The Future Today Institute has released a 62-pages rapport on Decentralization & Blockchain. They present several key insights and examples, from programmable money, automated risk modeling, monetised memes, to smart royalties and non-fungible tokens (NFTs). This blog presents a few of the topics from the report, along with additional insights from the author.
Token Economy
Tokens can represent a digital asset (like a Bitcoin) or be linked to a physical asset (like a diamond), to create transparency of ownership, transactions, and supply chains. Tokens can furthermore be fungible or non-fungible. A fungible token represents a unit that is interchangeable, such as a Bitcoin. A non-fungible token (NFT) represents a unit that is uninterchangeable, such as a specific diamond or an original digital art piece
Companies and institutions can issue tokens that represents usage, utility, or value. These tokens can create incentive mechanisms, platform governance rights, or supply chain transparency. They can be used in loyalty programs instead of points, such as FlyCoin. Or be used to incentive stakeholders to share data, like FishCoins. They can also enable new marketplaces e.g., the trading of biodiversity like BioTokens. Or they can make new business models, like the Brave browser that rewards users for viewing content and adds.
The usage of tokens, and the new business models they enable, are practically endless. It is therefore important that society reflects on tokenization and the incentives they create. Just as it is illegal to sell human organs because it could incentive murders, tokens could incentivize harmful actions and business models, if not carefully created.
Community Currencies
The rapport mentions “hometown coins”, also known as scrips or community currencies. Paper scrips were used in the U.S. after the Great Depression to trade locally. Today, local trading can be supported with “digital scrips” based on blockchain technology.
An example is MiamiCoin that raised $4.5 million in 40 days. These will be used to mitigate climate strategies, help underprivileged, and to incentivise tech entrepreneurs. Next up, will be New York and Austin offering NYCCoin and AustinCoin. In Kenya, communities can create digital currencies based on the Sarafu Network created by Grassroots Economics. These community currencies will protect local trade and jobs in times of inflation.
Central Bank Digital Currencies (CBDC)
CBDCs are digital currencies that is issued and managed by central banks. Having blockchain-based tokens from central banks, could potentially support financial inclusion, make payment systems more safe and secure, and give better data reporting to central banks. The Central Bank of Nigeria has already launched their CBDC called eNaira. But the biggest player in the CBDC market must be the People’s Bank of China which has implemented large-scale pilots of their e-CYN at the 2022 Olympics. The Federal Reserve Bank of Boston, the Bank of England, and the Bank of Canada are currently researching hypothetical CBDCs in collaboration with the Digital Currency Initiative at MIT. However, privacy concerns have also been raised in relation to CBDCs, as they might enable governments to surveillance transaction and control individual citizens.
Decentralised Autonomous Organizations (DAOs)
Decentralised Autonomous Organisations rely on blockchain technology to organise themselves without a middleman. Principles are coded in the system and processes are automated using smart contracts. One can think of them as online co-ops using technilogy to facilitate collective ownership and value creation.
DAOs exist in various industries such as art, finance, media, and law. Some of the first DAOs were designed as venture capital funds with no board of directors. Today, DAOs are used to organize and manage freelance guilds, social groups, art creation, and investment portfolios. Uniswap is a protocol designed for exchanging cryptocurrencies on the Ethereum Blockchain, governed by UNI token holders. The HeroDAO is a community aiming to create comic books and superhero franchises where the IP is owned by the community. Friends With Benefits is a social DAO where individuals can share knowledge, skills, and thoughts on how to influence Web3 transformation. MakerDAO is a global financial system that offers the DAI currency. Collectively, DAOs manage more than $10 billion assets. Weaknesess in code have DAO attacks causing members to lose millions of dollars. As it is very difficault to change the technical structure of an DAO once it has been deployed, it is imperative that risk mitigation strategies and ethical considerations have been conduceted before the launch.
Blockchain technology enables new business models and new ways of organizing structures in society. The token economy, community currencies, CDBCs, and DAOs are only a few examples of blockchain-based solutions. Once a blockchain system has been launched, it is often difficault or impossible to change. It is therefore important to make ethical reflections on the derived effetcts for socitey and individuals, already in the design phase.
You can read the full rapport from Future Today Institue, here.
Signe Agerskov is researching blockchain ethics at the European Blockchain Center and is a member of the EU Expert Group on Blockchain Ethics (EGBE).
