Musings Report 2018-24 6-16-18 Solutions without Historical Templates: Cryptocurrencies and Blockchains
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Solutions without Historical Templates: Cryptocurrencies and Blockchains
We're accustomed to three basic templates for system-wide solutions or improvements:
1. an individual "builds a better mousetrap" and starts a company to exploit this competitive advantage;
2. a company invents something that spawns a new industry (the copier, the web browser, for example) and/or disrupts existing business models;
3. the central government decrees a strategy or investment, i.e. makes something happen by brute force (the Interstate Highway system in the 1950s, the space race to the moon in the 1960s, for example).
I don't think any of these templates really captures the eventual impact of cryptocurrencies and blockchains, which I define broadly as any decentralized, distributed ledger.
As for the better mousetrap-- the creators of bitcoin explicitly designed a form of money that they reckoned was superior to centrally controlled fiat currency. A decentralized form of money that isn't borrowed into existence like fiat currencies is certainly revolutionary, but that is only one aspect of the crypto-blockchain technology.
Since bitcoin and the blockchain technology behind it aren't owned by a corporation, the template of a company benefiting from disrupting existing business models (for example, Apple's iPod, iTunes and iPhone) doesn't fit.
It's certainly true that cryptos and blockchain are spawning a new industry, much like micro-processors and digital memory launched the computer revolution and the world wide web and its protocols launched the Internet revolution.
There are between 1,600 and 1,900 cryptocurrencies and tokens based on them, and hundreds of enterprises are developing applications for blockchain and related technologies.
I think the difference between these old templates and the crypto-blockchain technologies is these have explicit social and political applications and ramifications--consequences that cannot be mapped onto consumer product innovation or process innovations such as increasing computational power.
These technologies have the potential to re-order the structure and processes of governance and of social relations. In this way, crypto-blockchain technologies are leveraging the potential of computers and the web for direct political-social innovation.
Here's an example (described in an email to me from Decred's lead developer, Jake Yocom-Piatt) of a software platform that is not connected to a cryptocurrency that could be applied to the kinds of decentralized governance, community development, guaranteed paid work and markets that I describe in my CLIME system (community labor integrated money economy):
"The big idea with Politeia was to create a time-anchored filesystem with a minimal on-chain footprint, so you can be certain that the information in the filesystem existed on or before a particular date. Additionally, it includes identity data, so that person/entity X can attest to data Y at time Z in a way that cannot be altered after-the-fact. I felt that having a plain old website for our governance system wasn't sufficiently censorship resistant.
As I expect you can see, Politeia is an incredibly generic tool, and you can make use of it without holding any Decred."
This sort of distributed ledger--stripped of the computational weight of the blockchain--could power community democracy, the distribution of a labor-backed currency (as I describe in my book "A Radically Beneficial World") and render market transactions transparent to all participants.
These applications don't enrich a corporation--they re-order the power structure of the economy and society.
I don't think there are any historical templates that fully capture the potential for such a direct (i.e. not a byproduct or second-order effect) re-ordering of political and financial power.
Highlights of the Blog This Past Week
Here We Go Again: Our Double-Bubble Economy -- I see the chart I posted here on Twitter and other sites....
Best Thing That Happened To Me This Week
I received an email from the lead developer of Decred (a cryptocurrency and platform), who wrote:
"I find your perspectives on nation state governments and fiat financial systems refreshing and novel. Your rhetoric cuts directly to the core of the major systemic problems at hand, whereas many others will misdiagnose the symptoms of these problems as the actual problems themselves."
My work tends to enter a relative vacuum in which what I reckon is important is ignored or simply not understood. It's encouraging to receive positive feedback from someone high up in the crypto food chain (Decred is #26 cryptocurrency globally as measured by market capitalization.)
Market Musings: Measuring Extremes
Extremes are reliable indicators of market turns for the basic reason nothing goes up in a straight line forever, i.e. mean reversion: trends reach extremes and then reverse.
Here are three extremes worth pondering:
1. Call options by small traders--these are bets by the most momentum-driven speculators (a.k.a. "the dumb money") that the market will continue rising.
Though the chart doesn't reflect this, the 2011 peaks led to a sell-off that put the entire "recovery" into such jeopardy that Mario Draghi, head of the European Central Bank (ECB) had to issue his famous "whatever it takes" speech to save the day.
2. The unemployment rate and the SPX stock index: note the perfect correlation between lows in the unemployment rate and the peaks of the stock market. In terms of reliable indiciators, it doesn't get any better than this.
3. Emerging Markets (EEM) and SPX. Tom McClellan posted this chart and I added the massive divergence that expands the idea he's noted.
These extremes include sentiment (options trading), "the real economy" (unemployment rate) and global-financial (Emerging Markets). When extremes appear across the spectrum, it pays to take notice.
From Left Field
Why No One Answers Their Phone Anymore -- 3.4 billion robo-calls a month...
Crisis on the High Plains: The Loss of America’s Largest Aquifer – the Ogallala (via John D.) -- the crisis that won't go away but that's completely ignored....
How long before the world runs out of fossil fuels? (via Steve K.) -- I think the author extends a trend that is no longer valid, i.e. the discovery of new reserves....
At the Intersection of Permaculture and Degrowth (via Bruce T.) -- here's the money-shot IMO: "One advantage of degrowth is that it recognizes that access to resources is tied to power relations that must be acted upon actively in order to be changed"
Paving for Pizza (via Steve K.) -- corporate America awakening to the need to keep local roads functional if they want their business to remain functional....
The Next Plague Is Coming. Is America Ready? The epidemics of the early 21st century revealed a world unprepared, even as the risks continue to multiply. Much worse is coming.
Michael Novogratz is searching for redemption in cryptocurrencies (via Maoxian) -- too long, that's the New Yorker style, but some interesting tidbits...
Looking closely at aerial shots of Shanghai in 1945 (via Maoxian) -- all the interesting blocks have been wiped out....
The Future of Governance is not Governments (via Lew G.) -- 18 months old but still relevant...
China has turned Xinjiang into a police state like no other (Apartheid with Chinese characteristics) (via Maoxian)
Who the Heck Bought $1.2 trillion in New US Treasuries over the past 12 Months?
UK cycling is worth more than the steel industry – where's the strategy?
Why many Americans aren’t benefiting from robust US economy -- a good list but incomplete...
"You have power over your mind - not outside events. Realize this, and you will find strength." Marcus Aurelius
Thanks for reading--
charles |
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