The Blockchain Economy: A Beginner’s Guide To Institutional Cryptoeconomics

User Manual:

Open the PDF directly: View PDF .
Page Count: 13

Cryptoeconomics

Follow

Posts by the team at cryptoeconomics.com.au

Sep 26 ·14 min read

The Blockchain Economy: A beginner’s

guide to institutional cryptoeconomics

!"#$%&'(#)*&+$,-./$#&0/1$2%3,&/,2&4/%3,&5366%&/#(&7#38&6"(&9:;<

'.3-=-"/$,&;,,31/6$3,&>?@*&6"(&A3#.2B%&C#%6&%3-$/.&%-$(,-(&#(%(/#-"&-(,6#(

$,63&6"(&(-3,38$-%*&D3.$6$-%*&%3-$3.3)E*&/,2&./A&37&@.3-=-"/$,&6(-",3.3)EF

...

!"#$%&'()("*+,$+-$*$.+/+0*&1$.#(#,02*&+-#.1$.+-02+%30#.$ledger4

5'-0$#67&*,*0+',-$8'2$0"#$+97'20*,(#$'8$0"#$%&'()("*+,$-0*20$:+0"$;+0<

('+,$*,.$0"#$"+-0'2=$'8$9',#=4$;30$9',#=$+-$>3-0$0"#$?2-0$3-#$(*-#$'8$0"#

%&'()("*+,4$@,.$+0$+-$3,&+)#&=$0'$%#$0"#$9'-0$+97'20*,04

A0$9+/"0$-##9$-02*,/#$0"*0$*$&#./#2 B *$.3&&$*,.$72*(0+(*&$.'(39#,0$*--'<

(+*0#.$9*+,&=$:+0"$*(('3,0+,/ B :'3&.$%#$.#-(2+%#.$*-$*$2#C'&30+',*2=

0#(",'&'/=4$;30$0"#$%&'()("*+,$9*00#2-$%#(*3-#$&#./#2-$9*00#24

Ledgers all the way down

D#./#2-$*2#$#C#2=:"#2#4$D#./#2-$.'$9'2#$0"*,$>3-0$2#('2.$*(('3,0+,/

02*,-*(0+',-4$@$&#./#2$(',-+-0-$-+97&=$'8$.*0*$-023(032#.$%=$23&#-4$@,=

0+9#$:#$,##.$*$consensus *%'30$facts1$:#$3-#$*$&#./#24$D#./#2-$2#('2.

0"#$8*(0-$3,.#27+,,+,/$0"#$9'.#2,$#(','9=4

Ledgers con0rm ownership.$E2'7#20=$0+0&#$2#/+-0#2-$9*7$:"'$':,-

:"*0$*,.$:"#0"#2$0"#+2$&*,.$+-$-3%>#(0$0'$*,=$(*C#*0-$'2$#,(39%2*,(#-4

F#2,*,.'$.#$G'0'$"*-$.'(39#,0#.$"':$0"#$7''2$-3H#2$:"#,$0"#=$':,

72'7#20=$0"*0$"*-$,'0$%##,$(',?29#.$+,$*$&#./#24$!"#$?29$+-$*$&#./#21$*-

*$,#0:'2)$'8$':,#2-"+71$#97&'=9#,0$*,.$72'.3(0+',$2#&*0+',-"+7-$:+0"

*$-+,/&#$7327'-#4$@$(&3%$+-$*$&#./#21$-023(032+,/$:"'$%#,#?0-$*,.$:"'

.'#-$,'04

Ledgers con0rm identity.$;3-+,#--#-$"*C#$+.#,0+0+#-$2#('2.#.$',$/'C<

#2,9#,0$&#./#2-$0'$02*()$0"#+2$#6+-0#,(#$*,.$0"#+2$-0*03-$3,.#2$0*6$&*:4

Images haven’t loaded yet. Please exit printing, wait for images to load, and try to

print again.

!"#$2#/+-0#2$'8$;+20"-$I#*0"-$*,.$5*22+*/#-$2#('2.-$0"#$#6+-0#,(#$'8$+,.+<

C+.3*&-$*0$)#=$9'9#,0-1$*,.$3-#-$0"*0$+,8'29*0+',$0'$(',?29$+.#,0+0+#-

:"#,$0"'-#$+,.+C+.3*&-$*2#$+,0#2*(0+,/$:+0"$0"#$:'2&.4

Ledgers con0rm status. J+0+K#,-"+7$+-$*$&#./#21$2#('2.+,/$:"'$"*-$0"#

2+/"0-$*,.$+-$-3%>#(0$0'$'%&+/*0+',-$.3#$0'$,*0+',*&$9#9%#2-"+74$!"#$#&#(<

0'2*&$2'&&$+-$*$&#./#21$*&&':+,/$L*,.1$+,$@3-02*&+*1$'%&+/+,/M$0"'-#$:"'$*2#

',$0"*0$2'&&$*$C'0#4$N97&'=9#,0$+-$*$&#./#21$/+C+,/$0"'-#$#97&'=#.$*$(',<

02*(03*&$(&*+9$',$7*=9#,0$+,$2#032,$8'2$:'2)4

Ledgers con0rm authority.$D#./#2-$+.#,0+8=$:"'$(*,$C*&+.&=$-+0$+,$7*2<

&+*9#,01$:"'$(*,$*((#--$:"*0$%*,)$*(('3,01$:"'$(*,$:'2)$:+0"$("+&<

.2#,1$:"'$(*,$#,0#2$2#-02+(0#.$*2#*-4

At their most fundamental level, ledgers map economic and social

relationships.

@/2##9#,0$*%'30$0"#$8*(0-$*,.$:"#,$0"#=$("*,/# B 0"*0$+-1$*$(',-#,-3-

*%'30$:"*0$+-$+,$0"#$&#./#21$*,.$*$023-0$0"*0$0"#$&#./#2$+-$*((32*0# B +-

',#$'8$0"#$83,.*9#,0*&$%*-#-$'8$9*2)#0$(*7+0*&+-94

Ownership, possession, and ledgers

D#0O-$9*)#$*$.+-0+,(0+',$"#2#$0"*0$+-$(23(+*&$%30$#*-=$0'$9+--P$%#0:##,

ownership *,.$possession4

!*)#$7*--7'20-4$N*("$('3,02 =$*--#20-$0"#$2+/"0$0'$(',02'&$:"'$(2'--#-$+0-

%'2.#2-1$*,.$#*("$('3,02=$9*+,0*+,-$*$&#./#2$'8$:"+("$'8$+0-$(+0+K#,-

"*C#$0"#$2+/"0$0'$02*C#&4$@$7*--7'20$+-$*$7"=-+(*&$+0#9 B (*&&$+0$*$token B 

0"*0$2#8#2-$%*()$0'$0"+-$&#./#24

A,$0"#$72#<.+/+0*&$:'2&.1$7'--#--+',$+,.+(*0#.$':,#2-"+7$'8$0"*0$2+/"04

!"#$@3-02*&+*,$7*--7'20$&#./#2$(',-+-0#.$'8$+,.#6$(*2.-$"#&.$+,$%=$0"#

/'C#2,9#,0$'8$#*("$-0*0#4$;'2.#2$*/#,0-$72#-#,0#.$:+0"$*$7*--7'20$('3&.

-329+-#$0"*0$0"#$02*C#&&#2$:"'$"#&.$+0$:*-$&+-0#.$',$*$.+-0*,0$&#./#2$*-$*&<

&':#.$0'$02*C#&4$Q8$('32-#$0"+-$&#80$%'2.#2$(',02'&$"+/"&=$#67'-#.$0'

82*3.4

G&'(.)$/,&D/%%D3#6&"(.2&@E&6"(&G?%6#/.$/,&H/6$3,/.&G#-"$1(%*&GIJK

LMIININOKPM

E'--#--+',$$8D.$(%&':,#2-"+71$%30$7'--#--+',$+-$,36&':,#2-"+74$R':

9'.#2,$7*--7'20-$*&&':$0"#$*30"'2+0+#-$0'$(',?29$':,#2-"+7$.+2#(0&=4

!"#+2$.+/+0*&$8#*032#-$*&&':$*+2&+,#-$*,.$+99+/2*0+',$*30"'2+0+#-$0'$S3#2=

0"#$,*0+',*&$7*--7'20$.*0*%*-#$*,.$.#0#29+,#$0"*0$*$7*--#,/#2$+-$82##$0'

02*C#&4

E*--7'20-$*2#$*$2#&*0+C#&=$-02*+/"08'2:*2.$#6*97&#$'8$0"+-$.+-0+,(0+',4$;30

*-$;+0('+,$"*-$-"':,P$money is a ledger, too4

E'--#--+',$'8$*$%*,),'0#$0')#,$+,.+(*0#-$':,#2-"+74$A,$0"#$,+,#0##,0"

(#,032=$0"#$7'--#--'2 B T%#*2#2O B '8$*$%*,),'0#$"*.$*$2+/"0$0'$.2*:$',

0"#$+--3+,/$%*,)$0"#$C*&3#$'8$0"#$,'0#4$!"#-#$%*,),'0#-$:#2#$.+2#(0$&+*<

%+&+0+#-$8'2$0"#$+--3+,/$%*,)1$*,.$:#2#$2#('2.#.$',$0"#$%*,)-O$&#./#24$@

2#/+9#$'8$7'--#--+',$+,.+(*0+,/$':,#2-"+7$9#*,0$0"*0$%*,),'0#-$:#2#

-3-(#70+%&#$0'$%#$%'0"$-0'&#,$*,.$8'2/#.4

A,$'32$#2*$?*0$(322#,(+#-$*$?C#$.'&&*2$%+&&$(*,,'0$%#$2#032,#.$0'$0"#$(#,<

02*&$%*,)$8'2$/'&.4$;30$0"#$2#&*0+',-"+7$2#9*+,- B 0"#$C*&3#$'8$0"#$%+&&$+-

.#7#,.#,0$',$*$-'(+*&$(',-#,-3-$*%'30$0"#$-0*%+&+0=$'8$0"#$(322#,(=$*,.

/'C#2,9#,0$0"*0$+--3#.$+04$;*,),'0#-$*2#$,'0$:#*&0"1$*-$U+9%*%:#*,-

*,.$V3/'-&*C+*,-$*,.$W#+9*2$X#73%&+($Y#29*,-$"*C#$3,8'203,*0#&=

&#*2,#.4$@$%+&&$+-$*$(*&&$',$*$2#&*0+',-"+7$+,$*$L,':$-=,0"#0+(M$&#./#2$*,.$+8

0"*0$2#&*0+',-"+7$('&&*7-#-1$-'$.'#-$0"#$C*&3#$'8$0"#$%+&&4

The evolution of the ledger

Z'2$*&&$+0-$+97'20*,(#1$&#./#2$0#(",'&'/=$"*-$%##,$9'-0&=$3,("*,/#.$[

3,0+&$,':4

D#./#2-$*77#*2$*0$0"#$.*:,$'8$:2+00#,$('993,+(*0+',4$Ledgers and

writing developed simultaneously$+,$0"#$@,(+#,0$R#*2$N*-0$0'$2#('2.

72'.3(0+',1$02*.#1$*,.$.#%04$J&*=$0*%&#0-$%*)#.$:+0"$(3,#+8'29$-(2+70$.#<

0*+&#.$3,+0-$'8$2*0+',-1$0*6#-1$:'2)#2-$*,.$-'$8'20"4$!"#$?2-0$+,0#2,*0+',*&

T('993,+0=O$:*-$*22*,/#.$0"2'3/"$*$-023(032#.$,#0:'2)$'8$*&&+*,(#-$0"*0

83,(0+',#.$*$&'0$&+)#$*$.+-02+%30#.$&#./#24

G&7#/)8(,6&37&/&./6(&'/@E.3,$/,&-?,($73#8&.(2)(#*&"(.2&@E&6"(&'#$6$%"&:?%(Q

?8*&KROPR

!"#$?2-0$9*>'2$("*,/#$0'$&#./#2-$*77#*2#.$+,$0"#$8'320##,0"$(#,032=

:+0"$0"#$+,C#,0+',$'8$double entry bookkeeping4$;=$2#('2.+,/$%'0"

.#%+0-$*,.$(2#.+0-1$.'3%&#$#,02=$%''))##7+,/$(',-#2C#.$.*0*$*(2'--$93&<

0+7&#$L.+-02+%30#.M$&#./#2-1$*,.$*&&':#.$8'2$0"#$2#(',(+&+*0+',$'8$+,8'29*<

0+',$%#0:##,$&#./#2-4

!"#$,+,#0##,0"$(#,032=$-*:$0"#$,#60$*.C*,(#$+,$&#./#2$0#(",'&'/=$:+0"

0"#$2+-#$'8$&*2/#$('27'2*0#$?29-$*,.$&*2/#$%32#*3(2*(+#-4$!"#-#$cen-

tralised ledgers$#,*%&#.$.2*9*0+($+,(2#*-#-$+,$'2/*,+-*0+',*&$-+K#$*,.

-('7#1$%30$2#&+#.$#,0+2#&=$',$trust +,$0"#$(#,02*&+-#.$+,-0+030+',-4

A,$0"#$&*0#$0:#,0+#0"$(#,032=$&#./#2-$9'C#.$82'9$*,*&'/$0'$digital

ledgers4$Z'2$#6*97&#1$+,$0"#$\]^_-$0"#$@3-02*&+*,$7*--7'20$&#./#2$:*-

.+/+0+-#.$*,.$(#,02*&+-#.4$@$.*0*%*-#$*&&':-$8'2$9'2#$('97&#6$.+-02+%3<

0+',1$(*&(3&*0+',1$*,*&=-+-$*,.$02*()+,/4$@$.*0*%*-#$+-$('9730*%&#$*,.

-#*2("*%&#4

;30$*$.*0*%*-#$-0+&&$2#&+#-$',$023-0`$*$.+/+0+-#.$&#./#2$+-$',&=$*-$2#&+*%&#$*-

0"#$'2/*,+-*0+',$0"*0$9*+,0*+,-$+0$L*,.$0"#$+,.+C+.3*&-$0"#=$#97&'=M4$A0$+-

0"+-$72'%&#9$0"*0$0"#$%&'()("*+,$-'&C#-4$!"#$%&'()("*+,$+-$*$.+-02+%30#.

&#./#2-$0"*0$.'#-$,'0$2#&=$',$*$023-0#.$(#,02*&$*30"'2+0=$0'$9*+,0*+,$*,.

C*&+.*0#$0"#$&#./#24

Blockchain and the economic institutions

of capitalism

!"#$#(','9+($-023(032#$'8$9'.#2,$(*7+0*&+-9$"*-$#C'&C#.$+,$'2.#2$-#2<

C+(#$0"#-#$&#./#2-4

Q&+C#2$W+&&+*9-',1$0"#$a__]$R'%#&$&*32#*0#$+,$#(','9+(-1$*2/3#.$0"*0

7#'7&#$72'.3(#$*,.$#6("*,/#$+,$9*2)#0-1$?29-1$'2$/'C#2,9#,0-$.#7#,.<

+,/$',$0"#$2#&*0+C#$transactions costs$'8$#*("$+,-0+030+',4$W+&&+*9-',O-

02*,-*(0+',-$('-0$*772'*("$72'C+.#-$*$)#=$0'$3,.#2-0*,.+,/$:"*0$+,-0+03<

0+',-$9*,*/#$&#./#2-$*,.$:"=4

Y'C#2,9#,0-$9*+,0*+,$&#./#2-$'8$*30"'2+0=1$72+C+&#/#1$2#-7',-+%+&+0=$*,.

*((#--4$Y'C#2,9#,0-$*2#$0"#$023-0#.$#,0+0=$0"*0$)##7-$.*0*%*-#-$'8$(+0+<

K#,-"+7$*,.$0"#$2+/"0$0'$02*C#&1$0*6*0+',$'%&+/*0+',-1$-'(+*&$-#(32+0=$#,0+<

0&#9#,0-1$*,.$72'7#20=$':,#2-"+74$W"#2#$*$&#./#2$2#S3+2#-$('#2(+',$+,

'2.#2$0'$%#$#,8'2(#.1$0"#$/'C#2,9#,0$+-$2#S3+2#.4

Z+29-$*&-'$9*+,0*+,$&#./#2-P$72'72+#0*2=$&#./#2-$'8$#97&'=9#,0$*,.$2#<

-7',-+%+&+0=1$'8$0"#$':,#2-"+7$*,.$.#7&'=9#,0$'8$7"=-+(*&$*,.$"39*,

(*7+0*&1$'8$-377&+#2-$*,.$(3-0'9#2-1$'8$+,0#&&#(03*&$72'7#20=$*,.$('27'<

2*0#$72+C+&#/#4$@$?29$+-$'80#,$.#-(2+%#.$*-$*$T,#63-$'8$(',02*(0-O4$;30$0"#

C*&3#$'8$0"#$?29$('9#-$82'9$0"#$:*=$0"*0$,#63-$+-$'2.#2#.$*,.$-023(<

032#. B 0"#$?29$+-$+,$8*(0$*$&#./#2$'8$(',02*(0-$*,.$(*7+0*&4

Firms and governments can use blockchains to make their work

more e?cient and reliable.$53&0+,*0+',*&$?29-$*,.$,#0:'2)-$'8$?29-

,##.$0'$2#(',(+&#$02*,-*(0+',-$',$*$/&'%*&$%*-+-$*,.$%&'()("*+,-$(*,$*&<

&':$0"#9$0'$.'$-'$,#*2<+,-0*,0*,#'3-&=4$Y'C#2,9#,0-$(*,$3-#$0"#$+9<

930*%+&+0=$'8$0"#$%&'()("*+,$0'$/3*2*,0##$0"*0$72'7#20=$0+0&#-$*,.

+.#,0+0=$2#('2.-$*2#$*((32*0#$*,.$3,0*97#2#.4$W#&&<.#-+/,#.$7#29+-<

-+',+,/$23&#-$',$%&'()("*+,$*77&+(*0+',-$(*,$/+C#$(+0+K#,-$*,.$(',-39#2-

9'2#$(',02'&$'C#2$0"#+2$.*0*4

But blockchains also compete against 0rms and governments4$!"#

%&'()("*+,$+-$*,$+,-0+030+',*&$0#(",'&'/=4$A0$+-$*$,#:$:*=$0'$9*+,0*+,$*

&#./#2 B 0"*0$+-1$(''2.+,*0#$#(','9+($*(0+C+0= B .+-0+,(0$82'9$?29-$*,.

/'C#2,9#,0-4

<"(&,(A&(-3,38$-&$,%6$6?6$3,%&37&-/D$6/.$%8

;&'()("*+,-$(*,$%#$3-#.$%=$?29-1$%30$0"#=$(*,$*&-'$#(D./-(&?29-4$@

&#./#2$'8$(',02*(0-$*,.$(*7+0*&$(*,$,':$%#$.#(#,02*&+-#.$*,.$.+-02+%30#.

+,$*$:*=$0"#=$('3&.$,'0$%#8'2#4$D#./#2-$'8$+.#,0+0=1$7#29+--+',1$72+C+&#/#

*,.$#,0+0&#9#,0$(*,$%#$9*+,0*+,#.$*,.$#,8'2(#.$:+0"'30$0"#$,##.$8'2

/'C#2,9#,0$%*()+,/4

Institutional cryptoeconomics

!"+-$+-$:"*0$+,-0+030+',*&$(2=70'#(','9+(-$-03.+#-P$0"#$+,-0+030+',*&$(',<

-#S3#,(#-$'8$(2=70'/2*7"+(*&&=$-#(32#$*,.$023-0&#--$&#./#2-4

J&*--+(*&$*,.$,#'(&*--+(*&$#(','9+-0-$3,.#2-0*,.$0"#$7327'-#$'8$#('<

,'9+(-$*-$-03.=+,/$0"#$72'.3(0+',$*,.$.+-02+%30+',$'8$-(*2(#$2#-'32(#-1

*,.$0"#$8*(0'2-$:"+("$3,.#27+,,#.$0"*0$72'.3(0+',$*,.$.+-02+%30+',4

A,-0+030+',*&$#(','9+(-$3,.#2-0*,.-$0"#$#(','9=$*-$9*.#$'8$23&#-4

X3&#-$L&+)#$&*:-1$&*,/3*/#-1$72'7#20=$2+/"0-1$2#/3&*0+',-1$-'(+*&$,'29-1

*,.$+.#'&'/+#-M$*&&':$.+-7#2-#.$*,.$'77'203,+-0+($7#'7&#$0'$(''2.+,*0#

0"#+2$*(0+C+0=$0'/#0"#24$X3&#-$8*(+&+0*0#$#6("*,/# B #(','9+($#6("*,/#

%30$*&-'$-'(+*&$*,.$7'&+0+(*&$#6("*,/#$*-$:#&&4

W"*0$"*-$('9#$0'$%#$(*&&#.$(2=70'#(','9+(-$8'(3-#-$',$0"#$#(','9+(

72+,(+7&#-$*,.$0"#'2=$3,.#27+,,+,/$0"#$%&'()("*+,$*,.$*&0#2,*0+C#

%&'()("*+,$+97&#9#,0*0+',-4$A0$&'')-$*0$/*9#$0"#'2=$*,.$+,(#,0+C#$.#<

-+/,$*-$0"#=$2#&*0#$0'$%&'()("*+,$9#("*,+-9$.#-+/,4

;=$(',02*-01 institutional cryptoeconomics looks at the institutional

economics of the blockchain and cryptoeconomy.$D+)#$+0-$(&'-#$('3-+,

+,-0+030+',*&$#(','9+(-1$0"#$#(','9=$+-$*$-=-0#9$0'$(''2.+,*0#$#6<

("*,/#4$;30$2*0"#2$0"*,$&'')+,/$*0$23&#-1$+,-0+030+',*&$(2=70'#(','9+(-

8'(3-#-$',$&#./#2-P$.*0*$-023(032#.$%=$23&#-4

A,-0+030+',*&$(2=70'#(','9+(-$+-$+,0#2#-0#.$+,$0"#$23&#-$0"*0$/'C#2,

&#./#2-1$0"#$-'(+*&1$7'&+0+(*&1$*,.$#(','9+($+,-0+030+',-$0"*0$"*C#$.#C#&<

'7#.$0'$-#2C+(#$0"'-#$&#./#2-1$*,.$"':$0"#$+,C#,0+',$'8$0"#$%&'()("*+,

("*,/#-$0"#$7*00#2,-$'8$&#./#2-$0"2'3/"'30$-'(+#0=4

The economic consequences of the

blockchain

A,-0+030+',*&$(2=70'#(','9+(-$/+C#-$3-$0"#$0''&-$0'$3,.#2-0*,.$:"*0$+-

"*77#,+,/$+,$0"#$%&'()("*+,$2#C'&30+', B *,.$:"*0$:#$(*,O0$72#.+(04

;&'()("*+,-$*2#$*,$#67#2+9#,0*&$0#(",'&'/=4$W"#2#$0"#$%&'()("*+,$(*,

%#$3-#.$+-$*,$#,02#72#,#32+*&$S3#-0+',4$G'9#$&#./#2-$:+&&$9'C#$',0'$0"#

%&'()("*+,4$G'9#$#,02#72#,#32-$:+&&$02=$0'$9'C#$&#./#2-$',0'$0"#

%&'()("*+,$*,.$8*+&4$R'0$#C#2=0"+,/$+-$*$%&'()("*+,$3-#$(*-#4$W#$72'%*%&=

"*C#,O0$=#0$-##,$0"#$%&'()("*+,$)+&&#2$*77$=#04$R'2$(*,$:#$72#.+(0$:"*0

0"#$('9%+,*0+',$'8$&#./#2-1$(2=70'/2*7"=1$7##2$0'$7##2$,#0:'2)+,/$:+&&

0"2':$37$+,$0"#$83032#4

This process is going to be extremely disruptive. !"#$/&'%*&$#(','9=

8*(#-$L:"*0$:#$#67#(0$:+&&$%#M$*$&#,/0"=$7#2+'.$'8$3,(#20*+,0=$*%'30$"':

0"#$8*(0-$0"*0$3,.#27+,$+0$:+&&$%#$2#-023(032#.1$.+-9*,0&#.1$*,.

2#'2/*,+-#.4

!"#$%#-0$3-#-$'8$0"#$%&'()("*+,$"*C#$0'$%#$T.+-('C#2#.O4$!"#,$0"#=$"*C#$0'

%#$+97&#9#,0#.$+,$*$2#*&$:'2&.$7'&+0+(*&$*,.$#(','9+($-=-0#9$0"*0$"*-

.##71$#-0*%&+-"#.$+,-0+030+',-$0"*0$*&2#*.=$-#2C+(#$&#./#2-4$!"*0$-#(',.

7*20$:+&&$,'0$%#$('-0$82##4

D#./#2-$*2#$-'$7#2C*-+C# B *,.$0"#$7'--+%&#$*77&+(*0+',-$'8$0"#

%&'()("*+,$-'$*&&<#,('97*--+,/ B 0"*0$-'9#$'8$0"#$9'-0$83,.*9#,0*&

72+,(+7&#-$/'C#2,+,/$'32$-'(+#0=$*2#$37$8'2$/2*%-4

Institutional creative destruction

W#OC#$%##,$0"2'3/"$2#C'&30+',-$&+)#$0"+-$%#8'2#4

A0$+-$('99',$0'$('97*2#$0"#$+,C#,0+',$'8$;+0('+,$*,.$0"#$%&'()("*+,

:+0"$0"#$+,0#2,#04$!"#$%&'()("*+,$+-$A,0#2,#0$a4_ B '2$A,0#2,#0$b4_4$!"#

+,0#2,#0$+-$*$7':#283&$0''&$0"*0$"*-$2#C'&30+',+-#.$0"#$:*=$:#$+,0#2*(0

*,.$.'$%3-+,#--4$;30$+8$*,=0"+,/$0"#$('97*2+-',$3,.#2-#&&-$0"#

%&'()("*+,4$!"#$+,0#2,#0$"*-$*&&':#.$3-$0'$('993,+(*0#$*,.$#6("*,/#

%#00#2 B 9'2#$S3+()&=1$9'2#$#c(+#,0&=4

;30$0"#$%&'()("*+,$*&&':-$3-$0'$#6("*,/#$2$S(#(,6.E4$A better metaphor

for the blockchain is the invention of mechanical time.

;#8'2#$9#("*,+(*&$0+9#1$"39*,$*(0+C+0=$:*-$0#97'2*&&=$2#/3&*0#.$%=$,*<

032#P$0"#$(2':$'8$0"#$2''-0#2$+,$0"#$9'2,+,/1$0"#$-&':$.#-(#,0$+,0'$.*2)<

,#--$*0$,+/"04$@-$0"#$#(','9+($"+-0'2+*,$I'3/&*-$W4$@&&#,$*2/3#-1$0"#

72'%&#9$:*-$C*2+*%+&+0=P$d0"#2#$:*-$-+97&=$0''$93("$C*2+*,(#$+,$0"#

9#*-32#9#,0$'8$0+9#$[$0'$"*C#$*$3-#83&$9#*,+,/$+,$9*,=$.*+&=

*(0+C+0+#-e4

<"(&LO6"&-(,6?#E&4/E#?,&T/6(#&!.3-=

d!"#$#H#(0$'8$0"#$2#.3(0+',$+,$0"#$C*2+*,(#$'8$0+9#$9#*-32#9#,0$:*-$8#&0

#C#2=:"#2#e1$@&&#,$:2+0#-4$Mechanical time opened up entirely new

categories of economic organisation that had until then been not

just impossible, but unimaginable.$5#("*,+(*&$0+9#$*&&':#.$02*.#$*,.

#6("*,/#$0'$%#$-=,("2',+-#.$*(2'--$/2#*0$.+-0*,(#-4$A0$*&&':#.$8'2$72'<

.3(0+',$*,.$02*,-7'20$0'$%#$(''2.+,*0#.4$A0$*&&':#.$8'2$0"#$.*=$0'$%#

-023(032#.1$8'2$:'2)$0'$%#$('97#,-*0#.$*(('2.+,/$0'$0"#$*9'3,0$'8$0+9#

:'2)#. B *,.$8'2$:'2)#2-$0'$),':$0"*0$0"#=$:#2#$%#+,/$('97#,-*0#.

8*+2&=4$;'0"$#97&'=#2-$*,.$#97&'=##-$('3&.$&'')$*0$*$-0*,.*2.1$+,.#7#,<

.#,0$+,-0239#,0$0'$C#2+8=$0"*0$*$(',02*(0$"*.$%##,$7#28'29#.4

Complete and incomplete smart contracts

Q&+C#2$W+&&+*9-',$*,.$X',*&.$J'*-#$L:"'$:*-$*&-'$*,$#(','9+(-$R'%#&

72+K#$:+,,#21$+,$\]]\M$730$(',02*(0-$*0$0"#$"#*20$'8$#(','9+($*,.$%3-+<

,#--$'2/*,+-*0+',4$J',02*(0-$*2#$*0$0"#$(#,02#$'8$+,-0+030+',*&$(2=70'#('<

,'9+(-4$A0$+-$"#2#$0"*0$%&'()("*+,-$"*C#$0"#$9'-0$2#C'&30+',*2=

+97&+(*0+',-4

G9*20$(',02*(0-$',$0"#$%&'()("*+,$*&&':-$8'2$(',02*(03*&$*/2##9#,0-$0'

%#$*30'9*0+(*&&=1$*30','9'3-&=1$*,.$-#(32#&=$#6#(30#.4$G9*20$(',02*(0-

(*,$#&+9+,*0#$*,$#,0+2#$(&*--$'8$:'2)$0"*0$(322#,0&=$9*+,0*+,-1$#,8'2(#-

*,.$(',?29-$0"*0$(',02*(0-$*2#$#6#(30#. B *(('3,0*,0-1$*3.+0'2-1

&*:=#2-1$*,.$+,.##.$93("$'8$0"#$&#/*&$-=-0#94

;30$0"#$-9*20$(',02*(0-$*2#$&+9+0#.$%=$:"*0$(*,$%#$-7#(+?#.$+,$0"#$*&/'<

2+0"94$N(','9+-0-$"*C#$8'(3-#.$',$0"#$.+-0+,(0+',$%#0:##,$('97&#0#$*,.

+,('97&#0#$(',02*(0-4

@$complete contract$-7#(+?#-$:"*0$+-$0'$'((32$3,.#2$#C#2=$7'--+%&#$(',<

0+,/#,(=4$@,$incomplete contract$*&&':-$0"#$0#29-$'8$0"#$(',02*(0$0'$%#

2#,#/'0+*0#.$+,$0"#$(*-#$'8$3,#67#(0#.$#C#,0-4$A,('97&#0#$(',02*(0-$72'<

C+.#$',#$#67&*,*0+',$8'2$:"=$-'9#$#6("*,/#-$0*)#$7&*(#$+,$?29-1$*,.

:"=$'0"#2-$0*)#$7&*(#$+,$9*2)#0-1$*,.$72'C+.#-$*$8320"#2$/3+.#$0'$S3#-<

0+',-$-322'3,.+,/$C#20+(*&$+,0#/2*0+',$*,.$0"#$-+K#$'8$0"#$?294

J'97&#0#$(',02*(0-$*2#$+97'--+%&#$0'$#6#(30#1$:"+&#$+,('97&#0#$(',02*(0-

*2#$#67#,-+C#4$!"#$%&'()("*+,1$0"'3/"$-9*20$(',02*(0-1$&':#2-$0"#$+,8'2<

9*0+',$('-0-$*,.$02*,-*(0+',-$('-0-$*--'(+*0#.$:+0"$9*,=$+,('97&#0#

(',02*(0-$*,.$-'$#67*,.-$0"#$-(*&#$*,.$-('7#$'8$#(','9+($*(0+C+0=$0"*0

(*,$%#$3,.#20*)#,4$A0$*&&':-$9*2)#0-$0'$'7#2*0#$:"#2#$%#8'2#$',&=$&*2/#

?29-$('3&.$'7#2*0#1$*,.$+0$*&&':-$%3-+,#--$*,.$9*2)#0-$0'$'7#2*0#$:"#2#

%#8'2#$',&=$/'C#2,9#,0$('3&.$'7#2*0#4

!"#$72#(+-#$.#0*+&-$'8$"':$*,.$:"#,$0"+-$:+&&$'((32$+-$*$("*&&#,/#$*,.$*

72'%&#9$8'2$#,02#72#,#32-$0'$2#-'&C#4$J322#,0&=1$oracles 72'C+.#$*$&+,)

%#0:##,$0"#$*&/'2+0"9+($:'2&.$'8$0"#$%&'()("*+,$*,.$0"#$2#*&$:'2&.1

023-0#.$#,0+0+#-$0"*0$(',C#20$+,8'29*0+',$+,0'$.*0*$0"*0$(*,$%#$72'(#--#.

%=$*$-9*20$(',02*(04

!"#$2#*&$/*+,-$0'$%#$9*.#$+,$0"#$%&'()("*+,$2#C'&30+',1$:#$-3//#-01$*2#

+,$.#C#&'7+,/$%#00#2$*,.$9'2#$7':#283&$'2*(&#- B (',C#20+,/$+,('97&#0#

(',02*(0-$0'$(',02*(0-$0"*0$*2#$-3c(+#,0&=$('97&#0#$0'$%#$:2+00#,$*&/'<

2+0"9+(*&&=$*,.$#6#(30#.$',$0"#$%&'()("*+,4

!"#$9#2("*,0$2#C'&30+',$'8$0"#$9+..&#$*/#-$:*-$9*.#$7'--+%&#$%=$0"#

.#C#&'79#,0$'8$9#2("*,0$('320- B #H#(0+C#&=$023-0#.$'2*(&#- B 0"*0$*&<

&':#.$02*.#2-$0'$#,8'2(#$*/2##9#,0-$72+C*0#&=4$Z'2$%&'()("*+,1$0"*0$2#C'<

&30+',$-##9-$=#0$0'$('9#4

Whither government?

!"#$%&'()("*+,$#(','9=$730-$72#--32#$',$/'C#2,9#,0$72'(#--#-$+,$*

:"'&#$"'-0$'8$:*=-1$82'9$0*6*0+',1$0'$2#/3&*0+',1$0'$-#2C+(#$.#&+C#2=4

A,C#-0+/*0+,/$0"#-#$("*,/#-$+-$*,$',/'+,/$72'>#(0$'8$'32-4$;30$(',-+.#21

8'2$+,-0*,(#1$"':$:#$2#/3&*0#$%*,)-4

E23.#,0+*&$(',02'&-$"*C#$#C'&C#.$0'$#,-32#$0"#$-*8#0=$*,.$-'3,.,#--$'8

?,*,(+*&$+,-0+030+',-$0"*0$+,0#2*(0$:+0"$0"#$73%&+(4$!=7+(*&&=$0"#-#$(',<

02'&-$L8'2$#6*97&#1$&+S3+.+0=$*,.$(*7+0*&$2#S3+2#9#,0-M$"*C#$%##,$>3-0+<

?#.$%=$0"#$8*(0$0"*0$.#7'-+0'2-$*,.$-"*2#"'&.#2-$*2#$3,*%&#$0'$'%-#2C#

0"#$%*,)O-$&#./#24$!"#$.#7'-+0'2-$*,.$-"*2#"'&.#2-$*2#$3,*%&#$0'$.+-(+<

7&+,#$0"#$?29$*,.$+0-$9*,*/#9#,04

;*,)$23,-$'((32$:"#,$.#7'-+0'2-$.+-('C#2$L'2$-+97&=$+9*/+,#M$0"*0$0"#+2

%*,)$9+/"0$,'0$%#$*%&#$0'$('C#2$0"#+2$.#7'-+0-1$*,.$0"#=$23-"$0'$:+0"<

.2*:$0"#+2$9',#=4

<"(&@/,=&#?,&$,&:/#E&53DD$,%&ULMVIW

Q,#$7'--+%&#$*77&+(*0+',$'8$0"#$%&'()("*+,$:'3&.$*&&':$.#7'-+0'2-$*,.

-"*2#"'&.#2-$0'$(',0+,3'3-&=$9',+0'2$0"#$%*,)O-$2#-#2C#-$*,.$&#,.+,/-1

-3%-0*,0+*&&=$#&+9+,*0+,/$0"#$+,8'29*0+',$*-=99#02+#-$%#0:##,$0"#9

*,.$0"#$%*,)$9*,*/#9#,04

A,$0"+-$:'2&.1$9*2)#0$.+-(+7&+,#$:'3&.$%#$7'--+%&#4$E3%&+($023-0$+,$0"#$+9<

930*%+&+0=$'8$0"#$%&'()("*+,$:'3&.$#,-32#$,'$8*&-#$%*,)$23,-$'((322#.4

!"#$2'&#$'8$0"#$2#/3&*0'2$9+/"0$%#$&+9+0#.$0'$(#20+8=+,/$0"#$%&'()("*+,

:*-$('22#(0&=$*,.$-#(32#&=$-023(032#.4

@$9'2#$8*2$2#*("+,/$*77&+(*0+',$:'3&.$%#$*$cryptobank B *,$*3<

0','9'3-$%&'()("*+,$*77&+(*0+',$0"*0$%'22':-$-"'20$*,.$&#,.-$&',/1$7#2<

"*7-$9*0("+,/$%'22':#2-$:+0"$&#,.#2-$.+2#(0&=4$@$(2=70'%*,)$-023(032#.

*&/'2+0"9+(*&&=$%=$-9*20$(',02*(0-$:'3&.$"*C#$0"#$-*9#$02*,-7*2#,(=

72'7#20+#-$*-$0"#$%*,)$:+0"$*$73%&+($%&'()("*+,$&#./#2$%30$:+0"$'0"#2

8#*032#-$0"*0$9+/"0$('97&#0#&=$,#/&#(0$0"#$,##.$8'2$2#/3&*0'2-4$Z'2$#6*9<

7&#1$a cryptobank could be self-liquidating4$@0$0"#$9'9#,0$0"#$(2=70'<

%*,)$%#/*,$02*.+,/$:"+&#$+,-'&C#,01$0"#$3,.#2&=+,/$*--#0-$:'3&.$%#

*30'9*0+(*&&=$.+-%32-#.$0'$-"*2#"'&.#2-$*,.$.#7'-+0'2-4

A0$+-$3,(&#*2$:"*0$2#/3&*0'2=$2'&#$/'C#2,9#,0$-"'3&.$"*C#$+,$0"+-$:'2&.4

!=&#2$J':#,$*,.$@&#6$!*%*22')$"*C#$*2/3#.$0"*0$93("$/'C#2,9#,0$2#/<

3&*0+',$*77#*2-$0'$%#$.#-+/,#.$0'$2#-'&C#$*-=99#02+($+,8'29*0+',$72'%<

&#9- B 72'%&#9-$0"*01$+,$*$:'2&.$'8$+,8'29*0+',$3%+S3+0=1$'80#,$.'$,'0

#6+-0$*,=$9'2#4$;&'()("*+,$*77&+(*0+',-$-+/,+?(*,0&=$+,(2#*-#$0"+-$+,8'2<

9*0+',$3%+S3+0=1$*,.$9*)#$0"*0$+,8'29*0+',$9'2#$02*,-7*2#,01$7#29*<

,#,01$*,.$*((#--+%&#4

;&'()("*+,-$"*C#$0"#+2$3-#-$+,$:"*0$+-$%#+,/$(*&&#.$‘regtech’ B 0"#$*77&+<

(*0+',$'8$0#(",'&'/=$0'$0"#$02*.+0+',*&$2#/3&*0'2=$83,(0+',-$'8$*3.+0+,/1

('97&+*,(#1$*,.$9*2)#0$-32C#+&&*,(#4$@,.$:#$'3/"0$,'0$0'$.+-9+--$0"#

7'--+%+&+0=$0"*0$0"#2#$:+&&$%#$,#:$#(','9+($72'%&#9-$0"*0$.#9*,.$,#:

(',-39#2$72'0#(0+',-$'2$9*2)#0$(',02'&-$+,$0"#$%&'()("*+,$:'2&.4

R#C#20"#&#--1$0"#$2#-023(032+,/$*,.$2#(2#*0+',$'8$%*-+($#(','9+($8'29-

&+)#$%*,)-$:+&&$730$72#--32#$,'0$>3-0$',$"':$2#/3&*0+',$+-$#,8'2(#.1$%30

:"*0$0"#$2#/3&*0+',$-"'3&.$.'4

Whither Big Business?

!"#$+97&+(*0+',-$8'2$%+/$%3-+,#--$*2#$&+)#&=$0'$%#$>3-0$*-$72'8'3,.4$;3-+<

,#--$-+K#$+-$'80#,$.2+C#,$%=$0"#$,##.$0'$('C#2$0"#$('-0-$'8$%3-+,#--$"+#2*2<

("= B +,$032,$.3#$0'$+,('97&#0#$(',02*(0-$*,.$0#(",'&'/+(*&$,#(#--+0=$'8

&*2/#$-(*&#$?,*,(+*&$+,C#-09#,04$!"*0$%3-+,#--$9'.#&$"*-$9#*,0$0"*0

-"*2#"'&.#2$(*7+0*&+-9$+-$0"#$.'9+,*,0$8'29$'8$%3-+,#--$'2/*,+-*0+',4

!"#$*%+&+0=$0'$:2+0#$9'2#$('97&#0#$(',02*(0-$',$0"#$%&'()("*+,$9#*,-

0"*0$#,02#72#,#32-$*,.$+,,'C*0'2-$:+&&$%#$*%&#$0'$9*+,0*+,$':,#2-"+7

*,.$(',02'&$'8$0"#+2$"39*,$(*7+0*&$*,.$72'?0$*0$0"#$-*9#$0+9#4$!"#

,#63-$%#0:##,$'7#2*0+,/$*$-3((#--83&$%3-+,#--$*,.$*((#--$0'$?,*,(+*&

(*7+0*&$"*-$%##,$:#*)#,+,/$'C#2$0+9#1$%30$,':$9+/"0$#C#,$%#$%2')#,4

The age of human capitalism is dawning.

N,02#72#,#32-$:+&&$%#$*%&#$0'$:2+0#$*$C*&3*%&#$*77$*,.$2#&#*-#$+0$+,0'$0"#

d:+&.e$2#*.=$0'$%#$#97&'=#.$%=$*,=',#$*,.$#C#2=',#$:"'$,##.-$0"*0

83,(0+',*&+0=4$!"#$#,02#72#,#32$+,$032,$-+97&=$'%-#2C#$9+(2'<7*=9#,0-

*((393&*0+,/$+,$0"#+2$:*&&#04$@$.#-+/,#2$('3&.$2#&#*-#$0"#+2$.#-+/,$+,0'

0"#$d:+&.e$*,.$?,*&$(',-39#2-$('3&.$.':,&'*.$0"*0$.#-+/,$0'$0"#+2$fI

72+,0#2$*,.$"*C#$0"#$72'.3(0$*&9'-0$+99#.+*0#&=4$!"+-$%3-+,#--$9'.#&

('3&.$-##$9'2#$L&'(*&+-#.M$9*,38*(032+,/$'((32$+,$@3-02*&+*$0"*,$*0

72#-#,04

!"#$*%+&+0=$'8$(',-39#2-$0'$+,0#2*(0$.+2#(0&=$:+0"$72'.3(#2-$'2$.#-+/,#2-

:+&&$&+9+0$0"#$2'&#$0"*0$9+..&#9#,$7&*=$+,$0"#$#(','9=4$D'/+-0+(-$?29-1

"':#C#21$:+&&$(',0+,3#$0'$72'-7#21$%30$0"#$*.C#,0$'8$.2+C#2&#--$02*,-<

7'20*0+',$:+&&$-##$.+-2370+',$0'$+,.3-02=$0''4

;#*2$+,$9+,.1$*,=$.+-2370+',$'8$%3-+,#--$:+&&$*&-'$.+-2370$0"#$('97*,=

0*6$%*-#4 It may become di?cult for government to tax business at

all B -'$:#$9+/"0$-##$/2#*0#2$72#--32#$',$-*&#-$L(',-3970+',M$0*6#-$*,.

#C#,$7'&&$0*6#-4

Conclusion

!"#$%&'()("*+,$*,.$*--'(+*0#.$0#(",'&'/+(*&$("*,/#-$:+&&$9*--+C#&=$.+-<

2370$(322#,0$#(','9+($(',.+0+',-4$!"#$+,.3-02+*&$2#C'&30+',$3-"#2#.$+,$*

:'2&.$:"#2#$%3-+,#--$9'.#&-$:#2#$72#.+(*0#.$',$"+#2*2("=$*,.$?,*,(+*&

(*7+0*&+-94$!"#$%&'()("*+,$2#C'&30+',$:+&&$-##$*,$#(','9=$.'9+,*0#.$%=

"39*,$(*7+0*&+-9$*,.$/2#*0#2$+,.+C+.3*&$*30','9=4

F':$0"*0$3,8'&.-$+-$3,(&#*2$*0$72#-#,04$N,02#72#,#32-$*,.$+,,'C*0'2-

:+&&$2#-'&C#$3,(#20*+,0=1$*-$*&:*=-1$0"2'3/"$*$72'(#--$'8$02+*&$*,.$#22'24

R'$.'3%0$/2#*0$8'203,#-$:+&&$%#$9*.#$*,.$&'-0$%#8'2#$:#$),':$#6*(0&=

"':$0"+-$.+-2370+',$:+&&$3,8'&.4

Q32$(',02+%30+',$+-$0"*0$:#$"*C#$*$(&#*2$3,.#2-0*,.+,/$'8$*$9'.#&$0"*0

(*,$%#$.#7&'=#.$0'$72'C+.#$(&*2+0=$0'$0"#$.+-2370+',$*-$*,.$:"#,$+0

'((32-4