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Opinion: Bitcoin Flips What We Know About Economics

Elon Musk’s recent enthusiasm for Bitcoin can be interpreted in some obvious ways. Philosophically speaking this excitement about Bitcoin as the future of finance certainly overlaps with the innovator’s aspirations for his tech ventures, SpaceX, Neuralink, and Starlink.

Musk certified this excitement by opening up to accepting Bitcoin and buying about $1.5 billion worth of it. Is the tech visionary seeing something that Satoshi Nakamoto was envisioning? Probably not, but that does not belittle the significance of such interest from one of the key players in the tech industry today.

Could Bitcoin change the economy completely?

Technology is the Continuous Revolution

In the context of innovation, is it possibly true that anything when combined with technology becomes a potential revolution? No one would argue that our now ancient ability to engineer tools like wheels and arrowheads has logically trended towards our invention of particle accelerators and artificial intelligence in the past several decades of history.

Technology plays a central role in human evolution; it has altered every field that it has been applied in. In the twenty-first century we are witnessing a peak in its evolution. If all goes well, this might not be the last peak either. Be it medicine or art, politics, or psychology, incorporation of technology has forever opened up astounding possibilities in every domain that it has entered. So if we envision a technological innovation in the field of economics, what would it look like?

Obvious examples to submit — in the context of the content and audience here — would obviously be blockchain and cryptocurrency. The rising interest of futurists and tech-entrepreneurs in this area is probably supportive of this argument.

But before getting into how blockchain and cryptocurrency can potentially be an opportunity for innovation in economics, let us acknowledge that any such revolution in our economic paradigms has significant social implications. It would be naive to suggest that better economic systems do not correlate positively with better social well being.

Better Tech Doesn’t Automatically Improve Society  

Better does not necessarily have to imply quantitative parameters of measuring economic health such as GDP alone. Rather qualitative social outcomes that can be verifiable at the grass roots level in improving the human condition are probably more pertinent markers of social health.

Few would disagree that better societies are based on nondiscriminatory principles, minimization of poverty, and citizens who genuinely enjoy optimal physical and mental wellbeing.

Imagining a Better Economic System

It can be inferred that only through the elimination of human bias can we imagine building better economic systems. Bitcoin as a prototypical cryptocurrency deployed on a blockchain network is a persuasive case for eliminating human bias from economic infrastructure. The proof-of-work computational rule on which the entire concept of Bitcoin (and other cryptocurrencies) is based, is a mathematically sound solution to override the shortcomings and miscalculations emanating in economic contexts as a result of human prejudice.

The precise beauty of Bitcoin lies in its inviolable attributes. For instance, there are only 21 million Bitcoin and that number will always remain consistent unlike traditional currencies like dollars that can be printed at infinitum. It is reasonable to compare Bitcoin with physically mined resources of value such as gold and oil. These mineral resources are scarce and ultimately limited in quantity, which is why they embody value.

However, we do not know the exact quantity of these natural resources on the planet. Notwithstanding the consideration of extraterrestrial sources for these rare minerals, which can completely change the modelling parameters for such scenarios, one can safely assume that the planetary amount of oil or gold is finite but not accurately quantifiable. Bitcoin on the other hand is finite but completely quantifiable because of its priori count set at 21 million. This gives it immense power and potential to create a solid economic infrastructure.

Cryptographic Proof Based Economics

Twenty-one million Bitcoin being mined by a computational logic and infrastructure that can be analyzed and monitored through mathematical precision, over a decentralized infrastructure, overcomes several pitfalls of traditional economic systems that are based on centralized control and unregulated governance.

A case for technologically driven innovation in economics can thus be made on this premise alone.

Who May Wield Absolute Power?

The sacrosanct status imposed mathematically on the Bitcoin number directly implies that its value is always amenable to analysis and scrutiny, unlike the traditional money-based economic systems that have generated massive corruption through unbridled capitalism and wealth inequality — consequences of human shortcomings such as avarice and imbalanced power hierarchies.

In early 2010, we saw how the power of crowd-based, network-driven movements such as the anti-government protests of the Arab Spring could threaten long established oppressive regimes. On the other hand, Facebook’s scandal involving data breach by Cambridge Analytica, and the manipulation of the 2016 US election showed us how this power comes in the form of a double-edged sword. Recent events involving naked shorting of Gamestop stocks, evinced how Wall Street could be beaten at its own game by an orchestrated swarm of networked Redditors. These examples are connected by their commonality with the internet. They highlight the critical role of decentralized systems in shifting the power dynamics of the wired web of information that is increasingly regulating the function of the modern world.

Given the immense creative (and disruptive) forces encoded in our connected technologies, ethical and sociological considerations for tech-driven societies of the future is becoming highly relevant. Our fears of Artificial Intelligence and Skynet-like dystopias is indeed becoming a very real concern as new generations look forward to the world that they are inventing and also simultaneously discovering at the same time.

Don’t Trust, Verify

Considering these factors, if there is one area in which it behooves us to trust computers, then it is the world of numbers. Economics, in its most fundamental sense, is all about numbers. Human biases and the aforementioned shortcomings make us vulnerable to manipulating numbers to make them suit our own selfish needs. These kind of infrastructural vulnerabilities in our traditional economic systems have created an astronomical number of problems since time immemorial. Wealth inequality and social discrimination, through political manipulation of economic power have generated great social injustices precisely because the fallibility of human judgement.

Therefore, moving forward, does it not sound imperative for us to entrust computers and  the inviolable rules of mathematics to govern our economies? Some of the enthusiasm for innovations like blockchain and cryptocurrency is classically inspired by such questions. In considering all kinds of monetary theories, it seems inevitable that the best way to ensure that no body ever misuses economics by gaming the system is by making the system infallible. Technology can help us accomplish this.

Bitcoin: The Great Leveller

I personally find these lofty prospects as the most exciting attributes of the disruptive potential of ideas like Bitcoin. In a few more years Facebook and Oculus Rift will replace the user-interfaces between nodes on social networks through virtual and augmented realities.

In such a future, cryptocurrencies and blockchain are bound to become an even more essential substrate for running transactions on the upcoming iterations of social media. Since this future is clearly heading towards us with a force of certitude, we would be amiss to ignore the power of blockchain and Bitcoin in helping us level the field.

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Ankur Dynanmote

About the Author

Ankur Dnyanmote

Ankur Dnyanmote Ph.D. does research involving computational biology and bioinformatics. He is deeply interested in systems thinking and interdisciplinary work focused on a wide spectrum of issues related to science, philosophy, innovation, and technology. His curiosity about blockchain and cryptocurrency is largely driven by these interests.