Blockchain Vs The Economy
Economic Evolution – If you can’t beat ’em, coin ’em
We are living in a market driven, international, profit focused economy. Within this economy, businesses have adopted a range of new techniques to widen their scope and maximise wealth. Whether this means contracting internal activity to an external company via offshoring, or doing the exact opposite, there are now more markets than ever before, more options for production and, thanks to globalisation, fewer constraints on expansion. There is also no shortage of innovative technology to nurture economic diversity, but in complex and ever changing economies, where might blockchain fit in?
In many ways, blockchain doesn’t seem suited to today’s fast paced, high volume economy. A combination of slow transaction rates, high transaction costs and failure to meet demand have discouraged some potential adopters. Not only that, but the value of cryptocurrency holdings is thought to lack stability. In light of these fundamental issues, both Facebook and Google had openly prohibited the use of advertisements that promote cryptocurrencies. Google’s ban is due to come into effect, although Facebook has reversed its move and reinstated the ads. In a piece written for the World Economic Forum, Jon Danielsson, director at the London School of Economics, even went so far as to call cryptocurrencies a ‘cult’ with an investment value comparable to that of a stamp collection. While this view could be described as extreme, it represents the ongoing sentiment that the economy, at least in its current form, is perhaps not the ideal breeding ground for blockchain. From this perspective, either blockchain or the economy itself must change. Interestingly, both are doing just that.
Enabling economic evolution
Blockchain might not marry perfectly with today’s economic expectations, but economies, as we know, are dynamic. The way that consumers perceive the value of products and services is experiencing a shift towards sharing and co-use. Within sharing economies, resources are exchanged between peers instead of purchased from traditional vendors. This can include physical objects, skills and expertise. But how do you ensure trust in this postmodern economic system? Due to their decentralised and transparent nature, mature blockchain systems could provide a solution. Chronicled, for example, allows users to microchip and register high value assets on the blockchain. These assets can then be insured via their app. Blockchain, therefore, could work within an economy that relies on shared assets. Today, that is certainly not the general rule, but sharing economy values are gradually beginning to take hold.
Blockchain technology is clearly not without its faults, but it has already been used for a myriad of successful applications. Every relevant, real world use case is another point in blockchain’s favour, and is helping to convince naysayers. Despite banning crypto friendly ads at the beginning of the year, Facebook has since expressed an interest in blockchain. A team led by ex-PayPal president David Marcus has now been set up to explore the technology’s potential across the business. In fact, there is already a blockchain powered social network called Steemit. In an ironic turnaround, perhaps blockchain adoption will be driven by consumer facing behemoths.
It’s easy to see why scepticism remains over blockchain’s economic viability. Limitations range from scalability to sheer cost, leading to justified caution. At the same time, the technology has proven its worth across industries, and seems to have inspired a complete U-turn in the policy of the world’s biggest social network. In a paradoxical cycle, blockchain is enabling the rise of the sharing economy, while the sharing economy is encouraging the adoption of blockchain. Even if we agree that blockchain is not compatible with today’s economy, the economy will inevitably evolve. Perhaps it’s not so much a case of ‘blockchain vs. today’s economy’ as ‘blockchain for the economy of tomorrow’.
Can blockchain positively disrupt global economies? Will blockchain enable the expansion of sharing economy values? Are cryptocurrencies a ‘cult’ or a worthwhile investment?
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