Total Societal Impact and The Token Economy?

 I was prompted to write this piece because of a stunning example of the above. It is a new gold trading platform which has just been launched. It is a prime example of 21c total societal business models. 

The use of technology and ‘not only for profit’ business models improve the benefits for all.

The token economy is not new. 

An electronic currency called the WIR was founded in 1934 by two businessmen Werner Zimmermann and Paul Enz to compensate for currency shortages and global financial instability. 

The WIR Franc is an electronic currency reflected in clients’ trade accounts so there is no paper money. WIR is an independent complementary currency system in Switzerland that serves businesses in hospitality, construction, manufacturing, retail and professional services.

In vacation ownership and property sector timeshare is a much-maligned and discussed concept which has been open to many cases of abuse. Essentially, it is a way of buying a share in an asset to be used over some time. It is a $2.2 billion industry but has to be distinguished from fractionalised ownership which is a different thing.

It’s much overdue for an overhaul!

What is different now?

Blockchain and cryptocurrencies are what has changed. 

For most people, these subjects are only vaguely on the perimeter of their radar. 

However, it should not be so, they are now central to one's understanding of how business, society, and global affairs, function.

Blockchain and tokenisation will be the change factor for the 21c.

Because most people don't really understand what blockchain or a cryptocurrency is - let me give you some examples of how they're currently being used. 

Blockchain 

Blockchain technology is a distributed ledger system that promotes decentralisation, transparency and data integrity or, in one word - trust.

If you think of it as a chain containing a series of blocks. Each block has digital information stored in it. 

The type of information usually stored is time, date, ownership, identity and so on.

The chain recognises its constituent parts and members access the chain through cryptographic identity keys. 

In this way ones identity is secure and anonymous and on the chain forever.

You do not extract information from the chain because it is immutable you simply disconnect your identity from the key you were using.

Blockchain is being used financial or other types of transactions but its usage is about to spread to all areas of our lives.

The benefit is that the middlemen in the process such as banks, become unnecessary, resulting in lower costs and faster processes. This kind of decentralised network allows the user to take control rather than the middlemen.

What it provides, in fact, is trust, hence the term trusted ledger. 

Let’s take the example of buying a clock. You don't want to pay for the clock until it has been dispatched and the seller doesn't want to send it until it has been paid for. Hence, PayPal and Amazon, and other transaction platforms. 

They effectively guarantee trust whereby under certain conditions the transaction will take place. 

With blockchain trading platforms the details about you, the clock and the seller is all stored in a smart contract. Once the parties are happy to proceed you just authorise the transaction as does the seller, and in seconds it takes place. 

There's no need for PayPal's or Amazons fees, or infrastructure because it's all on the blockchain.

Cryptocurrencies

Cryptocurrencies are often confused with blockchain or, lumped into one definition.

Investopedia. defines a cryptocurrency as ‘A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralised networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.’ 

If we accept this definition you can see that cryptocurrency is different from money and theoretically immune from Government manipulation. 

This means that it is not controlled by central banks, currency systems, or bank trading rules and restrictions. A cryptocurrency exists within a blockchain structure but as a separate entity for trading. 

Tokenisation

Tokenisation is different and there are many different types of tokens. The best way to consider a token as part of a cryptocurrency. A token is not the same as a coin. 

There are cryptocurrency coins and tokens;

• A token is a subset of a coin and exists only on a coin cryptocurrency network.
• I.e. Bitcoin is a coin. Ethereum and EOS are coins. A coin is the native digital asset of a network.
• There are many tokens that can be built on top of Ethereum (ERC20, ERC721) and EOS that “live” within their respective cryptocurrency ecosystem.
• A token is a quantified (defined) unit of value.
• It is generic – it can define (practically) any specific form of value.
• It is fungible –or exchangeable between different specific forms of value.
• Tokens are programmable. (Smart Contracts).

The other important thing to understand is that cryptocurrency and tokens can do things that Fiat cannot. They can measure and trade in things that money cannot, a more intangible asset. This could be intellectual property, competencies, or human capital, for example.

Tokens can also be programmed in smart contracts to operate automatically, for example, to trade under certain conditions.

I hope that's not too complicated but just bear with me as I give me some examples of why this is important.

A Case Study - A Gold Trading Platform 

Let's just let’s look at how the gold mining and the gold bullion market works at the moment.

Gold is mined by two types of groups. Large corporations and small artisanal miners. 

About 40% is extracted by hand by the latter group is extremely dangerous, difficult and poisonous conditions.

Of course, the gold extracted by large companies has done extremely safely and workers operate in safe conditions. The process is much more efficient as they refine between 80 to 90% of the gold extracted. 

The artisanal miners or ASGM suffer health hazards, uncontrolled working environments and many even are slave labourers or children. 

In the case of ASGMS, there are many middlemen who all take a cut, the government, exporters, agents, and agents buyers and sellers.

The new business model is to fund ASGMS to improve their working conditions and techniques by sharing the benefits of their labour more equitably between them and the investors who provide the capital to finance their operations.

Effectively by contracting the sale of the materials, the ASGMS are going to mine they finance their extraction more efficiently and share the profits of future sales with their investors.

By putting these transactions into a blockchain and cryptocurrency environment investors can easily buy cryptocurrency which converts into Fiat for the purposes of investments where the mining takes place. 

The role of the organisations operating the Blockchain is to run the trading platform, select the mines to invest in and ensure the security of the materials mined.

The blockchain platform provides the trust structure replacing all the middlemen in the supply chain who are replaced by automated smart contracts, cryptocurrency and tokens on the Blockchain.

So by decentralising the process from the traditional supply chain, the whole thing becomes more democratic, faster, secure, and less prone to ‘interference’ from Third World governments who are often demanding a slice of these transactions

You will have undoubtedly heard of fair trade and this could be considered as a more sophisticated fair trade vehicle for the mining industry.

The effects are profound. There is an immediate socio-economic impact on areas around the mines because the workers are always local.

The quality of the material improved by better extraction processes producing more gold for the same effort increasing wealth all the stakeholders. Because margins and benefits are shared investors making this a total societal impact investment model. 

One could say all benefit perhaps even the customer who is buying something that he/she can be assured is ethically sourced.

What could the benefits of these kinds of systems be?

You could consider this a postcolonial alternative economic system where the people who own the assets and work hard to retrieve them benefit equally with the investors who financed the operations.

If we consider the wider possibilities of this kind of technology is your imagination can run riot.

In this post-pandemic mood when many people feel they have been let down by existing systems, governments and structures that they trusted many are predicting there will be a huge take-up of decentralised business models.

The public and businesses are becoming more concerned about societal impact and how we can do business in a different way. This includes how we source materials to make our shiny technology toys.

By allowing the producing countries to take control of their own trading platforms and effectively trade direct to the end-user rather through numerous intermediaries and interfering government, we could liberate hundreds of millions of people from servitude and improve their lives beyond imagination.

This is also a way of improving our own end of the supply chain as businesses processing materials can source better and cheaper and share in the overall benefit.

All this can only be supported by an automated and trusted transaction process.

The individual user case

It is not just in poorer countries where people can benefit. Consider the position of the average person in the USA or Europe. 

If you're lucky you have a reasonable job, most of the time, and you get paid. You invest this money in a property which is charged a vast amount of interest on loans. At the same time, you're encouraged to invest in financial structures for your future working retirement and old age. 

These also cost you a fortune and are operated by middlemen such as banks and pension companies. 

Guess what they do? They also invest property with your money. 

They make a profit for their shareholders by using your money and pay you very little if anything in return. You might even receive less than you put it under current low-interest rate conditions. When you set up your own business renting an office, when you go on holiday you rent a hotel room as you do when you go on a business trip you need to use property. 

……….Imagine a different scenario in the blockchain world. 

Imagine you invest in a cryptocurrency which owns and develops property globally. 

Now you don't need to have a mortgage or invest in a pension fund because you are investing in an asset-backed cryptocurrency which is backed by property assets. 

It is effectively being done for you automatically and much cheaper than the current system.

Furthermore, at any time you choose to liquidate for Fiat, or increase or decrease your investments, you can without begging middlemen for your money back.

All of that could be done on the smartphone which makes banks, financial advisors, pension funds and others redundant.

So in effect, anything can be tokenised, your house, gold mining and even your education. There is a group in the USA who have just launched a scheme using cryptocurrencies to allow students to borrow the money to pay their course fees by signing virtual contracts on their future earnings.

The ultimate decentralisation.

If you think of a world without our complex supply chains and middlemen things would get very interesting systems and concepts.

You would not need investors, banks, financial markets, stock exchanges or shareholders. 

Because ultimately, there only two parties that are important in the business supply chain, customers and producers. 

When you buy something from a company why don’t you become a shareholder? 

You would not need all of those car showrooms to sell cars. 

You would simply order the car direct and at a reduced cost because of all the supply chain savings.

Fairer better and more innovative business models using blockchain technology and cryptocurrencies are the answer.

So maybe it is time to understand what blockchain, cryptocurrencies and tokenisation are? I think they are the most important concept for democratic change in the 21st-century.