Blockchain, Cryptocurrency, and the Reasons Why
From time to time in the history of big impact inventions (the electric motor, harnessing radio waves, the internet, etc.), something comes along so revolutionary and transformative in its potential, that the majority of people cannot at first find an angle of understanding, a way to gain new eyes.
For those of us who have seen the new landscape, one built on blockchain, it’s a larger world. Many of us become evangelizers. We see salvation and we want to share the good news. Probably to a lot of you, we look crazy.
Comprehension begins with metaphors and there are a lot out there, from poker to fruit to this adorable one using Legos where this fellow talks about the fossil layers.
Daniel Jeffries, has done the best job I’ve read at explaining what a powerful invention now sits in front of us. Jeffries claims, “It’s more revolutionary than the cotton gin, the steam engine, the PC and the smart phone combined.” He walks us through a history of the single entry ledger, then double entry and finally he credits Yuji Ijiri, with perhaps being a little too ahead of his time, inventing triple entry ledgers (essentially what blockchain tech is, a powerful tool of trust and verification), in 1989. And he goes on to refute, one by one, the most common ways in which people are dismissing this as just another fad or a flash-pan phenomenon like the Dutch tulip craze of 1636.
In other words, probably more than half of the exchanges of currency, goods and services currently operating in our world, can gain efficiency, lower cost and become more secure and reliable through the appropriate deployment of a scalable blockchain protocol.
“Crypto is a bet against the modern macroeconomic dogma, which is passed off as science, but is really a branch of politics — with rulers, winners and losers.”
- Naval Ravikant –
Blockchain as the Biggest Disruption
We live in a world predominantly shaped by centralized command and control systems (businesses, governments, etc.), hierarchies with concentrated and centralized power.
Sometimes this queen or king in the center is pretty benevolent. For all the criticisms of giants like Apple, Google and Facebook, so far, they have been relatively gentle on all of us. So have most of our American presidents.
But over the years, the incentives of command and control systems as they exist now, of our current “more is better” system of commerce, is to concentrate power and wealth in fewer and fewer hands. In this piece by Eric Ortiz, he argues that we in the United States may already be living in a society with the most unequal distribution of wealth the world has ever known. And I would add, that we also, in the United States, have the most heavily armed citizenry the world has ever known. Powder keg much?
The distributed nature of blockchain, the trust it builds between parties who don’t know each other, has the potential to disrupt these centralizing forces and allow us to ask big questions. Is growing the economy, based on accelerating production and consumption of goods and services, always a good thing? Is creating more jobs always a good thing?
The Swedish Minister for Employment and Integration, Ylva Johansson was recently quoted, “The jobs disappear, and then we train people for new jobs. We won’t protect jobs, but we will protect workers.” They also have a robust social safety net and a shrinking work week. The gains are far more equitably distributed than in places like the U.S. and U.K., both in profit and in leisure.
Our concentrations of wealth and power are destabilizing. They mean that if some particularly dubious, stupid or malevolent people fall into those roles and/or amass that wealth, they can do a lot of harm very quickly. Imagine a future Google CEO who doesn’t exactly take “do no evil” to heart. What could happen?
So, enter cryptocurrencies, blockchain, their decentralizing power and the beginning of a technology that just might save us from ourselves.
Cryptocurrencies are distributed and engineered. This means that unlike fiat currencies like the dollar, another “faith” system of value, cryptocurrencies like Bitcoin can be deflationary. They can be calibrated in such a way that even as more becomes gradually available, the value can be nudged upward, while the trend lines for almost every fiat currency is downward (inflationary). This is a job of central banks now with fiat currencies, managing inflation.
What is out of control of those issuing our new digital currencies is widespread adoption, but this can be stoked through expanding use cases. What does this mean, potentially? A future of hyper-abundance. A massive expansion of the pool of wealth without Zimbabwe-like hyperinflation.
Unlike our current command and control economics, a future economy built on cryptocurrencies and blockchain can have built in incentives for growing trust and distributing rewards widely.
This is nothing short of a macro-economic revolution.
We can engineer our systems (not every chain will) to harness profit motive, but to also incentivize distribution and utilization across as many participants as possible. This new model is a challenge that reflects the values of many of us building new protocols. Our blockchains can operate as a substrate to almost any online transaction, and at any scale. The benefits can accrue to anyone with access to any level of computing.
So what about those jobs? It is undeniable and probably inevitable that blockchain, by going beyond smart contracts to “programmable information,” will remove the need for a lot of middlemen and trust brokers. Goodbye jobs. Should we mobilize and race to invent new jobs for them to stay afloat?
I don’t think so.
Too many folks in our world are forced out of sheer necessity to work in conditions and for pay that the privileged among us would quickly find unbearable.
I believe, like many who have broad vision in the growing technologies of distributed ledgers, AI and robotics, that a Universal Basic Income becomes an inevitable next step. The abundance we are about to unlock can fulfill the bottom of Maslow’s Hieararchy of Needs for every American — and hopefully every human being on earth, in time — and maybe empower many more people to harness their untapped creativity and ability to learn and explore by returning to them the most valuable commodity of all, the only one that is truly finite, their time.
The Five Whys
I have seen this powerful and simple tool mend and heal broken relationships, bring communities together and fix bugs in software or a broken machine. You just keep asking follow on why questions, down the rabbit hole.
Blockchain technology — Bitcoin and cryptocurrency being only an early use case — is an elegant and potentially transformative shift in how information and value is moved and controlled, focused not just on building trust, but on building cooperation and incentives to cooperate at scale.
1) Why use it?
Because a distributed ledger is a huge leap forward in security and disintermediation. It makes the need for middlemen in many cases obsolete. It is a tool that can build trust and cooperation at scales never before possible.
2) Why is this a good thing?
A scalable distributed ledger, without data bottlenecks and energy consumption issues, will empower people, from solo entrepreneurs up to massive enterprise companies, to work far closer to their end users. Programmable information will replace intermediaries. In other words, huge reductions in cost and additions of efficiency and security.
3) Why would we want this?
For the average person, it will make much of what you do, any system that uses information, faster, leaner and more efficient, including the supply chains that bring you all of your material goods.
4) Why isn’t that just an explosion of economic growth? Won’t that accelerate the concentration of wealth and power and leave most folks out in the cold?
It could. With the internet, after an egalitarian beginning, we created “walled gardens” and the trend has moved us in the wrong direction, concentrating profits in the hands of a small minority. Which is why we should support distributed ledger systems that are implicitly designed to share the wealth and empower as many human beings as possible. Commerce here can be the vehicle for tangible ethical progress.
5) Why is this a good thing?
Because it will return to us our time. In 1930 economist John Maynard Keynes predicted that the growth of our economic efficiencies would mean his grandchildren would only work for 15 hours per week. Yet somehow, this didn’t happen. We became, some of us, more resource rich and more time poor. How did this happen? The previously mentioned concentrations of privilege, wealth and power are self-perpetuating feedback loops. The incentives to grow consumption mean nobody ever really has enough. Having capital grows capital, more than having a great work ethic, good ideas or credentials ever could.
Blockchain presents an opportunity for us to recalibrate and shift the incentives of this economic system. If there is an explosive growth in the availability of wealth through crypto-currencies, this is our chance to broaden access to that wealth as widely as possibly.
6) Okay, one last and 6th why. Why is getting more time back helpful, if we achieve it?
Up near the top of that Maslow’s Hierarchy is the idea of “self-actualization,” the notion that when freed to find our autonomy (given time and our basic necessities met), to relax and get out of our fight or flight fearful instincts around basic survival, many of us, perhaps most of us, can engage in one of the more fulfilling outcomes of true freedom, the ability to explore, learn and create, relationships, things and meaning. This builds on a theory that our world is filled with people like Einstein and Marie Curie and that their ability to manifest their potential is locked within the prison of poverty in childhood, through no fault of their own. Imagine most of the human race in a “flow state.” What might we accomplish?
In short, blockchain can harness the incentives of our current system to shift the macro-economics in the direction of a better system, one that staves off catastrophe and lifts more people out of poverty and marginalized positions than any invention…maybe ever.
So that’s why I leap out of bed to work on this in the morning.
Do you work in a new distributed ledger technology? What do you think about how blockchain might transform and improve access to basic needs and opportunity?
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