The implications of implementing token economics are many, but the first that we can note is that we’re no longer dependant upon centralized organizations to define value within society. The maintenance of databases where value is recorded has shifted to information networks and it’s increasingly becoming possible for anyone or any group of people to set up one of these networks. It implies that individuals and groups can define what they value instead of that being defined for them, and naturally, who gets to find value within society is of critical importance.
Previously, only large centralized institutions got to define objective units of value; the largest of which, the nation-state, got to determine widely accepted currencies. However, these tokens were always relative to a centralized entity. They only really defined what that entity values. E.g. a Starbucks gift card, the remnant B, a share in “Microsoft”, and so on are forms of tokens. These units of value are defined, created, and managed by centralized entities according to their interests and needs. What is changing now is that anyone or any group can now define any form of value through the creation of a digital token on a blockchain. These tokens are not required to have for an external centralized entity, they can simply represent the inherent value within a network of peers. Tokens are generic units of value that can be used to quantify any form of valued resource. More importantly, they can be used to define specific and distinct forms of value. This is why in a blockchain economy we have so many tokens e.g. energy tokens, food tokens, transport tokens, social tokens, and the list is ever expanding. In such a way, the token economy offers the potential to incorprate more and different kinds of value, thus giving value representation to what was previously excluded from being defined as economic activity.
The potential of this is that we may for the first time, start to move towards an economic system based upon a full cost accounting. In recent years, with the environmental sustainability crisis unfolding, the idea of a full cost accounting economy has been presented as a solution. But to date, the complexity of realizing that have been overwhelming, and the tools for implementing it have remained limited. Rapid advances in big data, complex analytics, and blockchain technology are starting to provide the technical infrastructure for economy that may in fact, incorporate all relevant event information and value sources, thus bringing more areas of social capital and natural capital into token market exchanges.
Tokenization is the process of converting some assets into a token unit that is recorded on a blockchain, anything of economic value can be tokenized and thus brought into the blockchain economy. Today, we’ve started on a long journey of migrating our entire global economy to blockchain networks. Real estate, commodities, supply chains, energy markets, insurance, and so on are going to migrate, one block at a time, into the new information based economy.
“Everything that can be tokenized will be tokenized” says Venture Capitalist Bradley Rotter Yvette
With this technology, not only existing forms of valued assets will get tokenized, but with advances in Information Technology we are quantifying and assigning value units to more and more aspects of our worlds and our social interactions. Token networks will be used to support these new forms of economies, whether we’re talking about the emerging natural capital economy or social capital. It will be a number of years before we really have the underlining blockchain technology to do that on a large scale, but it’s coming, and the implications are enermous.
The point is, the blockchains are not simply extensions of existing financial or monetary systems, but there’s something truly different; they allow us to define, quantify, and exchange new sets of values that emerge in a post-industrial economy. In so doing, they allow us to expand market systems and economies as distributed management systems to coordinate more and more spheres of human activity in a decentralized fashion, through peer-to-peer exchanges within digital token markets.