We messed up
[Firestartr, OpenOcean hosted the 4th Spark Series, a debate on crypto-economics, at UBS in central London. You can listen to the podcast from the event here.]
We messed up when we built a communist economy with shared ownership of the means of production, and a negation of incentives for free economic man.
We messed up when we built a market of capitalist communism, aggravated and magnified into the effective but pernicious ‘religion’ by technology.
Today, 8 men own half of the world’s capital, all while the poorest 3.6 billion — the majority of which are women — are facing the daily struggle to survive (Oxfam report, 2017). In 2015, the number was 62. Five years earlier — 388. And the gap is deteriorating: while the wealth of the richest 62 people has risen by 44% in five years since 2015 (to $1.76 trillion!), the “wealth” of the poorest half has dropped by 41% (Oxfam report, 2016).The world is falling into cracks.
But crypto-economics, and new decentralized economies might just give us new alternatives for organizing social and economic exchange. Advances in cryptography give us the ability to prove facts in the past, while natural economic incentives can be reigned to deliver future desirable properties. This is potentially transformational.
Let us go back a little. Satoshi Nakamoto released his paper on Bitcoin in 2008. Vitalik conceived of Ethereum in 2013. Four years later, there are 877 different cryptocurrencies in circulation, with Bitcoin valued at $45bn and Ethereum valued at $21bn (NB: but, we know not when the flippening cometh).
The pace of innovation in decentralized technologies is accelerating faster than anyone had imagined. This has resulted in some extraordinary projects being built on top of these networks, many of which have used a fundamentally new method of funding and sharing network value. By creating and distributing digital tokens to their early adopters, these companies have managed to not only raise millions of funding (since May 1st 2017, 43 projects have raised over $1.2bn worth of capital in ICOs), but also solve the “chicken and egg” problem of “network effect”. Since the network’s digital tokens increase in value as the network itself grows, the community is incentivized to adopt the protocol or dApp utility, and spread the love for the product.
Some see this crypto boom as an opportunity to speculate on the value of a platform’s cryptoassets and hope they will appreciate with the network’s utilization. Others view it as a new model of crowdfunding, challenging traditional VC in particular. Yet others envision it as long-sought opportunity to fund open source models and join exciting projects on the first floor.
But there’s infinitely more to it.
Interactions and transactions between mutually mistrusting parties have been taking place for centuries, with a multiplicity of models being developed to predict optimal outcomes. For centuries, the solution to achieving game-theoretic equilibrium was by inserting a trusted “middleman” in the transaction — a central authority exercising governance and ensuring the transaction remains incorrupt.
The current internet paradigm is firmly based on the fact that we must entrust established providers with an ever more precise and nuanced version of our digital identity, in order to gain value from their networks — which in turn gives the centralised giants like Facebook, Google, Twitter and PayPal sole ownership and power over our data.
The development of decentralized networks, crypto-economics, and the game-theory inherent in these approaches, propose new models for how these transactions take place, removing the need for the “trusted middleman” and giving the network itself the power to self-govern in a sustainable fashion. Henceforth Margin should only accrue to where value is truly delivered.
The flexible platform for ‘permissionless experimentation’ that the blockchain(s) provides seems destined to ultimately birth and evolve the systems that successfully tread the tightrope between the alternate ‘fatal conceit’s of both rigid, corrupt central planning and anarchic, brittle decentralisation.
So we see here that it this is more than a novel funding model. We are observing the creation of new organizational — and indeed possibly government and social — structures, where both creators and users of the network have a stake in the game, and where their goals are unified. This new paradigm shift promises the entirely new, “free, decentralized, and open future” we’ve been dreaming of since the invention of the Internet.
With this premise, we brought together some incredible panelists to debate the motion ‘This house believes that crypto economics is the paramount concept of this century’:
Vinay Gupta — founder @ hexayurt.capital and #Mattereum
Jon Matonis — Founding Director @ the Bitcoin Foundation
Irene NG — Chairman and Chief Economist @ HAT Data Exchange; Professor of Marketing and Service Systems @ University of Warwick
Jack du Rose — Co-founder @ Colony; Co-founder @ Ownage
Jeremy Millar — Chief of Staff @ ConsenSys; Founder & Managing Partner @ Ledger Partners LLP
Christina Frankopan — CEO @ Protozoa; Advisor @ OpenOcean and Firestartr
George Hallam — Head of BD at Melonport AG; Previously at the Ethereum Foundation
Richard Muirhead — Founding Chairman, Firestartr; General Partner, OpenOcean
As well as a closing keynote Michael Mainelli — Alderman Professor; Executive Chairman @ Z/Yen Group; Emeritus Professor of Commerce @ Gresham College; Principal Advisor @ Long Finance
Discussion plunged to protocol level and soared to discussions of immortality including such (currently) unsubstantiated claims as:
- Virtualisation of most assets will create a revolution that will be accelerated by the introduction of interest rates on cryptocurrencies and tokens
- 15 steps in the outdated delivery of an ISA can be streamlined with the the blockchain
- Bitcoin will seize back the platform mantle from Ethereum
- Software Token Distribution Event is the correct term
- The death of ‘middleman-ship’ is nigh
- Bitcoin transactions consume the same electricity as a day and a half of the average US household
- Crypto-Economics will pale in comparison to the impact from epigenetics and longevity this century
- The Nth degree of tokenisation and real time fractionalisation will radically democratise investment opportunities and better allocate capital
Questions that might have been discussed, but you must listen to the podcast to find out:
- If blockchain can deliver transaction settlement better than GS then why haven’t the killer apps hit home?
- Will quantum computing break crypto or will it bring a missing analogue subtlety to incentive structures to the tokens?
- Efficient ISAs are one thing…but how much better can asset allocation become?
- Mightn’t the blockchain reinforce biases to Cartesian curriculum vitae concepts and miss the ‘double olly and boneless’ skills the kids might have?
- How do we preserve nuances of our historical truths?
- How will carbon tracking on the blockchain save the world?
- Will all of this seem cute in the face of 800 year lifespans brought on by the triumph of epigenetic studies?
In conclusion, we were left with a 51% to 49% victory for the motion and an optimism that the narrowness of the margin was due more to the excitement around progress on other important innovations this century than dismay at the technical challenges still remaining in crafting a future governed in a more ‘emergent’ fashion and intrinsically more balanced in the distribution of wealth and, more critically, quality of life.
We are all fascinated to continue the debate, so please follow me on Twitter: @richardmuirhead and Medium: Richard Muirhead, get commenting and perhaps join us at Spark Series 5, for which we are planning a follow up. Panelist, motion and question suggestions very welcome.
With many thanks to OpenOcean and UBS for support in making the event possible. In particular thanks to Anastasiya Belyaeva, Max Mersch, and Christina Frankopan for pulling everything together like magic. See @firestartrco and #FirestartrSparkSeries for tweets from the day, and listen to the podcast from the event here.
