Translating Web3 from 26th Century Saturn into 21st Century Earth: Peer-to-Peer Finance

Part 2 in Bloom’s 4-part series that breaks down the major concepts of web3 in a way that non-technical people can understand.

Peer-to-Peer Finance

What cryptocurrencies are, why they are, and how you can program them to run more complex and equitable value systems

With today’s money system, you either have it or you don’t, and it controls your ability to access a nice place to live, get your kid to a doctor, or have food to eat. With cryptocurrency, *you* control what it means, together with a community of people who care about similar things as you.

Let’s talk about Bitcoin first, since it is the most widely adopted one, and fundamentally different from most other cryptocurrencies. Bitcoin is simply peer-to-peer electronic cash. The difference between it and say, US dollars, is that the federal reserve can print money whenever it wants to, creating debt, and changing the value of the dollar. Additionally, the US dollar tends to be tied up with the oil economy — some people call it the “petro dollar.” There are many reasons this setup is not ideal — including how it props up empires and is tied up with the war economy. People vying for control of money and power is a brittle system, it incentives sociopathy and divisive / combative political systems. It is built on a long history of feudalism, colonialism, slavery, policing, redlining, and genocide. Many people who built Bitcoin and later blockchains did so because they believe that the root of systems change is changing money itself.

“The” economy and today’s monetary system is not the only way to approach money. Many Indigenous communities have more sophisticated structures of value exchange that support healthy social and ecological relationships. Cryptocurrency has the potential to diversify who has access to money, and how they get it.

With Bitcoin, there will only ever be 21 million Bitcoins. (P.S., Bitcoins are divisible into tiny pieces called Satoshis or “SATS”. You can own .0000001 bitcoin; you don’t have to pay $30,000 to get a whole one to have any.) One reason this fixed amount is important, is because no tiny set of old white men can dictate the fate of Bitcoin. Its governance is completely, technologically decentralized and subject to global consensus rules.

Bitcoin is the easiest to use as ‘normal’ish money today. You can get gift cards with Bitcoin to buy groceries. You can send someone money for a coffee instantly with nearly no fees (Whereas most normal money payment processors charge a 3% fee — credit cards, all online payment processors like Stripe, etc — those fees are passed on to the customer as higher prices). You can instantly send money back home to your family in another country without bureaucracy. It’s the most widely adopted cryptocurrency, and the oldest. The last thing we’ll mention is that Bitcoin is an asset, most comparable to gold — whereas other forms of cryptocurrency allow for complex programming about what types of value they store and unlock.

(I will skip over the environmental debate for now, but once we find a good breakdown of that for you we will post it here. To summarize my understanding on it: Is it worth some amount of carbon spend to stop the global war machine? The entire global energy usage of Bitcoin mining and exchanging is less than the energy usage in the United States on clothes dryers, which are largely not necessary and most countries do not use them. Most of the statistics that get circulated in these debates are false comparisons.)

In summary, Bitcoin is decentralized digital money.

Programmable Currencies

Cryptocurrencies on Ethereum and other blockchains tend to be more akin to computer programs. The best phrase I’ve heard for it is “money as programmable language” (h/t Andy Tudhope).

While Bloom will encourage adoption of Bitcoin later on in our development, at first we are using Ethereum-based tools to address the lack of access to capital that is common among community-led projects. To catalyze large-scale climate mobilization, fast.

Customizing power relationships: With cryptocurrency, you can use math formulas to flatten the power curve as much as you need to, so someone with 2 million of that token doesn’t have extremely more power or voice than someone who has 20. You can also program it to reward people for doing business with historically disadvantaged entrepreneurs, to incentivize an equalization of power. At Bloom we believe those kinds of adjustments could lead to more creativity, better social health, and innovation capacity.

Non-Bitcoin cryptocurrencies are usually called tokens. Like, token of appreciation, or a token you can use to vacuum your car at a car wash. There is a whole engineering field for designing and programming tokens, called token engineering. Their ability to hold complexity makes it possible to design local economies that are just and ecologically in balance.

Cryptocurrencies also able to fix problems where, for example, the government subsidizes the cost of oil to ship you clothes made in sweatshops from Bangladesh where the chemical dyes used have permanently destroyed their rivers. Where instead, your local seamstress would be thrilled to make your clothes but the economics don’t work out unless she has rich clients. Insert your country’s most insane subsidy story here.

There are thousands of programming tools to customize the “utility” and “properties” of a token. They all have stupidly technical/arcane names, but so you know the scale of creativity you have here in programming economies, here is a library of them from my coworkers at dOrg, Ori Shimony and Juan Blanco. https://mechanism.institute/ )

If you’ve ever tried to throw your head at cryptocurrency and are still totally confused, know you are not stupid, this technology has the capacity to hold incredibly complex programming of what has value, why, and who has the power to set the rules of what has value.

I spent several years engineering Bloom’s token FLO (Flowers), after listening deeply to local community organizers from around the world, studying and mapping what Bloom members have in surplus and what they need but can’t access due to being cash poor, and then doing a boatload of trainings and fellowships to design it to reduce risk to our already at-risk communities. We will slowly train you up on what it is and how to use it, and we will govern how it’s distributed together as a collective, iteratively over time.

Cryptocurrencies compared to community currencies:

Unlike other forms of community currency that people have been experimenting with to support local economies, cryptocurrency has more “knobs you can twiddle”. This provides pathways for community-designed subsidies, and complex business models that include ecology and social wellbeing instead of “externalizing” them the way most corporations today do.

They also fix common problems that community currencies and timebanks have. For example, over 95% of the time, a community currency becomes essentially worthless because a few people or businesses end up with a hugely disproportionate amount of it compared to anyone else. Timebanks, where people put their time on a digital exchange board, end up usually having the same racial bias problems that many societies have. You can pin down those biases and dynamics, and collectively create policies and incentivize social processes that remedy them, much faster than is possible through nation-level governments.

Conclusion

Whereas money is one-dimensional, you have it or you don’t, and the power games around it across the planet have grown through feudalism and genocide, cryptocurrency allows communities to program their own value systems.

Cryptocurrencies can be and are widely abused or used to scam people. There is a smaller sliver of people creating wondrous protocols and value systems of care with these tools. The Bitcoin whitepaper was written to invent peer-to-peer electronic cash that isn’t controlled by small non-representative sets of people in power in a government.

We will go more into governance later, but for now, let’s go to the next most common thing you’ll come across — NFT’s. Continue to Part 3 →

Author: Magenta Ceiba
Principal Systems Architect
Stay connected: bloomnetwork.earth