with the ongoing revolution in
information technology our economic
systems of organization are being
transformed and disrupted by the rise of
information networks it started with the
advent of the personal computer World
Wide Web and with the rise of online
platforms the disruptive power of
information networks to reshape economic
organization became ever more apparent
today this process of economic
transformation continues with a new set
of technologies as we are currently in
the process of remaking the technology
stack of the Internet building what is
called web 3.0 a primary component of
which is the blockchain
the defining feature of this next stage
of economic development is that it
decentralizes our economy and shifts
operations to global information based
networks like never before
Internet technology stack that is
currently being built enables a network
of computers to maintain a collective
database of value ownership and
exchanges via Internet protocols this
bookkeeping is neither closed nor the
control of one party rather it is public
and available in one digital ledger
which is distributed across the network
the most mature example of this is what
we call the blockchain in the blockchain
all transactions are logged including
information on the date time
participants and amount of every single
transaction on the basis of
sophisticated mathematical principles
the transactions are verified by the so
called miners who run the computing
infrastructure required to maintain the
Ledger's
the technology of web 3.0 enables a new
form of decentralized economy as it
removes the dependency on a centralized
authority for managing the network
instead replacing it with a distributed
consensus model managed by many this
shared securely encrypted database
enables trustless peer-to-peer
interactions via new internet protocols
people can begin to set up their own
networks for coordination and direct
exchanges of value peer-to-peer and it
enables the rules of these transactions
to be automated in new ways
at the heart of this system is the
distributed ledger which records the
exchanges of value these distributed
Ledger's can account for and validate
the exchange of any form of value it may
be a currency it may be property it may
be a kilowatt hour of energy the usage
of a parking spot the number of
followers a person has on social media
these distributed Ledger's provide the
infrastructure for building token
economies a token is simply a quantified
unit of value tokens are both generic
and fungible it is generic in that it
can be used to define any form of value
and it is fungible meaning it is
exchangeable between different specific
forms of value
traditional monetary currencies are not
fully fungible as there are many
circumstances when one cannot exchange a
monetary currency for other forms of
value for example likes on social media
may have a certain value but typically
cannot be directly exchanged for
monetary currencies
a token differs from our traditional
monetary currency and that it is more
generic our existing currencies define a
particular type of monetary value what
we call utility which is based upon the
economic logic of the industrial economy
while tokens because they are more
generic can define a broader set of
values social capital natural capital or
cultural capital for example natural
capital is the integrity of an ecosystem
that enables it to function and provide
ecosystems services to people in our
traditional economic model we only
quantify and account for the services
that the ecosystem delivers such as food
water materials etc however we do not
account for the integrity of the
ecosystem that enables it to function
the generic nature of the token means it
can be used to account for values such
as this natural capital
the capacity to differentiate between
different forms of value is made
possible by the programmability of token
units because tokens are digital
they are also programmable which enables
one to specify certain rules for that
token and have those rules executed when
it is exchanged thus enabling certain
constraints or possibilities in its
usage one can specify that a certain
token is only spendable under certain
terms or specify how it can be converted
for example one could program the tokens
so that it cannot be exchanged for
diamonds that are mined in a particular
location of the world known for its use
of slave labor in this way the token is
not just a unit of utility but also
expresses social values
likewise one could create a healthcare
allowance in dollars or Euros that could
be programmed on the blockchain so that
it can only be used to pay for
healthcare at certified parties
automating these measures leads to a
considerable decrease in bureaucracy
this programmable token system works to
shift our economies from a single value
model to a multi value model they create
many different types of value and
economies but still retain the
possibility for exchange between them
the distributed web is the convergence
of the economic market system with
information technology that enables us
to convert traditional organizations
into distributed markets based on tokens
tokens define whatever is a value within
that organization and the market system
is used as a distributed coordination
mechanism for managing and growing that
resource
by creating an expanded definition of
value and converting closed
organizations into open markets this
means that we can vastly expand the
scope and capacities of the economy the
provisioning of services within the
economy no longer becomes dependent upon
a limited number of centralized
organizations acting for profit but
instead anyone can now provide the
service via these open protocols this
means we can harness the resources of
the many in a distributed fashion
instead of being dependent upon a few
likewise the token economy can harness
the motives of individuals not just for
financial rewards but for a multiplicity
of values
to illustrate how this works let's think
about the service of cloud data storage
currently this is provided by a limited
number of enterprises like Amazon and
Microsoft these centralized
organizations have huge data centers but
still those data centers are only a very
small fraction of the storage capacity
in the world most of the storage is in
the personal computing devices of
end-users and most of that is not being
used a file coin is one organization
that works to create a distributed token
economy for this storage file coin is a
decentralized storage network that turns
cloud storage into an algorithmic market
the market runs on a blockchain with a
native protocol token also called file
coin which miners earned by providing
storage to clients conversely clients
spend file coins hiring miners to store
or distribute data the sum of all these
computers that are coordinated through
an automatic market system on the
blockchain can provide a much larger
more resilient system than the
centralized model while reducing
redundancy and inefficiencies in the
overall system it also pushes the
provision of the service out to the
location where it is demanded as people
are connecting peer-to-peer locally
instead of going to the centralized
server that may be on the other side of
the planet
tokens such as file coins can be
exchanged for other currencies or
members can hold on to their tokens
whose value may appreciate as the
networks grow over time
this illustrates a very interesting
aspect to tokens anyone who uses the
system is also an investor in the system
thus tokens merge investment capital and
liquid exchange capital in new ways in
the traditional capitalist model we have
a divide between owners of capital and
workers a divide between a more fixed
investment capital and liquid exchange
currencies the shares in a company are
not the same thing as what people get
paid with for working in that enterprise
and use for everyday exchanges in the
market this creates the notorious divide
within the industrial economy described
by Karl Marx between the capitalists
that make money off their investments
and the workers that have to stay
selling their labor for money without
ownership
tokens represent both the inherent value
of the community which is its capital
investments and they are also units of
exchange within that ecosystem the
founders of the project issue a number
of tokens at inception and sell those
for someone to use the system they have
to buy the tokens in so doing they
become part investors in the project but
they also use those same tokens to make
exchanges within the market thus the
people creating the value in the
ecosystem are also getting paid in
tokens meaning the workers that are
creating the value through their work
also have ownership within the
organization
in the traditional utility-based
exchange of cash people have no
ownership in the organization they just
try to make money and this can create
divides between the owners and the users
the token system works to better align
the incentives of the individuals with
the overall system because the value of
the tokens they earn is also dependent
upon the value of the whole when you are
working for a token network you are both
working for yourself and for the whole
organization as the to become more
aligned unlike the traditional divide
between capitalist and worker
the token system enables networks to
overcome the chicken-and-egg problem if
you are the first user of a network like
eBay then the value would be very low
thus it is difficult to get the network
started because it has to reach a
critical mass before it will be of value
to the users this means that it may
require a large investment to create a
network the Silicon Valley model worked
by having large initial venture capital
backing that enables them to overcome
this but it means that most networks
don't get off the ground and that once a
network reaches scale and has value it
becomes dominant and very difficult to
compete with resulting in a lock-in
effect and making it easy for large
incumbent organizations to become
extractive over time it also means that
those who founded the organization win
big time if the network takes off it
creates a winner-takes-all dynamic with
most people losing because of the
threshold
the token system extends the benefits as
being an early adopter of a new network
to all the users and thus helps to solve
this issue it does this by issuing
tokens for anyone to purchase at the
beginning of the project as the project
grows the tokens come to have greater
value for all of the holders
this also works to make the users of the
network promoters of that organization
because as it grows the tokens that they
hold become more valuable it
incentivizes people to join networks
early so as to gain the benefits of the
increase in their token value as it
grows which reduces the problem of
thresholds with this technology
companies no longer have to go to
traditional capital markets through an
initial public offering of shares in the
company in exchange for money but
instead they simply sell tokens directly
on the Internet to raise initial capital
for the project in what is called an
initial coin offering or IC o----
this means that founders can monetize
their networks directly by simply
holding their tokens and making the
network useful
to date we have had an Internet patched
onto the side of an economy operated
through the many centralized
organizations of the Industrial Age
creating a strong contradiction between
the underlying technology and the
institutional arrangements the
distributed web will work to transform
this by merging information networks and
economic organization as the flow of
information an economic value becomes
one this will greatly reduce our
dependency on centralized organizations
expanding markets as systems of
organization the global market economy
will become available to the many
through small distributed peer-to-peer
interactions running through web
protocols as the decentralized internet
takes us a step further into the
networked economy
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