An Ocean of Tokens
To understand where we’re going, we have to start out with where we’ve been and where we’re at now.
In the past fiat was issued by entities, which backed that currency with a particular asset. Historically, this model example is applicable to gold, both as a resource and commodity. Now it can be compared to a principle of faith — a mass hallucination. You have faith when you go into the bank that you can withdraw this money, and you have faith when you go to exchange this money for goods and services, and you have faith that the region supplying this currency will constantly back the value of this currency in some way. It is a mass understanding that suppliers and owners of resources will continue to facilitate use in this currency.
Next, there are other territories with their respective currencies, trading with one another. Optimization of local resources through trade in their own currencies helps distinguish what resources they demand. Similarly in how currencies such as the Euro, the Dollar, Yen, Yuan, etc. are optimized from territory to territory.
Additionally, there are secondary markets where these currencies can be exchanged openly as well — ultimately equating these acts of trading in the values of those underlying assets like land, labor, capital, and intellectual property.
The idea of the currency continues to be abstracted beyond paper, becoming a representation moved onto ledgers. Money is evolving into an electronic binary representation of those resources and assets.
Then there is cryptocurrency (crypto), like Bitcoin and Ethereum. Crypto allows not just one institution to own a ledger or to distribute the funds, but allows anyone to participate. This concept enables, quite possibly, the first true global currency that doesn’t belong to one particular territory of a majority of people determining value.
Having a representation of tokens and the underlying assets, has created this kind of Cambrian explosion, a variety of tokens, of cryptocurrencies that start representing their own optimizations. Similarly to the Dollar, the Yen, the Yuan, the Euro etc. These tokens now abstractly represent their own optimization.
We should always be thinking of these kind of boom and busts economies that grow and evolve in terms of explore and exploit. Their growth function comprises a parameter that you tune to explore more or exploit some resource, in attempt to find global maxima. At the moment, with current token offerings, it is explorative. Tokens are being created with the intention that they will optimize for a particular accessible resource, whether that’s represented by an entity like a start-up or a business.
These tokens are representations of these underlying resources, assets and access. Participation isn’t limited in one chain, there is the ability to fork that chain, participate in it by creating applications in different ways using the underlying technology . Or new whole chains with new limits, optimizations, and tradeoffs could be created.
The advent of things like side chains or networks that are off chain enable people and agents to transact off chain, then settle back into the main chain. Part of the stack that we’re using technologically is becoming part of this chain. Stack chains will become a new kind of protocol experience — a localized stacked chain, relative to your device. Each layer in the tech stack will be represented by its own tokens and its own use locally. Transactions that happen between the stack locally will actually participate in off chain transactions or side chain transactions that will eventually settle back into the main chain.
Resources that the tokens represent will start to unlock and optimize for new technologies as society values those new technologies. It’s a constant optimization between explore and exploit, from the tokens that represent the resources, assets and values that society and technology find utility and worth in.
There will one day be a trillion type of tokens and maybe they’ll all collapse back into one chain and one technology that facilitates them all. But right now we’re still in the explore phase. When you explore, you do a lot of different things. You try to optimize in a lot of different ways to find what works and what doesn’t, and then when you exploit, you maximize output and make efficiencies for your selection. We maximize the energy we expend in order to find some new maxima. Once you find a new maxima, you move your resources from exploring to exploiting that maxima.
This current explosion of tokens represents exploration. A lot of these tokens will fail, since it’s the nature of the function. This pattern will keep repeating as technology keeps evolving over time and we discover what works and what doesn’t.
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