How blockchain is reshaping our economic, environmental and social orders Pt II

For over a century the efficiency gains brought by new technology were predicted to lead us into an "age of leisure" where we’d work less because machines would do our work in a fraction of the time.

In fact, the exact opposite happened. Instead of taking the extra leisure time, humans have doubled-down on the consumption of cheap goods and driven demand higher so that we are producing at a faster pace than ever which has led to a state of overcapacity in production and a world that is operating beyond its carbon-absorptive capacity, representing a major challenge for future growth.

In the US’ latest National Climate Assessment, researchers issued their most dire economic and climatic warning to date dissenting their boss President Trump’s official stance:

"Without substantial and sustained global mitigation and regional adaptation efforts, climate change is expected to cause growing losses to American infrastructure and property and impede the rate of economic growth over this century."

Changing human behavior with token economics

In The Limits to Growth, researchers at MIT in the 1970s projected the world’s growth trajectory into the 21st century using dynamic systems models. The authors concluded that if the historic behaviour of the economic man continued in the same manner, it would push the world to a ‘natural limit’: "The basic behavior mode of the world system is exponential growth of population and capital, followed by collapse."

The majority of the world’s people are concerned about with matters that affect only family or friends over a short period of time.

This ties in with the shortsighted bias of humans, in particular politicians and corporate executives beholden to the electorate and shareholders, and their focus on short term consequences as opposed to a bigger picture view.

In coming years, it will be the people— through new currencies and technology—that take over the climate issue from politicians and corporations. The emerging field of token economics is our first foray into organizing and incentivizing the environmental behaviour of billions of people in an overpopulated planet that is already producing beyond the needs of its population.

Moving from a linear to a circular economy

Cryptocurrencies will play a central role in replacing the exponential growth model with a more steady-state sharing economy that incentivizes people not to extract value but to add value to and circulate what we have already produced.

Referred to in classic economics as ‘stationary’, Adam Smith being one proponent, the steady-state (or circular) economy doesn’t grow per se but a constant supply of stock/capital already in the system is met by a constant demand from the stock of population, both stocks regulated by the flow of natural resources.

Blockchains hybrids which focus on the IoT microtransactions such as Hashgraph or IOTA facilitate the exchange of value for data or electrons between machines. Projects such as Power Ledger, WePower and LO3 Energy are already using blockchain to disrupt the energy sector — developing applications for microgrids, electric vehicle (EV) charging and peer-to-peer transactions.

The earth’s population doubled in size in 30 years after 1970, though the rate of global population growth is slowing and could reach a plateau around 2100, according to the UN.

For decades, as population growth in the West has been slowing, GDP growth was imported from developing countries (with the fastest growing populations) in the form of ever cheaper consumer goods that drove domestic consumption. However, these "emerging countries" will likely miss out on the age of voracious consumer-driven growth that the West enjoyed as we reach the physical limits of growth.

Towards a world of more currencies and less growth

There are only 180 official currencies in the world (all created by bank debt) which is a very high concentration for 8 billion people and the proliferation of thousands more over the coming years will change our growth trajectory as continued growth of GDP year-on-year relies on the assumption of infinite elastic demand in a world of finite resources.

Infinitely elastic demand dictates that demand for a product is constant with its price, any price above that will drop demand to zero.

Macroeconomic models that extrapolate exponential growth are premised on demand being in equilibrium without factoring in dynamic changes like credit or changes of taste/preferences of a diverse population but are modelled on a single agent, ‘the perfect capitalist’, that is supposed to represent the entire social class. In the model above, demand is kept in equilibrium between quantity and price and assumes after any exogenous shocks in price or quantity they will return to equilibrium. This assumption of infinite elastic demand is the premise for chasing GDP growth to the earth’s limits.

However, most economic models only assume there is one currency available to the model citizen. What will happen to demand and GDP when there are thousands of complementary currencies to exchange the same good with? These conventional models will have to be ditched or "official" GDP growth rate will drop.

As the failures of many if not all of the recent climate accords between nations show, politicians aren’t willing to sacrifice GDP growth in their economy and their tenure in office for the sake of carbon reduction and governments in fact subsidize the pollution of multinational companies through free-trade agreements so companies themselves have little incentive to offset their damage.

According to the United Nations’ Sustainable Development Goals, there is an estimated $2.4 trillion required per annum globally to mitigate climate change damage.

Individually-issued currencies for the first time in history

Since governments aren’t willing to tackle the environmental issue as their national currencies are too tied up in corporate, personal and national debt to reduce economic growth, what we will see is regions and individuals using certain governance blockchain protocols to issue their own currencies to tackle it.

With the issuance of local cryptocurrencies backed by commons (land, air, water, minerals etc) people will instead have the choice and even be incentivized to offset their own emissions and that of companies. These currencies will stay in the local economy, circulating and benefiting SMEs, society and the currency’s conditions can be amended by the people.

Principles of a resource-backed currency

According to economist Elinor Ostrom, the first woman to win a Nobel prize in the field for her work on resource economics and governance, the 8 principles for governing a commons-backed currency are:

1. Define clear group boundaries
2. Match rules governing the use of common goods to local needs and conditions
3. Ensure that those affected by rules can modify the rules
4. Develop a monitoring system
5. Use graduated sanctions for rule violators
6. Provide accessible, low-cost dispute resolution
7. Make sure the rule-making is accepted by authorities
8. Bottom up responsibility for governing the common resources

For the first time in history, all these criteria can now be fulfilled in a currency by on-chain blockchain voting protocols – one of the evolutionary steps in cryptocurrencies. Hybrid blockchain protocols like Lisk and EOS’ delegated proof-of-stake, or Tezos ‘liquid-proof-of-stake’, are trying to create more democratic voting processes and participation among communities.

Bancor Protocol

The Bancor is a smart contract protocol that allows individuals to build their own currency on Ethereum. Bancor has been described by Bernard Lietaer as facilitating a "peaceful transition from the conventional national currency networks to a post-industrial blockchain space."

Bancor will tie in with Aragon which acts like a traditional trade association between DAOs existing purely in its digital jurisdiction. Where throughout the industrial age business has been organized nationally either in communist or capitalist form, in the internet/information age we will see the first supranational jurisdictions and organizations form. A supranational jurisdiction is not as novel as it may sound, the first was the Hanseatic League of the middle ages.

The process of issuing a community currency on Bancor:

1. Integrated Platform provides the platform for issuing basic/income or commons-backed currencies.
2. Governance Platform such as Aragon acts as the justice system
3. Bancor reserve is the foundation
4. Community creates the tokens on the Bancor platform
5. Community issues x amount of coins each week
6. Residents exchange coins creating value that stays in the community
7. Economic value is retained and spent on the community.

The main advantage of issuing smart tokens on Bancor over a straight ERC-20 or another blockchain is the Bancor exchange provides ‘constant liquidity’ for currencies issued on its platform by intermediating as the counterparty in each trade and ensuring that there is always an equal amount of buyers and sellers. Even for tokens with little liquidity, there is no bid/ask spread – in other words price is stable whether buying or selling.

This allows for community currencies with low liquidity that would otherwise be restricted in functionality to be converted to other community or cryptocurrency.

Crypto’s role in decarbonizing and regenerative farming

Since we have gone past the crucial point of limiting the climate temperature from rising 1.5 degrees within the next 20 years new technologies are emerging to actually remove carbon from the atmosphere. Swedish furniture giant IKEA is making plastic from Co2 removed from the atmosphere and industrial carbon capture is now an option for most large companies. However, they still need an incentive to do so.

Nori is a carbon blockchain marketplace striving to create the first universal price on carbon removal in which One NORI token represents the equivalent of one tonne of CO2 removed. Unlike other existing carbon credits which exchange the right to emit carbon, this is a digital certificate of a carbon removal which would appeal to corporations trying to boost their sustainability image just like the certification of organic or Fair Trade or players in the food supply chain that want to prevent soil erosion.

The marketplace for carbon removal credits brings together suppliers of carbon removal, verifiers of the removal process and buyers of NORI tokens. Paul Gambil, founder of Nori describes it as "the Stripe of carbon removal."

Ecological State Protocols built on top of Regen Ledger monitor on-the-ground conditions and generate trusted attestations about the health of ecosystems.

The creation of soil is also known to sequester carbon and is the aim of the practice of regenerative farming. Regen Network is another project using blockchain to generate and incentivize trusted attestations about the health of ecosystems to the Regen Ledger. Using its own open-source "ecological protocols" Regen will allow others to issue ecological tokens upon it.

Users earn the XRN token on Regen for their data input and this allows organizations to allocate funds and distribute them to specific projects that need funding according to the data.

Conclusion

Blockchain allows for a new decentralized way of organizing society in exciting ways from the ground-up, instead the very centralized top-down capitalist and socialist models we’ve had before, with the latter collapsing several times and the former arguably on the verge of collapse.

On-chain governance protocols allow individuals for the first time in history to issue and organize a currency around society’s needs instead of individuals being forced to accept a unit that no longer works in their favour. This allows for people to take more effective action to negate and reverse the damage being done to the planet and add to the plurality of "official" currencies in the world that could change the trajectory of destructive growth we’re currently on.

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