent actor at a different rate based on the skill they have learned over time, or the resource they extract.

In that exchange of rates lies my value, yours, and all others. An entity must be entrusted to conduct this exchange of labor production by creating a currency which allows greater liquidity and interchangeability.

The real value of the currency is normally measured only in the labor produced by that economy.

In other words, the entire economy is based on trust, in which a centralized entity is authorized to establish the rate of exchange, and is using relevant market data of the labor economy to do so. It may also fully dictate the value of all independent laborers within that economy by rewarding them with cash based on the product of their labor.

External to this centralized entity empowered to create a currency lies the various laws and regulations created by oversight agencies to protect the future value of labor by further methods of abstraction.

This is done in the formation of secondary markets where the flow of value is only barely related to the actual production of original laborer. It is in this concept that humanity conceivably exploits the value of others by abstracting their labor into markets where they eventually lose access to the markets and the primary value contained within them.

The financial system of the modern world was created to protect the value of the production within a society through the abstraction of that labor into cash and protecting that purchasing power of that cash globally with military power.

It is in this abstraction that I may equate my dependency, my role as a student living in debt, to the labor of a man who toils in a field, or works in a factory and how the exchange of such value creates a global economy.

In these separate markets, there exists an exchange rate that is controlled by a wealth protected by might. The value of the laborer opposite of me is missing the abstraction of might in order to make his value equal mine in a free market.

He does not have the power to argue against a larger economic entity that his value in relation to his production is equal to mine.The regulation of the rate of exchange is based loosely in law, and strictly in perception.

We have established one of these perceptions to be military based, yet there exists many others. While each domestic society maintains their own unique perception, governments may work together to enact laws that balance the operation of their economies between borders. This inter-operation is based on trust.

We trust governments control the rate of exchange through specific mechanisms called banks which, again we trust. These banks manage the flow of cash in relation to labor as described by the treasury.

Back to my specific example: while there are many forms of lending through banks, student loans are most evident in the control of an exchange rate between the abstracted production of labor and the value of the individual to the economy.

If I take out a loan to learn, the knowledge itself becomes dependent on the labor used to extract it, a labor that I am indebted to perform. So that if I borrow money to learn, in order to be of more value to society, I am already indebted to society by attempting to learn.

The labor has become objectified and therefore its value has to be realized or else the worker is a slave. I have assigned myself a debt-future contract at a leveraged margin based on the value of my life as determined by the potential value I may create for my nation.

By not realizing the value of that specific form of labor as production in education the concept of ‘human capital’ is reduced to ‘human commodity’, and the student must accept themselves as a slave to the system. Instead of production laborers they have become alienated objects.

Essentially if this concept is realized at a macroeconomic level, a certain portion of the youth population can be used as a resource to farm debt in order to print more cash to hedge organic inflation in the domestic economy for the remaining population.

As student loan debt increases the ability to print more cash also increases, which in turn allows more loans to be given out, and even more debt accumulated. This new labor mechanic is a futures play where labor is tied to the value of production and not goods or services it creates. The labor of education is valuable, but only when realized in the future.

Therefore as a student, I exist as a time-slave within a labor based economy that produces no current value, only future value. I am the object in which the value of currency is created from debt attached to my present being which can only be realized by the value created by my future self; a self that through further objectification could cease to exist as a producer.

The real value in labor production is created when you blur the lines between human capital and human commodity. Where human capital investment is not a priority and labor is rewarded based on centralized control economic prosperity is limited. To reverse these limitations simply decentralize access to human capital potential.

In a centralized system control of rewards is dictated by an oligarchy that’s interest is in maintaining the value of the commodity in relation to the supply of the labor. They do not want the free market to dictate the value of that same labor without controlling the flow of cash that is created by that labor.

However, as the world continues to globalize and we reach new levels of economic interdependence, we start to see that fiscal policy that limits foreign economic interaction, restricts loans with high interest rates, while inflating the currency to maintain their own ledgers only disrupts the organic growth potential that technology brings to human economies.

Technologies like blockchain which help to decentralize access to production value become increasingly attractive to the creditors and debtors alike as themselves as they start to understand their own inherent value.

As production labor adopts technology that allows its own value to be less abstracted by friction based services it helps build a new framework for the rest of the world to also adopt the same technology.

This network effect then allows liquidity to take over, and gravity to take over after that; like how many little streams joining together creates the mighty river. Our human civilizations always seem to sprout up next to those specific geographic points with access to liquidity, seeing as it provided the easiest access to the flow of new goods and ideas.

But that is all of the old world. The new world lies in the value of consensus labor. The same rivers exist and new ones sprout up every day, they are just digitized. the technologies that allow humans to transact with digital goods and services in a free market are going to be the same tools that change the world fundamentally from this point on. Understanding how they work will be pivotal.

The civilizations of the future will be built along new digital liquidity coordinators. Yet, the one major difference between future society and that of that past is that the value of the production in the future economies will be measured at the individual level with technology enabled by distributed ledgers.

Consensus Production

And once again, back to my specific academic example — the western example, the typical United States story: the unrealized labor of the student in the labor production economy is what gives rise to the possibility of a consensus production based economy.

My ability to take a loan out from the government to receive an education is an economic relationship built based on trust and validated by standardized academic labor. An agreed upon future value of production of which a conditional contract is built upon is the basis of my higher education and its potential value.

To elaborate further, consensus production is a form of imaginary labor based on a an abstracted time relationship; the labor does not need to be realized immediately in order for the value to be realized immediately. Because of this, most frictions within a labor production economy are not as present when abstracted to a consensus economy.

There are three important aspects of consensus production that are required to grow into a consensus economy or ‘Internet of Value’: scalability, liquidity, and Interoperability. Scalability ensures that as the volume of consensus labor increases, the exchange rate experiences the least amount of volatility possible.

Liquidity is generated in stable growing markets as the risk associated with friction in trust is reduced or removed. Finally, Interoperability creates seamless transitions between various types of consensus labor (as production labor is phased out) contracts and their associative secondary markets in the form of raw goods, unrealized labor, services, and even bonds.

Because I exist with enough trust within my economic system, I am given access to fiscal tools that others would not have if they didn’t have they same trust from their own economic comptrollers. What happens when trust can be established through engagement across borders?

If I build value by increasing trust within a decentralized network through my consensus production, then access to financial tools through that same system are increasingly made available. If I create global value through education, can I not then source the financing of that production globally?

As more potential value is created by sacrificing production labor for consensus labor due to the costs of production being lowered, the value of the labor itself increases fundamentally. It creates the ability for concepts like education to be funded based on the potential value they will bring a future economy.

As more trust is established within this new rapidly growing production network, more consensus is required between trusted nodes to validate the new market participants; the trust builds upon the consensus of the production within the network, also known as validation.

This validation is imperative because it rejects the previous production labor concepts of controlled and abstracted value by having a centralized entity affirm or reject the transaction. A gatekeeper that can create arbitrary bias.

Decentralized validation requires consensus to affirm a transaction, and if the centralization of the validation does not increase the cost of production, while simultaneously not introducing bias centralized controllers, the entire economy becomes more valuable.

Now some form of centralization is necessary as a fail-safe to vet the validity of the new participants, as validators join and leave the network, an initial trust-relationship must be established and strengthened from some entity that has custodianship of the data on the network.

Once enough primary relationships have been established, these new validators can further decentralize the system by repeating the process to bring new partners on. Overtime the custodian ship itself can be decentralized and abstracted to fully erase the potential of tampering with a ledger.

All of this combines to create a decentralized transaction ledger that is immutable, as not one centralized authority has the ability to accept or reject transactions within that ledger without establishing consensus from the other validators. Bias is not introduced, labor can be realized at any time, and yet value is moving instantly and infinitely faster over time.

Banking With Bits

We’ve already established that I, like many of my generation, are basically freeloading students who took a long term loan out with the government to get degrees that somehow entitle us to more career compensation in order to quickly pay back that debt to society.

There also exists a series of conditions to make me dependent on the completion a university degree to pay back total value with interest, such as the inability to consolidate your loans without a diploma from most creditors. This is another example of the control of the means to the production of value.

We’ve also established that someone in the southern economic hemisphere would probably not be given this opportunity without producing labor within a socialized system before hand, or making an even more binding contract with a private entity.

Regardless, access to the same financial services of the west would be highly unlikely based on their geopolitical and socioeconomic environment.

With both of these concepts fleshed out I want to discuss how various proposed financial systems built on concepts like digital currencies can affect the lives of these two separate subjects.

In the rest of this paper, macroeconomic theory is simplified and compared to the building furor behind blockchain concepts in order to perceive a few patterns emerging in the financial technology sector with massive implications for the future of microeconomics.

I believe that blockchain and decentralized ledger technology (DLT) will find specific support in the financial and banking industries due to its value of inherently lowering the production costs of new debt.

This is not a new statement, many have taken this stance. However, there have been relatively few discussions as to exactly how the technologies will be leveraged outside of the payments and remittance sectors.

The journey of debt in the modern western economies is important to understand because DLT and blockchain innovation will exponentially increase the movement of debt in global markets.

Diving Into Debt

When debt creation and management can move faster, for less costs, quantitative easing will enter a new era where governments will be in a position to buy assets directly from commercial banks, corporations and citizens in order to increase total economic liquidity.

Which assets are chosen to act as vehicles for QE policy will be based on how fast the economies of the future will need to create new debt.

For example it has been observed that as money moves through the economy, the more times it is observed moving, or if the course of the movement is changed, the momentum of the cash is slowed.

However, debt is one of the few mechanisms which rejects the net-loss of energy in the financial system in relations to human systems.

Debt is the abstraction of cash through time, and in that abstraction lies a profitable service: providing capital at one point in time for the promise of repayment at another.

It is in this consensus that the utility of banking in the modern world has become so established. Banks were able to take traditionally non-liquid assets, associate an exchange of value within an established economy by issuing credit and debt and after the term of the loan actually create more value from the exchange that existed before, through a series of trusted repayments.

Now, what happens if individuals can become creditors through the selling of assets back to the government in order to spur economic activity?

Also, if in that spurred economic activity the product of the economy is re-associated to that same asset, an era of hyper liquidity without the pitfall of inflation can be achieved. Where cash becomes a digital asset and the issuing of debt lies in the control of those same assets by the creditors.

In this era, you can maintain near zero interest rates, and make up for the loss in revenue by increasing the amount of debt created over time as most of the economy moves away from cash systems entirely.

This is because the cost of production for the cash that currently powers the global economy will only ever increase, as technology advances to ease in the counterfeiting of a physical bill, or the exploitation of a system meant to track bills like Swift.

As seigniorage continues to decrease, as is evident with hyper inflated cash economies around the world, the ability for their governments to effectively operate debt economies falters and economic recession occurs.

Basically, if a government cannot make enough money in the issuing of that same money, they can dissolve the value of that currency and the strength of their economy exponentially.

So what may governments do to rapidly decrease production costs of a currency without producing it themselves? They can let decentralized ledgers create new tokens that are inherently valuable because of the liquidity they provide a new digital economy which are also controlled by supply theory (Inflationary or Deflationary) in order to control the flow of those assets in the economy.

Then, in a very controlled manner, they can buy those tokens directly from the market makers who helped create them, or are currently speculating on the value of, and issue credit in the form of assets like traditional treasury bonds to the original holders.

This credit would then be used to create more debt within the decentralized ledgers as liquidity increases and more tokens are burned or created (depending on supply theory of the asset), only to be bought back by the central bank entities in order to issue more conventional debt, not backed by digital assets they control.

This debt would not be as advantageous to hold, as it does not automatically generate revenue as credit from treasury bonds. In this hypothetical situation, holding the digital asset of choice for central banks becomes the most valuable asset you can own in a functioning economy due to the direct ties to the solvency of the federal government which controls that same economy.

Crazy or Beautiful?

It is a mad and glorious combination of modern economic theory in regards to quantitative easing and seigniorage optimizations, where the creation of digital assets managed by central bank entities increases revenue which is created from the production of the asset, and economic energy is created by increasing the liquidity within the economy without introducing inflation.

Some would call it the New World Order, because central banks would further control the management of both the creation of debt, and the issuing of credit backed by the government in the form of a digital asset but I disagree.

This point has long been argued as an inherent evil in American economics, as the effects of mismanaged central banking can create economic collapse, and has in the past. However, I call it the first true observable clue of a future dominated by Hyper Capitalism.

This future is unwritten, and yet may be more prosperous for more people than any other perceived system because it allows the individual actors within the economy the ability to have access to an unlimited global liquidity pool, where market bias does not exist.

Consensus Economics

Ah, yes: market bias. We are back to the concepts mentioned before in regards to production labor, and consensus labor. In a western production economy, my value as a laborer does not equal the value of another inherently. It is based in the perceived value of our production by the free market.

In an eastern consensus economy, the value of my labor is perceived to be equal to that of another inherently. It is based on how our labor is combined into the total value of the national production.

With blockchain, and specifically Proof of Stake(PoS) applications, we can finally merge the two dueling concepts and create a new global marketplace where production labor economies can compete in global markets without abstracting the value of their labor through entities like commercial banks, and international intermediaries.

The creation of a true consensus economy where the value of all actors is agreed to be equal based on their production in relation to the value of other producers within all markets. Where bias is removed, growth can occur without restriction.

The whole world spins faster when debt and credit is not dependent on what your job is, or how much you make, but the value you can create for the economy as a whole over time.

Blockchain is incredibly special for banking because it allows the abstraction of labor to be positively attached to an increase in revenue potential for laborers over time by creating systems to track value in both the physical and digital realms.

While digital laborers, or those who create value within virtual economies that translate to physical goods and services industries in the physical realm, are immediately impacted by this new economic paradigm traditional production laborers are less impacted .

In fact, production laborers in a consensus economy would actually have their true value realized more readily if they can interact with digital services marketplaces ready to pay for their true value in labor.

This is because their labor production is also traceable at the same rate as the digital services through IoT and other sensor arrays are built out to tokenize data for blockchain systems.

Which means that production labor can have its value maintained in relation to its access to a market with the ability to offer digital economic goods and services in virtual spaces.

Their value of production is not abstracted within a virtual economy based on blockchain, it is maintained more so than in a traditional economy.

However, in Proof of Work (PoW) systems like Bitcoin(BTC) and Ethereum(ETH), the production cost spread of the asset itself is not high enough to act as functional currency for these production laborers because access to the markets running on their networks costs too much.

It is too expensive to interact within those systems, the value of the production is lost through abstraction of the labor presented in those markets.

It is for this reason that I know that PoW systems will fail eventually based on the inability to manage seigniorage, regardless of other mechanisms built within their architectures to lower the production costs of their own tokens over time.

Some of those same mechanisms even create political motive to destroy or alter the architecture itself to artificially keep production costs high to benefit of the validators within those systems.

While the bankless billions on the planet Earth continue to produce true value for consensus economies, technologies like blockchain and DLT will allow their value to be stored and compounded while creating revenue for those systems willing to take the risk to establish the infrastructure necessary to provide financial servicing to those people.

The same risks existed in building the first railroads out to the promise of gold in the western US. They created the rails needed to connect goods and services around the country with the markets that truly valued them. And they reaped massive rewards for increasing the liquidity across the North American continent.

This same era saw the invention of many financial technologies to help banks speed up the way cash flows. Or how financing is made available.

Today, there are already technologies which are even more rapidly changing the way money moves around the world. These entities are breaking the rules and changing the way the game is played.

This is a match of chess, not checkers. And when the dust settles, a new railway will exist. Where it goes is anyone’s guess, but I would wager that it leads to a new source of wealth in a desert previously untapped.

Back To School

So what does this mean in relation to the student debt analogy? It equalizes the equation for both parties. It allows the potential labor of the production labor participant to be valued just as much as digital service industry bound debt bearing citizen that I have become.

While we should both have access to the same services based in our potential value, the financial institutions that provide those services should not be encumbered by the task.

To remedy this dilemma, banks and other financial entities must adopt various technologies like blockchain and DLT which exist to offer a new decentralized systems to track the total value and the commitment of each market participant over time at an effective cost ratio.

With concepts like smart contracts and zero knowledge proofs — topics we will dive into another time — banks can lower the service industry bloat and other intervening mechanisms in the traditional financial world that has made truly global markets impossible in the past, and friction based in the present.

If in those systems, a consensus is formed within a Proof of Stake ledger with the power to interact with other blockchains and traditional economic data, then that network can create the opportunity to lend equity from one market participant to another with low friction.

Thus, a potential result is increasing the revenue of the financial service providers, increasing the value of production for all market participants, and increasing the total strength and interdependence of the economy over time.

In Conclusion

I see a future where debt is created through new methods of potential labor, and credit is created by the interaction of central bank digital currencies with market makers. The lower costs of seigniorage combined with the absence of inflation by using digital currency technology would allow more debt to be created for cheaper and the global economy would be forced to interoperate as more free market labor finds access to increased liquidity within these networks.

I associate the creation of new debt with an example of student loans in the west, and access to technology costs in the east. While both are intriguing in regards to how they abstract the production of labor, blockchain can combine to create a new economy where these two potential laborers can interact and find value in their polar opposite economic existences.

Finally I argue that Proof of Work systems cannot be an adequate solution for adoption by central banks because they cannot meet the conditions needed for a consensus economy. The production of the assets is too expensive, and the gatekeeping of the validation will only increase political strife.

However, a Proof of Stake solution with high liquidity mechanism and near instant settlement rate for transactions can increase the ability of governments to lend at low interest rates without negatively affecting the economy only if the government plans to use quantitative easing policy to acquire control of those assets over time.


Written by

Thoughts expressed here are my own, most of which are based around history, technology, and phiIosophy. I am an enraged etomancer.