What does token economics mean to a crypto novice who is also a history buff?
At the simplest sense, token economics can be seen as the attempt to answer and give insights to important questions that will accompany the rise of economic activities around public blockchains that have token as the basic unit of measurement in their respective economic incentive systems. As a newcomer to the field, I often ask myself questions about what new developments can come out of token and a tokenized economics if adoption becomes more widespread.
What are the implications of token in the grand scheme of things?
Why do we need blockchain token, which seems to play the same role as reward points in many existing cryptocurrency projects and in other ways resemble existing securities?
How should the token system of a public blockchain project be designed to facilitate long term sustainability?
What is the new technology set that token is really a part of, if at all?
What are other developments that will challenge the public blockchain field to improve and introduce solutions to the problems holding back these contemporary developments?
Perhaps most importantly, how would an economy powered by token look like?
I feel that while some of the questions can be answered by people who are pioneers on this new land of token powered economy, most can only be fully answered by time and by trial and error. As a history buff, I have read many instances of seemingly lucky breaks or sudden dissipations of almost ruinous circumstances for social orders and developments of significance in history. Upon closer inspection, many of their causes could be traced to deep undercurrents in the shifting of the economic reality, which in turn is intermingled with the changes in technologies that are not just technical, but also organizational and fundamentally epistemological, concerning the internal models and assumptions we have about the world. The fermentation and formulation of these phenomena have always been completely obscure and unrecognizable to most of their contemporaries until the very last moment.
The forms that token powered economy might take at any given point in time is unpredictable mainly since the heterogeneous agents within the system are constantly adapting their decision rules to the changing environment and interacting with one another, which catalyzes the emergence of novel economic structures. If the states at any given points were questionable subjects for examination, then instead of focusing on the equilibrium states of token economies, we should examine the evolutionary processes and the dynamics underlying those processes. In other words, the dynamics and undercurrents that led to the formation of new economic structures can help us continuously and timely revise our internal models of how token economies really look like and distinguish early on which nascent token economic structures are sustainable and which are brief flares. There are three variables that are worth exploring for looking at the evolution of token economics are diversity, flow and emergence. I would like to use the example of the rise of Christianity as the example to demonstrate these points simply because it was much less well known than the rise of internet of the numerous historical bubbles but was equally full of insights for token economics. Who doesn’t like a new story?
As many of you may know, Christianity was the only native religion to the Roman Empire. It grew out of Judaism in the 1st century BC and for a long while it was ignored by the society at large, and during that time it grew in stealth mode and quite slowly as well. Christianity was quite peculiar in that it was monotheistic, while almost all the other religions were polytheism at the time. Roman allowed other religions to coexist with their own, provided that the worshipers recognize the Roman official religion as supreme. The Christians only submitted themselves to God. This did not do for the Roman. Therefore, as time passed, prosecution of Christians became heavier and heavier, but the Christians held fast to their beliefs and would not submit. As the Roman Empire expanded, tremendous wealth funneled into Rome and in turn into the hands of the old nobilities. Constant warfare caused a lot of married women to become widows, which were essentially death sentences at that time. At the meantime, large waves of immigrants started to flood into the Roman world, but they had no place in the Roman society. Christianity was the only community at that time that offered help to these displaced population. They opened soup kitchens to feed the poor, employed the widows and created communities of people who cared for each other as brothers and sisters and who shared the same faith. They advocated the way of Christ, which simply put was self-sacrifice for others. The knowledge that someone as the son of God would self-sacrifice for a peasant in a world where all other Gods were deemed untouchable, callous and required substantial tributes for favors, Christianity was tremendously appealing. Moreover, it was in fact a highly interconnected system of believers across the Roman World that formed the Christian community. This was truly a great social innovation at that time, but it was also enabled by technological innovations such as the ubiquitous Roman roads. Eventually, the persecutions did not stifle the growth of Christianity but instead gave way to the official recognition of Christianity as the state religion for the Roman Empire.
First, Christianity was a bottom up social movement that was also positively self-reinforcing. At various time of its growth, its main constituents were of different backgrounds. In other words, it adapted to emerging needs and constraints as it grew. The great demographic shift changed the economic realities of the Roman Society and Christianity was the only community that sought to help the disenchanted systematically and ubiquitously by first providing economic assistance and later opportunities as its network grew in size and complexity, and its constituents became increasingly integrated into the Roman society. Cryptocurrency was doubtlessly a bottom up social movement. While speculation was inevitable at the early stage of a potentially disruptive technology, the real implications lied in how well token economics can cater to the emerging needs of a yet to be defined larger audience, perhaps they are digital nomads, or perhaps they are immigrants who seek success in a new world. Whoever they may be, they should benefit from participating in a token project in more than one dimension and in turn make more contributions to the token economic ecosystem. We had seen internet grew because the community using internet for increasing number of reasons grew, and in turn internet grew with the community. This multiplication of positive feedback loops both in quantity and style as well as the accelerating rate of flow of these loops were crucial to token economics. There was a reason world wide web was ubiquitous today and LAN slowed died.
Second, network effect was crucial to the success of Christianity. However, it was not just pure quantity, Diversity was just as important. In fact, studies on social media did point out the more distinctive social networks a movement can penetrate, the better chance the movement will be at sustaining itself and undergoes continuous evolution to adapt to changing circumstances. This was also true for the expansion of token system adoption. A resilient and expansive token system is one that has a diverse range of community members. Not just speculators and not just engineers, not just anarchists and libertarians. Furthermore, Token economics should concern itself much more with network sciences such as topology, complex adaptive system and artificial intelligence than traditional economics simply because virtual networks are becoming increasingly integrated in everyone’s life and work. There are just so much more sources of economic data and better tools to analyze them in token systems, so why not aim higher?
Finally, let’s not take it for granted that Christianity was supposed to be what it is now. It grew because it took heed of new economic structures that were catalyzed by changing circumstances and nudged things along those directions. Soup kitchens and widow employment were all emergent phenomena induced by the demographic shifts that the community then expanded into extensive programs across the Roman world. In a similar vein, token economics should be much more aware of the emergence of new economic structures and be much sensitive to evidence that suggests these phenomena. They are usually the symptoms of greater changes in the undercurrents of our economy and social reality. While there might be many false positives, the fact that finding just one can be extremely beneficial to the entire public blockchain sphere and one could hope, for the global economy as well. For it provides a possible way out of the ominous future depicted in the “Capital in the Twenty First Century”. Consider emergent economic structures a product of technological advancement and social shifts, the implications of us ignoring potentially better ways to discover and nurture emergent economic structures are too far-reaching to not be examined more closely. This will be a main direction where I will dive deeper and I kind of hope that I would have some company on the way to the discovery of token economics.
