How Will Blockchain Change The Economy?
How will blockchain change the economy?
This question originally appeared on Quora, the knowledge sharing network where compelling questions are answered by people with unique insights.
Answers by Revett Eldred, Morton Gelt, Walter Bril, Carl Leitz, Paul Sutton and Sam Radocchia.
Revett Eldred, blockhead.
Answered March 3
I think blockchain is a little like the laser. When the laser was invented it was a physical breakthrough, an amazing invention that was touted as having the potential to transform the world in many ways.
But it quickly became the technology for which nobody could think of a use. It disappeared from public interest for some years.
But now the laser is ubiquitous. Police use it to measure speed, DVD readers use it to count the little ‘on’ pits etched into the surface of the disc, the rain sensor for your car’s windshield wipers uses it, and the list goes on.
Blockchain will be the same. While its fans tout its ability to enable smart contracts, the poor shmucks who have to implement those contracts beg to differ. When some bright young programmer decides to get rich with an instant ICO on Ethereum, he joins the 1,500 other wannabe coins out there vying for attention and investment dollars. And so it goes on.
Meanwhile other people and companies are quietly testing real-world applications and variations on the current blockchain architectures. In time, new applications will appear, one by one, with 99 percent of people not even knowing they have anything to do with blockchains.
Will they “transform the global economy”? Perhaps, but it will be subtle and it will occur over a 20 year period.
Bitcoin, on the other hand, could have a significant impact if it doesn’t just fizzle and go away. Every modern national government relies on its ability to control currency. If Bitcoin starts to seriously threaten that, you can bank on anti-Bitcoin legislation and you can bank on the backlash that will follow and you will probably see some kind of economic transformation. But that will be because of Bitcoin, not because of its underlying technology except insofar as it is the technology that enables the app.
Morton Gelt, Founder of Decentralized AI Startup (2017-present)
Answered Dec. 10
It enables tokenization of the world economy, where any asset (real estate, commodities) could be tokenized and sold as an investment to anybody in the world. Removes intermediates from the majority of trades and asset transfers. Provides a platform for anybody anywhere in the world to invest, trade, purchase, borrow, pool money in, etc…
Most important smart contracts provide the way to automate many functions on modern intermediaries (banks, insurances). As for niches:
- Anonymous instant money transfers, thus competes with banks and such bus as western union
- Optimize and capitalize real estate transactions
- A new way of raising money via ICOs or private placements.
- Businesses to better incentivize its customers.
- To reduce fraud in advertising.
- Adds better ways to provide loans and deal with debt.
Walter Bril, studied Introduction to Digital Currencies & Blockchain Technology at University of Nicosia (2016)
Answered March 10
As technology merely amplifies current (thought) models, I believe that our neoclassic-influenced economy will be no exception.
I therefore expect that blockchain will not change immediately the way we currently look at economy; it will actually enforce existing and old models.
Specifically, regarding blockchain, a business should therefore not ask: How can blockchain help me to make better profit? But instead: Why do I exist and do I add sustainable value to our world?
Neoclassic economists hate this last question as it is influenced by moral philosophy.
On the other hand, when more and more people start to grasp this, blockchain might become the single biggest change driver in the economy ever.
Answered March 8
Blockchain has many uses and utility to do many things.
Financially it can facilitate the creation of fake value. Digital currency is using blockchain as a virtual printer to create fake value or money in digital form.
Blockchain can enhance the persistence and redundancy of stored data. Fake Value is useless without real value.
VALUE equals NATURE which sustains all LIFE.
The utility of blockchain lies in the storing and retrieving of data securely.
Data as in the case of digital records is fake value as opposed to life enabling real value.
Data has utility but doesn’t sustain life as does real value.
Paul Sutton, Stock Trader, electrical engineer
Answered Dec. 10
Not in the ways you probably imagine, that is, in endeavors such as Bitcoin. Rather, it will find its way into areas that we can’t even imagine.
Sam Radocchia, Co-Founder at Chronicled (2015-present)
Answered Feb. 8
Think of how the sharing economy has exploded in the past decade. If you’ve taken an Uber to the airport or rented an Airbnb, you’ve been a part of it.
We’re even at a point where renting out personal items is a viable business model. For example, Omni Storage stores items you’re not using—just like a normal storage company—but they also rent your items out to people. Skis, guitar, winter jacket. It’s all available for rent (with the owner’s permission) via an app.
We all hold onto certain possessions, because we plan to use them eventually. Or so we tell ourselves. Why not make some money off of our stuff instead of letting it go unused?
That question is at the heart of the sharing economy, and we’re going to be hearing a lot more about businesses like Omni in the next few years.
This is what it can look like if blockchain is involved.
Futuristic sharing concepts will only work if many other considerations are taken care of. Each item has to be documented, proven authentic, assigned a current value, and even insured. And blockchain can be extremely useful here.
Say I register a guitar on blockchain. In theory, I would be able to access information about where it is, as well as its current worth and condition.
This isn’t as far-fetched as you may think. Seven years ago, a friend of mine sent me a business plan for a platform that allows people to rent out their art. It’s funny to look back on that now, because we’re actually at the point where a concept like that is possible. And renting or leasing is just a part of it.
Imagine the entire art economy on top of blockchain, where individuals could own fractions of a work.
We have the ability to attach microchips to items and register them on blockchain, making it feasible that someone could rent an expensive piece of art and keep it in their office for a few years. It just means assigning the rights values. Take it a step farther and once we have that link between the physical asset and the digital tokenized representation of that art, buyers and sellers can invest in a small percentage of the art. 100 owners. One Michaelangelo.
With this system of renting comes an inevitable question: What if something happens to your stuff?
Renting out a guitar you pluck on once a year sounds like a good deal, but what if it gets broken or lost? You’d need insurance on it first to have peace of mind.
We actually thought about this at Chronicled a couple years ago. We were talking to some people who had built a platform for filmmakers to lease out their film equipment. But film equipment is very expensive—a lens could cost $10,000. And getting insurance isn’t always a simple process.
So, we built a proof of concept that allowed people to authenticate high value assets, place a microchip on them, and register them on blockchain. That was the link between the record of its authenticity and the data about its condition. Through the mobile app, you could quickly purchase insurance on it.
To buy insurance on an item this fast, you need to have available data on what it is, what it costs, and what condition it’s in. But if that was all collected and stored on a blockchain network, you could build a platform to quickly grab this data and add insurance accordingly.
Letting Go Of Ownership
If this type of radical sharing economy were to emerge, it would constitute a major shift in the way we view ownership and material possessions. And the storage facility concept is a great model for easing people into that thought process. You’ve already taken the first step by saying, “This isn’t important enough for me to keep in my home.”
When something sits idle for a long period of time, it becomes an underutilized asset. It makes sense to rent out items you own that simply sit in storage, costing you money.
Will a future sharing economy like this start moving us away from a consumer-based, materialistic mindset? Is it possible for people to be so accustomed to sharing that they change their attitude about ownership? Is it possible for tokenization and fractional ownership of possessions, art, real estate enabled by said tokenization to lead to a new concept of consumerism?
Maybe. Western society isn’t really built that way, so it would be a monumental change in how we view possessions. But it’s not impossible to make that adjustment.
Adjusting Our Attitudes
It is possible to change your view on material ownership. I know firsthand. When I first moved to San Francisco, my apartment complex was robbed by a maintenance worker. He took jewelry I inherited from my grandmother. They ended up catching the guy, but I never got the jewelry back. And after that robbery, I no longer had any possessions I cared much about.
That event makes it easier for me to accept the notion of the sharing economy. I don’t mind putting items in storage and letting other people rent them out, because I don’t feel attached to objects.
I’m sure some people don’t see things that way, but there are plenty of people who feel the same as I do. That’s why I’m interested to see how far we can take the sharing economy in the coming years and how blockchain can help make it a secure, seamless system.
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