Why Do I Care (About Tokenization)?
Exploring Blockchain's Societal Impact: Navigating the Future of Digital Assets and Individual Freedom
This isn't a question of Betamax vs. VHS; it's about freedom versus a police state. But let me explain.
Two comments got me thinking again this weekend why I am so drawn to the topic of digital assets. One was a dinner conversation where a friend made a point that even when people publicly endorse a move towards digital assets, they can be much sceptical in private. So there is at least part of the market activity that is a hedge and not driven by strategic intent. The other was, in fact, posted on LinkedIn along the following lines (paraphrasing): “the barriers to tokenisation are twofold: incumbents don’t like competition and consumers don’t care, and this must end.” Informing consumers about better alternatives is one thing, but is this suggesting we mandate a change? Take the current tokenization models for money market funds, they are predominantly an institutional product. Does Goldman Sachs really need our help to negotiate a better deal for themselves?
How can we protect our individual freedom in an increasingly technology-driven world that is too complex to understand?
Irrespective of what one may think about the potential of blockchain technology to change financial markets, I do think it is highly plausible that technology will encroach on more aspects of our lives. And with that comes a challenge for society as the technology increases complexity and requires ever-increasing specialisation, with the consequence that it's getting harder to understand the dynamics of change and decision-making, we become observable and controllable, and we become extremely dependent in order to reap the benefits, of course.
And I do believe there is a disturbing dynamic at play, which is the feeling that the decisions I can make are inconsequential and therefore the outcome I can directly influence is non-existent. Therefore, this raises a rather natural question: why should I vote, why do I care because, at the end of the day, my vote doesn’t matter. So let me buy strawberries in winter and fly them first class to my dining table because the climate will not be impacted whether I get them or not. I am now sinking to the lows of writing the bloody obvious: if we all think like that… Exactly!
Regardless of blockchain, we need solutions for this problem that is not solely caused by technology, but it is surely a big factor. Decentralising money like Bitcoin? The day Armageddon comes, I don’t think people will care too much about either their credit cards nor the Ledger Nano with the private keys. Personally speaking, I never felt it was a good idea to build for the day institutions fail, even if the entire history of humanity is an endless saga of empires rising and falling. I always felt institution building and reform is the only viable solution. There are many reasons for that. But the one that resonates most with me is looking at European history.
Lesson from past centuries:
Economists like Hernando de Soto have argued that clear and secure property rights were essential for Europe’s economic development. The gradual establishment of these rights encouraged investment, innovation, and trade, as individuals and businesses were more likely to invest in land and enterprises when they were confident that their property would not be arbitrarily confiscated or stolen. And this needs a legal system and the rule of law. This view is not without its critics, but for me, the data says very clearly that this makes all the difference between a developed country or not. Bankers and lawyers to save the day!
Lessons from the more recent past:
But institutions are nothing without their citizens. No law can compensate for a lack of education and means of participation. The experience in Russia is perhaps one of the strongest warnings not to forget this. Russia started a privatisation process during the 1990s, notably through schemes like "loans for shares," which allowed a small group of individuals to acquire significant wealth by obtaining large shares of former state enterprises at relatively low prices. We now call them oligarchs, and they wielded considerable economic and, eventually, political power.
Lessons from the last few years:
What did people do to bring more accountability to political decision-making? Direct democracy in the form of a referendum? Can this be a good idea? Of course not, yes Switzerland, you seem to be the only place on earth where this apparently works. Sort of. But it could be worse, so keep at it.
I do recommend watching the Yale History Course. Not only is it for free, but it's insightful and rich in context to understand how things came about. And it explains in quite some detail how measures such as a referendum undermine democracy. Simply speaking, governance is about trade-offs, and a referendum cannot capture the complexity which leads to more extreme and fractioned political groupings.
Blockchain as a Freedom-Enabling Technology
And this is why I am hooked on blockchain. Not to shave off a few cents off an equity settlement and getting into a debate whether a certain financial product has to gain from this technology or not. No repeat of the Betamax vs. VHS saga, I hope not, because the less advanced technology won then.
The technology has properties involving fundamental aspects of freedom and societal control that could – and this is all speculation on my part, not a prediction of what will happen – address all these societal issues. It is about a modern form of securing ownership and entitlement, it is gradual allowing us to learn how to use it, and it is decentralised. It allows us to see how the allegedly ‘inconsequential’ decision of a person forms part of a network. In that sense, I don’t think we can afford to get tokenisation wrong. Tokenisation is needed to enable the semantic web and with that could come back the emotionally experienced but also de facto reinstatement of a principle that has become marginalised: everyone counts.