The economic system with which we are most familiar is Capitalism. It is woefully misunderstood. To differing degrees, it is prevalent in most parts of the world. Since the governing political systems affect the economic systems, you indeed see different flavors of capitalism in different parts of the world. For example, an autocratic government overseeing a capitalist system might foster oligopoly.
Capitalism, in and of itself, is about optimizing for value. Take supply and demand, for example. If there is more supply of a good, its value drops, because it is widely available. If there’s a reduced supply, the value goes up, because there’s more demand than what’s being supplied.
People think that, in order to be a capitalist, you have to be selfish, self-serving, and maximize what you receive out of every deal. Indeed, certain people do see it that way. Humans have a way of corrupting even the simplest of systems. But, in theory, though it can also turn into a one-sided structure whereby a few people benefit at the expense of a larger community, capitalism could be a decent model. It could benefit the people.
Are there ‘better’ economic models other than capitalism? Perhaps. But, even the application of those ‘better’ models could be corrupted. That’s the challenge we as humanity will always face in any system.
If you have the monopolistic centralized financial model which governs all countries right now, a government controls a territory, and imposes its will, laws, and regulations on the people living in that territory--ideally, that entails protection, prosperity, and so on. In such a model, however, all too often the only source of wealth creation lies with the government, because they are the first beneficiaries of any value created.
When $1 is printed, who gets that value as soon as that bill is printed? It’s not you or me. It’s the government. Let’s say $10 billion is printed, and the government spends it. They created $10 billion worth of value.
Who then is the secondary beneficiary? It’s the bank that received the newly created value after the government. The banks spend it, loan it out or invest in projects. By the time that money trickles down to you or me working at a company and getting a salary, the value was already used by numerous different entities. With that model, it originates from a central authority, and we lack the individual rights to create value the same way a central bank or a government can.
Blockchain, crypto, and DeFi change that. A company or startup can now outline their vision in a white paper and describe what they plan to do, and create the new currency they plan to use. Whether they create their own token or use an already existing decentralized token, it doesn’t originate from a government.
The Ethereum Foundation, for example, began its journey six years ago, creating about $18 billion worth of value. It wasn’t created by a government entity, but, rather, a Foundation at the fulcrum of a bristling ecosystem. Anyone could take part. The same goes for Bitcoin. When Bitcoin was launched, it was experimental and academic, but, a few, short years later, it had real world value, if even but a few cents at first, and a growing community.
Fast forward to today, and everyone has seen the meteoric rise of Bitcoin, because enough people believe in it as a store of value. An anonymous network of people grew it into the economic force it is today.
Going from a central authority controlling all the wealth creation to anyone and everyone represents a step towards a more sustainable and beneficial model. It democratizes access to capital, opportunity, and economic activity for a multitude of disenfranchised groups.
The founder of Bitcoin, Satoshi Nakamoto, didn’t design it perfectly. That’s why Bitcoin forked more times than people realize. If you look at the improvements--the tweaks and changes- Bitcoin’s biggest innovation was the movement it inspired.
Crypto gives control to independent communities of people--the miners, the node operators, as well as the BTC users. Bitcoin could evolve without any government restriction or control. This is a lifesaver for people in certain parts of the world.
Here in the United States, I’ve access to easy banking, as well as a judicial structure that protects its citizens. That isn’t true in all countries. There are countries where having access to a cryptocurrency not controlled by the government determines life and death. You can look at Venezuela, Zimbabwe, and other countries experiencing hyperinflation today. Because of the decisions and the actions of their government, the people there are suffering.
Crypto is an escape hatch where people lack the protections enjoyed by the developed world. When the people there have an opportunity to use Ethereum, Bitcoin or any other crypto, their standard of living changes dramatically. They can go back to enjoying a normal life as opposed to worrying about money, which will be devalued 10% in the blink of an eye. You might consider locking in your currency rate at the start of your dining experience, rather than waiting until the end to know the final tab.
Economics is the study of the movement of value or money. When studying the economic models, systems or theories, you learn about human behavior, and how value is transferred from one entity to others, as well as the consequences of these activities.
Here's What The Economics Of Bitcoins Say About It
In Bitcoin’s incipience, had enough miners wished to shut down Bitcoin, they could have done so. They could have simply stopped mining, and the network would have slowly withered and died. It was a binary outcome. It was either going to survive or people are not going to really understand or be interested in it.
Instead, Bitcoin grew to a level that very few imagined, including the early adopters and founders, because a community drove it there. This community enjoys decision-making power over the direction of the network. If you want to change the block height, for example, you introduce a proposal. If enough miners accept, the new Bitcoin chain will have a different block height. If you want to introduce a new economics model, you propose it, and if enough of the participants accept it, it's incorporated.
The forks by dissenters who create their own chain are merely taking advantage of a great economic opportunity. If enough people support your chain, it could be the next Bitcoin Cash. There are forks of Bitcoin that enjoy viable, vibrant communities, because enough people agreed with the model. And then there are a bunch of ghost chains, where there's very little economic activity because the founders were not able to convince enough people that what they created should propagate, grow and hold value.
That's the beauty of Bitcoin. Governance by stakeholders has worked phenomenally so far.
About the Author
Brad Yasar is an entrepreneur, investor, mentor, and advisor who has started and bootstrapped several companies from inception to maturity over the past 30 years. Brad is currently the Founder and CEO of Beyond Enterprizes, offering strategic and technical leadership, advisory, and support capabilities to projects in all blockchain implementation and development stages.
Brad is also the co-founder of Blockchain Investors Consortium (BIC) with over 5 Billion dollars allocated to blockchain and cryptocurrency projects. Brad has also participated in dozens of successful crowd sales, which have raised billions from 100,000s of investors since 2016.
Passionate about where the worlds of technology and marketing collide, Brad is frequently invited to speak at events related to entrepreneurship, angel investing, and business strategy.