Using the Blockchain to Value What’s Valuable
This post is the third in a series of articles by Daniel Thorson and Michael Fogleman about cryptocurrencies and the possible futures they open up for organizations, communities, and individuals. It discusses the relationship between money, incentives, and systems, and points to how different crypto projects play with incentive systems in novel ways.
PART 1 | PART 2 | PART 3 | PART 4
Money is one of the most important innovations in human history.
In fact, money has been so successful that we often forget that it is a human invention. What we call “money” was designed to function in certain ways. Most of the seemingly intractable problems we see around the world today are symptoms of, in the words of Douglas Rushkoff, “running a 21st century digital economy on a 13th Century printing-press era operating system”. The way money was designed has brought us to a place of ridiculous wealth inequality, climate collapse, and resource depletion. This world-destroying logic is part of the design of our current version of money.
Fortunately, anything that has been designed can be redesigned.
What is money good for?
Money represents value. Value, broadly speaking, is something that a human likes, uses, or wishes to exist. Money is a powerful tool that human beings use to express how they want the world to be. For example, imagine you want to live in a world where you have a top-of-the-line phone in your pocket. With money you can rearrange the world to align with that want. You can use money as a tool to remake the world to accord with your values. In this case, having a fine new phone.
Another use of money is to provide an incentive for human action. Through the wonders of money you can cause buildings to be built, wars to be fought, or have almost any kind of experience you like. Money’s innovation is that it is a generalized form of incentive that works for everyone.
Unfortunately, within our current economic model there are huge and important things that most agree are valuable and meaningful, but that our current system is unable to value.
Where is the money in cleaning up our local lake? Where is the money in hosting healing conversations between politically polarized groups and individuals? Where is the money in addressing the epidemic of loneliness? Where is the money in solving systemic poverty?
If we look around, we can come up with a long list of valuable but unprofitable projects. These projects show just how out-of-date our economic, financial, and institutional code has become. They are symptoms of a system that is no longer able to serve us in the way we need.
It is past time for an upgrade.
We must redesign the system.
Enter the Blockchain
There is a good deal of confusion about blockchain and distributed ledger technologies. Rightly so, they are extraordinarily complicated and hard to understand, even for the technologically savvy.¹ Even if we understand the fundamental technological innovations of the blockchain, it might be beyond us to then imagine the ways that these technologies could change our world.
For now we can understand blockchain as a technology that allows us to replace trusted third parties with code. Blockchain allows us to create distributed systems that duplicate the utility of various functions that are currently served by a trusted third party such as banking, contract creation, or identity verification. While it is certainly possible to “blockchain-ify” existing social and economic arrangements, it is also possible to create entirely new arrangements.
In the previous article, Crypto-Optimism and Crypto-Pessimism, we looked at individual points of the generally optimistic or pessimistic opinions about cryptocurrencies and distributed ledger technologies. Let’s raise the stakes and look at these perspectives as encompassing visions.
The Pessimistic Vision
Nation-states consolidate their power using blockchain. Totalitarianism on the Blockchain.
In October 2017, Cointelegraph reported that Russia will issue its own “CryptoRuble.”² In the same month, Forbes reported that China was not far behind.³
It is ironic that a technology initially pioneered by anarchists and libertarians could become the key technology in a techno-totalitarian state more terrifying than any the world has seen. Imagine the capacity to see the movement of every unit of currency, the ability to instantly shut off anyone’s access to their account, and to automate tax retrieval.
This future is a real possibility and it would be unwise to underestimate the lengths nation-states will go to protect their dominion. That being said, it is more likely that nation-states will begin implementing their own cryptocurrency systems alongside the sorts of projects we will see in the optimistic vision.
The Optimistic Vision
We are seeing the rise of creative distributed systems that use cryptocurrencies to define incentive structures.
Incentives are the key to understanding how blockchain will have a bigger impact than merely being “digital gold”. The creation of such incentive systems was previously the domain of corporations and states. Only they had sufficient resources and power to create systems that would organize human behavior at scale. The rise of creative distributed systems enabled by distributed ledger technology has reduced the cost of novel system creation by many orders of magnitude. Now a programmer with a vision can create a system that incentivizes human behavior on a global scale.
These systems are limited only by our ability to measure whatever we would like to incentivize. As Naval Ravikant says, “what gets measured gets valued.”⁴ As we find a new way to measure different things, we will also find new ways to value them. We can then incentivize those things. That allows us to encourage behaviors that add value to the system’s overall health.
Here are some projects that play with incentives in new ways.
- Root Project — A crowdfunding service that uses cryptocurrency to align incentives for community projects.
- Props — A social video platform that incentivizes user created content through crypto rewards. Aims to take down YouTube.
- Eco Coin — Cryptocurrency intended to allow local communities to incentivize environmentally responsible behavior.
- Pink Coin — Charity cryptocurrency. Claims that individuals can ‘earn money’ while being a “champion of charity”.
- Metal — A Venmo-like platform that incentivizes usage by offering 5% back on all purchases. Aims to take down Paypal & Venmo. (Disclosure: I am an investor in MTL)
- Simple Token — Allows organizations to ‘roll their own’ crypto to incentivize certain behaviors.
- Circles — Universal Basic Income crypto project that allows local communities to create a high-velocity, local network based currency. The structure of the currency incentivizes certain ways of spending and saving.
- Basic Attention Token — Realigns advertising incentives to redistribute economic value to users. Aims to disrupt the advertising industry (Google & Facebook).
- Bitnation — Attempts to replace the nation-state by reprogramming incentives so that individuals choose to become voluntary citizens. Aims to disrupt nation-states.
- Aragon — A build your own Distributed Autonomous Organization framework. Projects like this will eventually allow tech savvy non-programmers to spin up incentive systems.
All of these projects remix incentives in creative ways. Most of them will fail before they get off the ground, and many of the rest will never find massive adoption. Perhaps one or two of these projects, or an entirely new project, will succeed. That will change the world. In any case, the important thing is that these projects are now possible to attempt. This is a very big deal.
Bitcoin began something much more significant than digital gold. It was the beginning of human beings learning how to make the various systems that structure our world digital and programmable. These technologies offer us a chance to experiment with alternative systems and, perhaps, to find something that works better for all of us.
¹ For the technical details of blockchain, please see Michael Fogleman’s previous article in this series, Crypto-Optimism and Crypto-Pessimism.
² BREAKING: Russia Issuing ‘CryptoRuble’.” Cointelegraph, Cointelegraph, 15 Oct. 2017, cointelegraph.com/news/breaking-russia-issuing-cryptoruble.
³ Hsu, Sara. “After Cracking Down On Bitcoin, China Contemplates Its Own Digital Currency.” Forbes, Forbes Magazine, 19 Oct. 2017, www.forbes.com/sites/sarahsu/2017/10/19/will-china-host-the-worlds-biggest-state-backed-digital-currency/#76328a811231.
⁴ See also: Naval Ravikant’s Tweetstorm on Blockchain
Vertical Context Cues
Curiously Related Rabbit Holes
- Sacred Economics: Traces the history of money from ancient gift economies to modern capitalism, revealing how the money system has contributed to alienation, competition, and scarcity, destroyed community, and necessitated endless growth.
- Mobilization Systems: technologies for motivating and coordinating human action: Discusses present and future ways of governance, including a novel connection between psychological flow and stigmergy
- The Fluid Mode Society: Theory of the emerging form of social systems as ‘transitory organizations spontaneously assembling within a durable social infrastructure matrix’. Includes for an ongoing meta-systematic re-negotiation of individual and social interfaces at all scales.
