Crypto Market Commentary 

6 March 2019

Today I want to run through some big concepts about economies of the future. When trying to describe the overall nature of these, we’ve considered referring to them as, “The Great Financial Awakening”, “The Great Financial Realignment”, or “The Big Banking Awakening”.

We’re still workshopping the names, but the important pieces are starting to emerge.

They are the Internet Economy, the Sharing Economy, and the Token Economy.

Let’s run through each:

The Internet Economy (or Digital Economy) refers to refers to an economy that is based on digital computing technologies, which conducts business through markets based on the internet, such as Amazon.

Major Features:

• Digitized info/workflows: The transactions can be fully managed by online processes given that the transaction related information is already digitized, including product/service info and payment method, etc.
• Logistics: Internet Economy relies on streamlined logistic processes to deliver the product/service to complete the transaction.
• Light-asset based: Since Internet Economy does require an offline location to interact with customers, the Internet Economy is light-asset based and more cost-effective in pricing for competition.

The Internet Economy has emerged out of our transition to a more globalized, technology-based, and digital-reliant society. In many ways it is the culmination of the 3rd Industrial Revolution we covered last week.

Next we have the Sharing Economy.

The Sharing Economy (aka Collaborative Consumption) refers to peer-to-peer (P2P) transactions that are based on the Internet. It differs from Internet Economy in the sense that the platform only facilitates online connection of product/service provider and consumers. The easiest way to think about the sharing economy is that the platform, or app, does not sell or provide the service directly, or it find some way to incentivize a sharing nature, e.g., WeWork is an office space provider that has a strong focus on community and freedom.

Major Features:

• Peer-to-Peer Transactions: Transactions in Sharing Economy are peer-2-peer, which can be B2C, C2C or B2B.
• Trust Authority: The platform serves as a trust authority to endorse both the consumer and product/service provider.
• Unused Value to Share: Sharing Economy is largely dependent on the willingness to share unused value, which can be recycled or reused. For example, cars are not used for 92% of the time and the unused value can be a significant resource/opportunity for sharing economy car solutions, such as Uber and Lyft.

The sharing economy is a relatively recent, and huge, trend for our society. Many 1B+ startup “unicorns” are sharing economy startups.

The sharing economy is not without its flaws. Apps like Uber/Lyft encourage people to trade their time and vehicle value for monetary compensation which is not worth it long term. AirBnB can reduce property values and wreck neighborhood cohesion.

The sharing economy does certainly have growing pains, but is certainly the direction we are headed.

Which brings me to the Token Economy, possible the biggest and most dramatic economic shift we will see in our lifetimes.

The Token Economy refers to the system of incentives based on cryptocurrencies that reinforce and build desirable behaviors. For example, to form the consensus in the blockchain, it requires miners to provide validation service for transactions.

Major Features:

• Blockchain-based: Token works naturally with blockchain technology as an intermediary of value measure and exchange. It does not require trust authority to validate the P2P transactions on the network.
• Multiple-purpose: Token is classified as utility token and security token. For utility tokens, it can be used for transaction, vote, and staking.
• Multi-Factor Driven: Depending on application scenarios, the token economics mechanism can be customized to address the unique characteristics of the application scenario.

This is where we see the “three pillars” of crypto, STOs, and DeFi (Decentralized Finance) acting in unison to prop up the Token Economy.

While the Sharing Economy is decentralized in some sense, the Token Economy is pushing for truly decentralized economic mechanisms.

We’re only beginning to experiment with these new technologies, methods, and economies. It is an exciting time for the innovative, the curious, and the bold.