Maybe blockchain’s biggest value proposition right now is that it’s lightly regulated and has hype, so using it greases the wheels when growing an audience or building a usually regulated product.
But the insidiousness is once you’re in, you’re in. Once you bought 4000 Tupperware to resell (insert any pyramid scheme here) , you can’t find fault in it, and when it crashes you’re burned.
I don’t want to bash blockchain, there might be interesting use cases, but I haven’t seen it yet in it’s current implementations.
I don't think you and I would agree on what constitutes "average people".
> it’s easy to setup trust systems - Alex setup his own token in a weekend for a “human IPO”, rather than running through the cost and time of properly setting it up with a lawyer and contracts.
Easy to set up, but how easy it is it to enforce?
Blockchain is just a ready-made DTCC for whatever asset/contract you want to securitize.
This is absolutely backwards though; the contract is enforcible, whereas the coin isn't. If Alex simply chooses not to pay back his investors, nothing happens other than a loss of face.
> it’s lightly regulated and has hype
Exactly.
But what he describes, hedging risk, is not a new concept. It is something that people do every day when they diversify investments or buy insurance. ISAs and "person as tokens" just push this to new levels.
> In such a scenario, every career becomes a pyramid scheme.
In other words, the rich get richer--scalability works.
One thing the author left out (or that I missed) is that scalability increases overall wealth. If I have to learn calculus from an average teacher because of geographic limitations, and then my child gets to learn from the best calculus teacher in the world, in the latter case the world gets richer because the same knowledge is arrived at quicker at less expense. (Of course, there's fallout for the average worker, but this is something we've been dealing with in the developed world for decades and still haven't figured out.)
Why people continually can’t understand this, and keep saying “buh buh buh mysql and lawyer fees! No need for blockchain!” is a failure of imagination.
Tokens, on the other hand, are the favorite tool of scammers.
I don’t think cryptocurrency is near mature enough to replace traditional contracts, but technology changes a lot in 5-10 years.
Many of the situations required in this article still require real-world contracts to make them work. The crypto tokens are additive on top of the contracts, but they don't replace contracts.
Someone could sell you an NFT that represents 15% of their future earnings over the next 3 years, but the blockchain can't enforce that. Even if we had all payments occurring on the blockchain, the person could simply create a new blockchain wallet and give their new address to future employers, claiming $0 earnings for their original blockchain address. The NFT itself is only valuable if supported by the weight of real contracts in the real world with real enforceability.
Crypto tokens only stand alone when the crypto token itself is being traded. Actual value still requires consensus that the token is worth something (Bitcoin, Ethereum) or a real-world contract that stipulates that whoever holds the token has a claim to some actual rights or asset.
It's likely that most of the real-world contracts for something of actual value have stipulations that the crypto tokens are null and void if determined to be lost or stolen. The crypto tokens are largely a distraction.
>Many of the situations required in this article still require real-world contracts to make them work. The crypto tokens are additive on top of the contracts, but they don't replace contracts.
There is no duality of 'real-world contract'/'digital contracts'. The question is if a digital document and signatures are accepted by a judicial system. In 50 years every judicial system will accept some format of digital contracts.
The potential upside of 'tokenized' and standardized/automated legal documents are: less ambiguous interpretations, automatic resolution, simpler trading, and easier cross-border contracts ( to some extent ).
All of this is possible by human hands, but legal systems are not known for their digital innovation. ( They don't even use standard 'diffs' to negotiate contracts )
This all requires contracts as code capable of ascertaining external facts. As far as I know the only such facts that have been made to work are facts about the prices of other cryptocoins.
Furthermore, most of the benefits can already be obtained by registering a contract to be traded over a commodities exchange. There are, for example, weather futures being bought, sold, and adjudicated without any need or use for a blockchain.
Do meatspace contracts ascertain external facts? No, a court of law does. For most things that will likely never change. But if the contract is of a fungible nature, then allowing it to exist on a blockchain means ownership can be traded with no additional infrastructure required. This is why I prefer to call blockchain “market-as-a-service”...
The same is true of the Chicago Board of Options, established 1848. The blockchain adds nothing. It’s the snake oil of the modern age.
And you can’t add a twist on the standard options contract, or experiment whatsoever, as a software dev fooling around. With blockchain you can experiment in infinite ways instantly. There is no permission.
Again, the lack of imagination and the total “blockchain equals bad! All of this tech is stupid because I say so!” nonsense is exhausting. You don’t want to learn so you won’t learn.
So stop doing it. No one is forcing you to push these get rich quick scams.
In any case, it’s not hard to imagine an evolution in our legal regime where tokens can gain the force of legal contracts. And then tokens will do everything that paper contracts will do, which is to say nothing except declare the terms of some mutual agreement between some meatspace entities. (obviously this only makes sense for fungible contracts)
Blockchain isn’t magic. It can’t do very much “new”. But if it can take something old (contract) and make that more accessible to more potential contract buyers/sellers, then that’s actually interesting.
Technology that makes slow complicated things fast and easy can have a lot of impact.
I won’t be selling shares of myself nor buying shares of others. But this we’re close to the point where blockchain actually provides real value beyond tulip speculation.
Isn't that also basically what any interest bearing loan/mortgage is?
At the end of the day, a mortgage is a contract that allows the borrower to purchase a home in exchange for a share of their future income, paid as interest on the loan.
Personal loans also already exist today. The primary difference in the scheme in the article is that it is blockchain-based, instead of bank-based, and the trust establishment mechanism between borrower and lender is based on personal marketing, not credit agencies.
Perhaps a bigger factor is that if the currency in which such a loan is offered is deflationary in the BTC style, it is a disadvantage to the borrower who will see the cost of their loan escalate over time, so this should be accounted for by lowering the interest rate.
It’s how you calculate the payment. In a loan it doesn’t matter how much money I make, I owe what I owe.
In the proposed equity arrangement I owe a percentage of my income. If I don’t make anything, I don’t owe anything. If I’m the next Musk, I owe billions.
That's just another way of saying 0 collateral.
> In the proposed equity arrangement I owe a percentage of my income. If I don’t make anything, I don’t owe anything
I agree the calculation is different, but I doubt there is a lender that isn't going to demand the return of their principal at the least.
Depending on the enforceability of such a contract (questionable and depends on the legal teeth they have in the respective jurisdictions) and the likelihood of default, it would significantly alter the risk profile.
If you want to take an "investment" of this sort, it would have to taken by an LLC or similar entity, which is by definition isolated from personal liability and vice versa.
You win some, you lose some. Presumably the person/organization making the loan has calculated that the upside pays for the students who end up paying nothing.
To the sibling comment about debt and equity, they're not necessarily as different as some assume. In this case, if I called it debt with a payback schedule based on ability to pay up to some cap, does that make it into something fundamentally different just because it's unusual?
But there’s still a basic framework before you get into the messy middle. Taxonomies are a useful technology, calling everything a loan obscures more than it clarifies.
And I don't disagree even though I had a long ago finance professor who hammered on the point that a lot of financial instruments weren't necessarily that distinct from each other just because they have different names. But, yes, we can generalize about the distinct characteristics of normal debt and normal equity.
Which may depend on an external factor if say it's a variable rate loan pegged to the prime. At some level, this is just using a different formula to determine the payment.
Again, no. Brute force Nakamoto consensus is bad for the environment, but lumping all crypto into that bucket is ignorant/intellectually dishonest.
All human production processes use energy, and therefore all economic activity is “bad for the environment” in the exact proportion of its energy use.
Also Proof of Stake.