“When a measure becomes a target, it ceases to be a good measure.”
A long, long time ago, units of value came about because we wanted to make it easier to track debts and make trades.
It turns out this was a really good idea. Not only did we get units of account, we got better mediums of exchange and stores of value too, which collectively helped make value MUCH more abundant.
But there was a drawback: once value was measured and stored, the units themselves became sought after, which poisoned the system. Unlike other things we measure like distance and weight, value is inherently subjective, making it easy to game. An immeasurable amount of real value has been destroyed in pursuit of units of value - perhaps more than for any other reason. And so far we’ve relied on government regulation to curb the damage, a less-than-ideal solution.
With the dawn of cryptocurrencies we face a Cambrian Explosion in units of value that could bring a wave of abundance dwarfing any in history, if it doesn’t destroy us through our own greed.
To summarize the problem:
Open-source money means everyone now has the ability to create and participate in token economies.
If we build these economies correctly, existing governments won’t be effective at regulating them.
We’re attracted to units of value like flies to light.
There will be decentralized ways of self-regulating crypto that can help - existing tools like Kleros might grow into this role. Also something like “penalty tokens” that fund public goods could be useful, where recipients have to pay a balance to get rid of them. Apps that require anti-sybil verification could then choose to restrict services to users with penalty token balances that they considered accurate representations of negative value.
But the far more powerful solution is for us to evolve, collectively as people, towards a shared cultural understanding that units of value are merely a tool, and thanks to distributed ledgers, that tool is now owned by the people and their communities who need them to work.
The more we treat our money like a yardstick or a hammer, the better our money will serve us as tools that measure and create value. Strong token engineering is needed too, but at the end of the day people choose for themselves what they do with their time and money.
With effective units of value we can:
Signal where there is value
Direct resources to grow that value
Reward people that create value, so they keep doing it
In the world of private goods, these functions happen naturally since people “vote with their money” when they buy goods and services they want. But in web3, where DAOs with shared treasuries coordinate resources to build non-private goods, you quite literally “vote with your money” when you participate in governance and with the tokens you decide to own.
So far we’ve used a lot of this power to fund things like 1,000% APR rewards, pump-and-dumps, algorithmic ponzis, manufactured FOMO, and outright scams. Our mosquito-to-the-light instincts are strong, making it hard to believe a lot of token valuations in crypto represent real value.
To put it shortly,
We’re headed towards a binary spectrum of 2 outcomes with cryptocurrencies.
On the losing side, we use the power given to us by the technology to chase after units of value for the sake of being rich. Cutthroat competition driven by greed and tribalism fuel our future, and efforts by governments to rein in crypto are rebuked. In fact, governments themselves become some of the best hoarders.
An era of digital economic warfare and mass value extraction begins.
On the winning side, we use the power given to us by cryptocurrencies to expand the capabilities of our economic system to better serve non-private goods. People learn to interact with token economies to grow wealth for communities they find valuable - not as a form of altruism, but from a fundamental understanding that personal wealth is a byproduct of shared wealth.
We evolve culturally to glorify value itself, because what good are bits of code on a digital ledger after all?
With all this, our ability to coordinate resources to create wealth improves exponentially, and a golden era of life on Earth begins.
Footnotes.
The opt-out scenario, which people are considering in light of recent abuses, is to willingly give up our autonomy to national governments by asking them to regulate cryptocurrency to protect us from ourselves, fitting our new technology within existing global power structures. This might prevent crypto’s worst case scenario, but it effectively cuts the legs from its greatest potential for positive change.
https://hackmd.io/@paul2/ryjrYF_Vi/edit
https://en.wikipedia.org/wiki/Goodhart%27s_law
https://unchainedpodcast.com/chris-burniske-a-blank-slate-of-state/
