This is the final article in a commitment device / series that I proposed a while ago, "How to think about blockchains". The first five articles covered firstly how we think about change generally, then bitcoin and what it means, the developing nature of money, tokenising everything, and blockchain based identity. Each of these is just an introduction to its subject. Writing an article about the future is almost by definition an introduction, but is also asking for trouble: "It is difficult to make predictions, especially about the future", as somebody once said.
There are some things we do know about the future, and the most useful may be Amara's law:
“We tend to over-estimate the short term impact of a new technology, while under-estimating its long term impact.”
This has proven to be true many times over, and I don't think it will be any different for blockchains. Looking at it another way, blockchains are just the latest iteration of the internet, and so should be considered as part of that medium's under-estimated long term impact. Given that blockchain-driven changes go to the very fundamentals of money and value, this was always going to be a long ride, and so what might help is some ways to think about it.
There are a few ways of doing this, my favourite being a scenario analysis process. The building blocks of this are a good framework for thinking about the future. We can start with some drivers of change:
1. What are the socio-economic trends that blockchains can be associated with?
In this context, we should look at things that are happening anyway, and think about the role that blockchains could play. An example might be global warming. This is one of several problems that are truly global, in that they affect everyone, and that are also fiendishly complex and difficult to solve. If we are going to properly address things like global warming - or inequality, or populism - then we need solutions that act at a global level. For a global scale problem, we need global scale solutions. Currently the best option we have for this is bodies like the UN, the IMF, and other groups that bring together representatives from (nearly) all nations. The obvious problems with these bodies at the moment are that (1) they become used by those nation states to advance nation state agendas, and (2) they are run by people who are all fallible and imperfect. This top down, centralised approach tends to be currently how we organise complex things: "Trust me, I'm a doctor / politician / financial advisor".
As the late, lamented Charlie Munger once said: "show me the incentives and I will show you the outcome". How do we organise the kind of global level change that is needed, by billions of individuals, to make an impact on global scale problems? With incentives. With the ability to build value into the internet, which is one way of defining web3, we have the ability to incentivise and therefore coordinate human behaviour at internet scale. It doesn't necessarily mean that we all use the same currency, but we do need to use the same mechanism, and - crucially - it has to be a bottom up, decentralised solution that represents the collective action of all of us. Again, blockchains can facilitate this. By verifiable transparent systems, we could get involved in the things that we have knowledge about, or a stake in, or a right to be consulted on. It could be that we vote on commercial issues if we run a business, on local issues to where we live or work, and on organisational decisions where we use or own the business.
2. What are the technological changes that blockchains bring?
I have written already about the things that blockchains can do, with the key themes being the programmability of value (money to start with), and the ability to tokenise anything and everything. I think that the best way to predict the future here is to take these things and apply them to your field of expertise. If you are in asset management, then programmability of value means that you can tokenise any asset, and transactions become much more efficient and automatable in ways that were not possible before. The implications of this could be that the definition of investible assets expands, the accessibility to investments changes, some intermediaries disappear, and so on. If you are in the telecoms space, then tokenising airtime or bandwidth use changes the economics of that process, or the complex management of roaming becomes cheaper.
3. What competitive changes will blockchains catalyse?
These drivers of change all overlap, and often this kind of thing creates unpredictable changes. Perhaps aspects of your industry will change altogether as a result of new technology and other developments. As an example, decentralised physical infrastructure, or DePIN, is a rapidly growing space. The trustless models built using blockchains enable us to create disruptive new business models. As an example, if you are a mobile network operator, then a ground up, peer to peer model of bandwidth sharing might be a threat that you haven't considered. If I am using Helium, which has a token based mechanism for sharing personal bandwidth, then I can access capacity that was previously unavailable, paying for it with tokens, and bypassing my cellphone and internet providers. The new business models have the greatest impact, but are always the hardest thing to spot.
An over-arching model: blockchains as a transaction layer
One way of thinking about blockchains is to consider them as an efficient transaction layer on top of what already exists. In terms of adoption, it is unlikely that we will see rapid radical change across many aspects of society all at once. The way to bet is that incumbents will fight their corner, regulators will be cautious, and things will change slowly. In many areas the system that we have, which has evolved over centuries of human endeavour, works just fine. If you take banking, say, then we have banks sitting on top of banking regulations that rely on a legal framework that depends on courts, legislation and the police, which in turn depend on the nation states' monopoly on violence. Building on top of the functioning "nation state stack" means that innovators can leverage what is already there. Stablecoins are the clearest version of this: a token that represents a claim on a US Dollar that is part of the existing system. The same principle can be applied to any type of asset: tokenise it, and then take advantage of the blockchain utility on top of the “nation state stack”. This is by no means as simple as it sounds, but has enormous potential to bring even more of our lives into the digital realm as we add assets of value to the global internet.
If you are a blockchain maxi, and shouting at me at this point, I beg for patience. We may get to everything as a native token, decentralised identities and even a network state, but this is the first step. Pace yourself.
Large scale impacts come when the infrastructure has evolved to enable the new technology to achieve its full potential. Motor vehicles did not change our lives until they were simple to operate, we had a network of roads and service stations, and we had a licencing framework in place. This took years. Blockchains are still young, but so is the internet: Bitcoin is only 15 years old, but Google is only 26, and Facebook has been open access for less than 20 years. So the technology grows up, but user behaviour has to change too. This part may be easier, because the changes required will be small. A lot of blockchain change will happen at the infrastructure level, so will be out of sight to users. Digital wallets are a good example: tokenised money can easily sit behind those without the user knowing or caring; the adoption of digital wallets is already well underway and can just incorporate stablecoins and digital assets.
As the saying goes, we are still early. It's only a cliche because it's true. One day we will talk about the clunky user experiences of early DeFi in the same way that we talk now about unplugging the phone to plug in a modem. We are not there yet, but as the Winston Churchill and the Beatles* said it may be “the end of the beginning”.
*(You may have noticed that all the titles in this series are song titles. Thanks for reading!)
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