What is cryptocurrency> What is blockchain> Where are they going to have an impact?
Many are asking themselves these questions. This is nothing new. People often do it when something is new. Since we are often looking at a paradigm shift, it is easy to miss what is taking place.
People often know something big is going on yet they are not aware of how things are going to be affected. This is something we see with cryptocurrency. People are often wondering how all of this ties together.
Of course this is a reminder of the famous Today show clip with Bryant Gumbel asking a simple question: what is the Internet anyway?
Decades later, few are asking this question. Not only is it clear to all of us, we also see how much of a part of our lives it is. In the developed world, it is near impossible to operate without it. Even the ability to pay bills is hindered by not being online.
The Internet did a lot of things for us. However, the biggest benefit is the economic output it generated.
How Much Productivity Does The Internet Provide?
It is difficult to gauge the Internet and its impact. Basically, it is now akin to a utility. What is the economic output of electricity? This is impossible to answer. We do know that absent it, the economy would crash. It is safe to say that our developed economies would loss more than 90% without electricity.
While the Internet is not at that scale, it is interesting to see how much it is expanding. This will continue. Nevertheless, it does not tell us how much value this adds.
Studies were conducted which, ultimately, are nothing more than guesses. That said, we did have a Study Finds Internet Economy Grew Seven Times Faster Than Total U.S. Economy, Created Over 7 Million Jobs in the Last Four Years. Then we have one from about 6 years ago that concluded U.S. Internet Economic Impact Measured at $1 Trillion Annually.
In short, nobody knows how much the digital economy is worth exactly. What we do comprehend it is a rather large number. We also fully grasp that it is growing at an explosive rate.
Here is ecommerce as a percentage of retail sales:
The point is that, whatever the exact figures, a little more than 25 years into this medium and we are into the hundreds trillions of dollars in economic activity generated.
How much will blockchain and cryptocurrency generate?
Quadrillions In Economic Productivity
The Internet moves economic activity from the physical world to the digital. This is evidenced by an online payment as opposed to writing a check. The physical aspect is removed and it is all digital.
With the different forms of cryptocurrency, we actually represent the physical world digitally. This is the tokenization of everything.
Whereas the Internet allows for payment of a car online, cryptocurrency actually puts the car online. Hence, not only is the transaction in this medium but the entire ownership model. This means it can be collateralized, subdivided, or transferred without anything physical. The only thing that cannot is the actually picking up of the vehicle.
Just take a look at what we often discuss:
- Decentralized Finance (DeFi)
- Cost reduction
- Elimination of intermediaries
- Inclusion
- Friction reduction
- GameFi
- Collateralization
- Property Rights
- Move-To-Earn
- Banking the unbanked
- Decentralized Autonomous Organizations (DAOs)
- Web 3.0
- Metaverse
This is an incomplete list of what is already taking place to some degree. Just consider the number of industries will be impacted.
In short, it affects most everything. For this reason, we are going to see the value of cryptocurrency not enter the trillions but, rather, quadrillions.
Expansion Of Global Trade
The tendency is for global trade to expand as time passes. This is evident by looking at the last few hundreds years of history. We can find some hiccups along with way but, overall, the trend is clear.
Technology increases this. Both cryptocurrency and blockchain bring technological innovation to the table. Just like the Internet was revolutionary in its impact upon economic output, cryptocurrency is going to put that on steroids. The excitement over the Metaverse comes from the paradigm shift many foresee. What will result, as we head in this direction, is a massive increase in economic productivity. It is going to absolutely explode.
And blockchain along with cryptocurrency is going to be at the center of it.
Here is the secret of looking at cryptocurrency projects. The winners of tomorrow are going to be those that increase economic activity. While having "digital gold" is of value, we have to watch where the development is taking place.
Our present economy is divided based upon geographic location. At the core of this is the nation-state. Here is where we are going to see another paradigm shift.
Ultimately, we are going to transition to decentralized network states that will make up the bulk of economic activity. Global trade will continue to grow since the digital world is that way by definition.
Log onto the Internet and you are in a global sphere.
In other words, we will see a lot more of this, spread throughout the world.
Basically, this is what the main focus of all should be. Where do we see the potential to increase economic output. Those are going to be the projects that excel in the future.
We often discuss the idea of building. Monkeying around with tokenomics are developing scarcity models is not going to achieve increased economic output. It is only through the development of applications and platforms that offer utility will we find the next leg up in our economic ascention.
This is nothing new. The last chart shows the massive push higher starting in the last 70 years. Within the last 30, we see many of the countries in the developed world heading almost vertical.
What do you think cryptocurrency and tokenization is going to add to the equation?
The next move up from trillions is quadrillions.
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