Abstract
Blockchain technology is changing the world incentive system, making programmable money. This kind of money is only fruitful and democratically livable in a transparent political environment. Otherwise, instead of unleashing innovation and collective action with the market's visible hand of qualified money, the new internet of value will deliver a digital money with the same algorithmic fate that social media met on the previous internet. The latter allows digitizing users' data and has been used to manipulate consumers and public opinion (possibly in the last two U.S. Presidential elections). Similarly, the former will let states and corporatocracy cross-reference social media and digital money's data, hurting privacy even more. As blockchains disseminate, having the crucial economic advantage of reducing transaction costs, only free-market competition between private and public blockchains guarantee transparency and democracy. Blockchain technology is the real McCoy, and decentralizing digital money is the free world's best shot, especially in the new normal triggered by COVID-19.
TopIntroduction
“Technology comes in packages, big and small.” (Kranzsberg, 1986) Kranzberg's Third Law
This chapter's main objective is to show both auspicious and worrisome implications of Blockchain Technology (BT), which has recently empowered money as the newest type of economic media (Beller, 2020) aired on the Internet of Value (Twesige, 2015). Several central banks are making efforts to develop their digital currencies (Náñez Alonso et al., 2021), and it will be discussed how to deal with the blockchain kind of money. It is thought that digital money's implications will be crucial to society in a post-pandemic new normal (Berwick, 2020) that requires a watchful consideration of “how institutions are designed and formed, and how the balance between institutions' control and the public's freedom is negotiated in society” (Tam, 2021, p.9).
As stated by Ebadi et al. (2020), “The idea of a secure digital currency that is not managed by a central authority has been an interesting field of research for decades. Bitcoin showed this ideal is reachable” (p. 54).
Whatever consumers may say, in the end, they want quality before anything else. […] To keep in pace with this growing trend, initiatives flourish to help increase transparency and traceability. […] More than just a buzzword, a blockchain is an opened ledger of every transaction between the stakeholders. The records are permanent and verifiable, and are not managed by a central authority. (Tonin et al., 2018, p. 3)
Following a rationale shared by economists like Keynes and Friedman but going against the conventional belief about money and not following the orthodox theory of most economic books, one can draw a line between one-dimensional centralized, traditional money and multi-dimensional programmable tokens. Not complying with rulers' perspective (see Seigniorage in Key Terms and Definitions), BT allows decentralizing money globally in a structured and secure way for the first time in history (Nakamoto, 2008). To understand such a paradigm shift is convenient to begin investigating what money is.
Although we usually assume a sharp line of distinction between what is money and what is not, and the law generally tries to make such a distinction so far as the causal effects of monetary events are concerned, there is no such clear difference. What we find is instead a continuum in which objects of various degrees of liquidity, or with values which can fluctuate independently of each other, shade into each other in the degree to which they function as money” (Hayek 1990, p. 56)
BT's predictable diffusion makes it possible to envision a “political transformation [that] requires the possibility of a redesign of the protocols of money” (Beller, 2020, p. 217), diversifying humans incentive systems and assuring freedom of choice on the Internet of Money (Peters & Panayi, 2016; Antonopoulos, 2017; Pocher, 2019; Srivastava et al., 2021).
Key Terms in this Chapter
Peer-to-Peer (P2P) Network: A group of computers that are linked together with equal permissions and responsibilities for processing data. Each connected machine has the same rights as its “peers” and can be used for the same purposes.
Crypto-Economics: Is the combination of cryptographic proofs of past events and economic incentives to encourage future events inside a blockchain system. On the cryptography side, components used centre mainly around consensus algorithms, digital signatures, and hash functions, plus more recently, zero-knowledge proofs, multi-party computation and homomorphic encryption. On the economy side, things are more complex and an active area of research involving game theory, mechanism design, and network economics.
Value-of-Exchange: The trade value that justify transacting something, for instance in the blockchain stage of the Internet (Internet of Value or Internet of Money).
Seignoriage: Seigniorage is the difference between the face value of money, and the cost to produce it. The economic cost of producing a currency within a given economy or country is lower than the actual exchange value, which generally accrues to governments who mint the money.
Smart Contracts: Software programs that code business arrangements and that execute themselves automatically under pre-determined circumstances which are also coded.
Self-Servuction: The process of production of a service carried out in a strategic partnership and close collaboration with the prosumers.
Decentralized Autonomous Organization (DAO): A new decentralized business model (open source) for organizing both commercial and non-profit endeavours.
Hedging: A hedge is an investment that is made with the intention of reducing the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting or opposite position in a related security.
Value-of-Use: The utility value that justify sharing something, for instance in the pre-blockchain stage of the Internet (Internet of Information).
Prosumer: A proactive consumer that voluntarily and when stimulated to do so, participates in the design, creation or improvement of products and services.
Fiat Money: Is the government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. Its value is derived from the demand-supply relation and the stability of the issuing entity (government) rather than by the worth of a commodity backing it (commodity money). Most modern paper currencies are fiat currencies , including the U.S. dollar, the euro, and other major global currencies.