Blockchain and Crypto-assets: Leading towards a global barter economy?
More than eight thousand professionals descended on Manhattan in May to attend the largest blockchain conference ever held. Onchainfx estimates that the fledgling crypto-asset sector now represents some US$330bn in value, down from a 2018 peak of over US$800bn
For all the hype, scandal and breathtaking price volatility, there is no longer any argument that the sector represents meaningful economic activity. The Marshall Islands recently signed a bill through which a national cryptocurrency will become legal tender for the first time, whilst elsewhere the prospect of attracting a slice of the emerging crypto-economy has seen regulators jostling to fast-track crypto-friendly legislation into place.
Blockchain to power an 'explosion' of tokenisation
Captains of industry face an unenviable challenge trying to decipher what may ultimately emerge from the swirling dust of excitement, hype, and bleeding edge development. But whilst bitcoin occupies much of the media spotlight, it has been side-stepped for most corporate uses. The usefulness of its underlying technology for sending and receiving digital tokens however has not, and it is the emerging trend of economic tokenisation which may fuel the largest and most disruptive shift of all.
Blockchain technologies appear to be laying a foundation of digital infrastructure in which cash is simply one asset class alongside thousands of others today — and perhaps millions in the future.
Blockchains are used to move tokens. Tokens are used to represent ownership of digital or physical things. Cryptocurrencies like bitcoin are now just one class of digital-asset within a field which now extends to all manner of ‘tokenised’ property, goods and services. Blockchain is powering an explosion of tokenisation in which assets that have historically been hard to trade digitally are being represented in standardised and interchangeable digital units, managed using digital wallets and exchanged within highly accessible digital marketplaces which operate 24/7, 365 days a year.
Tech savvy investors looking to add gold to investment portfolios are already buying gold tokens within the Ethereum blockchain, backed by weight per unit within secured physical vaults. Should those investors prefer exposure to London property those tokens can be exchanged for others backed by a physical portfolio of bricks and mortar, or anything else on offer. Beyond physical goods, tokenised assets under construction represent everything from regulated securities to software licenses, from digital media rights to cloud storage space and even human attention (which after all is what advertisers buy), all instantly exchangeable within peer-to-peer marketplaces.
Notwithstanding all the technical, legal, fiscal, privacy and other challenges, blockchain technologies appear to be laying a foundation of digital infrastructure in which cash is simply one asset class alongside thousands of others today — and perhaps millions in the future.
The evolving nature of money
Barter markets of old were supplanted by cash economies which enabled traders to overcome local imbalances of supply and demand by providing a trusted bridging asset (cash) of widely recognised value which would not perish. A highly liquid global marketplace might fundamentally reduce the need for intermediary hops into, and out of, cash across trading ecosystems worldwide.
Attention tokens earnt whilst browsing the internet could be spent to buy morning coffee, then re-spent by the coffee shop to purchase new advertising. Retail stores may allow customers to purchase goods using freight tokens, fuel tokens or agricultural commodity tokens, using them in turn to pay suppliers. Autonomous taxis may accept payment in anything which can easily be used to buy fuel or vehicle maintenance.
Blockchain represents one frontier in a digital revolution now decades old. Its landscape has yet to be fully mapped and a fully-fledged token economy is by no means assured.
Should this vision of a fully tokenised economy be fulfilled, our economic plumbing will have been transformed. Our financial infrastructure may resemble a digital barter economy operating at world-scale, in which the proportion of fiat currency used within trade everywhere from the coffee shop to the industrial plant is diminished.
Blockchain represents one frontier in a digital revolution now decades old. Its landscape has yet to be fully mapped and a fully-fledged token economy is by no means assured. However, for leaders looking to position themselves for potential advantage in the future economy, there is much to do. Accountants must establish classification and valuation approaches for digital assets just as governments must consider the mechanics of taxation within such environments. HR leaders must consider the implications of remuneration in non-standard asset classes whilst legal advisors must opine on the new forms, and jurisdictions, of digital ownership.
Industry leaders must explore the role of tokenised trade within end-to-end supply chains stretching from source to consumer, both to understand the opportunities, but also the risks of inaction. Finally, central banks, economists and wider businesses must consider the evolving nature of money. For in this future, everything is money.
Tyler Welmans, UK Blockchain Lead at Deloitte