There are many reasons but personally I think the primary factor to appreciate in understanding the significance of token economics is that the most basic way in which economic data is recorded is changing; with the advent of blockchain technology, the information layer upon which economies are built is changing and therefore everything upwards of that layer will change, which is essentially everything we know about how our economies work.
Economics is before anything based on information, it is base on records of ownership that define who owns what and what is exchanged – what we call ledgers – everything that exists within an advanced economy exists because it is recorded somewhere in a ledger. Because these ledgers define who has what we have to trust whoever it is that maintains those records. Those ledgers are currently maintained by the thing we trust the most which is the government and legal system. That legal system determines who gets to make entries into those databases and it grants that power to various institutions that prove their trustworthiness to the legal system, banks, insurance companies, hospitals, enterprises, institutional investors etc. These centralized authorities manage this complex set of records or databases and thus control how value is represented and flows within the economy – which is, of course, the foundations of their power and influence within society. This centralized approach can have many advantages in terms of simplicity, speed, and efficiency, but it also means that we have to trust those institutions and in this way, we hand over massive amounts of power to these centralized institutions and have to continuously work to constrain their powers.
Reply To: Why blockchain is important?Joss Colchester2018-06-23T09:45:20+00:00