Understanding the New Crypto Economic Paradigm

TL:DR; seeing the arrival of a brand new paradigm in real-time is very difficult and challenging. Not seeing it represents a missed opportunity.

My kids cannot understand that every single TV show that they want to watch isn’t immediately available. For them, there is no such thing as “going online.” Alexa and Siri have the answers they need.

This is their paradigm.

All of us live in paradigms and most of it is formed by the world in which we grew up and live.

Our paradigm involves large corporations and stock markets. The exist and, it seems, as if they have always existed.

But they haven’t.

The stock market is somewhere between 150 and 400 years old, depending on your viewpoint.

The concept of a “corporation” is roughly 200 hundred years old. It gets a lot of attention on Yuval Harari’s book, Sapiens, actually, because the idea that there could be an entity that buys, sells, and more but is not a person was totally revolutionary- at the time.

Now, it’s all part of our paradigm as we know it.

But, as we’ve said here before, blockchains represent a new economic paradigm.

I bring all of this up in order to call your attention to Mike Maples’ amazing piece, Crypto Commons.

What Mike does brilliantly in this blog post is to explain how crypto-economic systems represent as big an economic innovation as the concept of a stock market, which has “generated $30 trillion in abundance.” Stock markets have helped increase GDP per capita by 6 fold globally in the past 200 years.

Mike’s argument is that crypto can unleash the next $30 trillion in abundance by virtue of the fact that they can solve the problem of “decentralized governance at scale.”

As he writes,

[Blockchains] create the first medium for people to be rewarded for enforcing decentralized “governance” at scale.

Now, if this concept sounds familiar, it should because I blogged about it just the other day.

Where he takes it to the next level, for me, is that he puts governance in terms of the “killer app” of blockchains-markets, thereby marrying the two concepts.

The Internet moved information.

Blockchains move value in the form of peer-to-peer markets.

A vote, no matter how it is weighted, is a type of value and that value can be transferred via a peer-to-peer market. Those votes enable people to decide how they want to live and create the best environment as they see fit.

A key part of Mike’s post hinges on the arguments of the 1998 Nobel Prize winner in Economics, Elinor Olstrom.

As he writes:

“Just like a stock market was a financial platform for creating the scalable corporation, blockchains can be governance platforms for enabling the scalable commons.”

When I talk to people about projects like Bitcoin or Augur, I invariably run into questions and concerns. Plus, a ton of skepticism.

I am not dismayed or upset. What I have learned, however, is that I need to figure out a better way (and it starts here on the blog) to help people understand that the innovation we are seeing now in terms of crypto-economic systems and markets is akin to what was once a brand new concept- the stock market and the corporation.

Today, those entities are part of our paradigm.

Tomorrow, scalable, decentralized governance systems based on blockchain systems will be part of our paradigm.

“Investing in stocks is obvious today, but imagine you were a blacksmith or fur trader in 1870, and someone offers a share of stock in a railroad. It wasn’t “valuable” like money because you couldn’t go to the store and buy things with it. And you couldn’t say to a train conductor “I want to use my share of stock to take a ride on this train.”

Now, change that just a bit.

Investing in crypto tokens is obvious today, but imagine you were a lawyer, doctor or accountant in 2018 and and someone offers you tokens in a decentralized network.

It wasn’t “valuable” like money because you couldn’t go to the store and buy things with it. And you couldn’t say to a barista “I want to use my tokens to buy coffee at Starbucks.”

Paradigms change as technology evolves. Thirty years ago, you had to wait for a show to come on TV.