Crypto-Economics Could Change Our Understanding of Value
tl:dr; crypto-economics, if properly conceived and implemented, could enable a much richer way to measure the value created in an economy.
One of the longer articles that I have read recently was Economics back into Cryptoeconomics. Be forewarned…this is not “light reading.”
What it is is an effort to help people understand the “economics” part of crypto (sometimes called “token”) economics. The crypto part, while not simple, can be learned. Economics, obviously, goes back a lot farther and the authors invoke Friedrich Hayek and Ronald Coase among others.
Having some background in economic theory may be helpful, but not a deal breaker.
There are plenty of naysayers about the possibility of a crypto-economics discipline. I’m not one of them and the article helps explain.
Overall, I felt like I walked away with a way to think of blockchains as enablers of markets of digital-native goods backed by cryptographic proofs.
What’s more, because of the relatively low transaction costs, the capability to measure value in smaller increments in previously untouched markets may offer us new insights about ourselves and our society.
-For example, they talk about tokens as being an alternative unit of account. For example, we have bushels of corn. Why not have Sia/Filecoins worth of storage? Each coin then represents some unique digital good, in this case, some amount of memory on a hard drive. I suppose there could be a megabyte market, but it needs to be priced in something and it can’t be dollars or pounds.
-It’s too much to go into here, but he talks about how the value that people create for a network (e.g. posting to Steemit and curating there to earn tokes) are a form of intangible value or “synthetic knowledge.
Now, they are saying, we can use those tokens as new ways of measuring intangible value
-Which brings me to the next point. One powerful quote was:
“the lack of appropriate tools for valuation has emerged as a conspicuous accounting problem”
which was followed by
“some leading accountants claim that the profession is in a crisis because of an incapacity to measure the value of intangible assets.”
They went to great lengths to show that the model for valuing a company that we use is premised on an earlier, industrial era. Now, the value of a company isn’t its mills, mines, and factories. It’s the knowledge that it has and other intangibles. Companies (and accountants) are going to need a way to measure this.
I particularly liked how I could see this applied to things like teachers, stay-at-home moms/dads, first responders, and veterans.
-and finally, something for the rest of us….that “cryptotokens are in this context a put option on the state: the right to sell out of the state’s unit of account.” Thought that was genius…and accurate. After all, there’s no guarantee that any fiat currency will last forever (or even maintain while it is around). Now that you have an option, it makes sense to protect yourself and your family.