The Bitcoin Genesis Block was mined today ten years ago.
As a cryptocurrency bitcoin has been highly volatile – those buying at the top of the market in late 2017 have massive capital losses going forward. Those who bought in ten years ago are still sitting on massive capital gains.
The real story here isn’t a new investment asset class or a new competitor to fiat currency but rather the institutional and organisational disruption the underlying technology will bring.
My RMIT colleagues Chris Berg, Jason Potts and I have a new working paper – Capitalism after Satoshi – that explores our ideas in this space.
What are the long-run economic and policy consequences of wide-spread blockchain technology adoption? We examine the structural economic effects of this institutional innovation as disintermediation in markets, dehierarchicalisation of organisations, and growing private provision of economic infrastructure for exchange, contracting and coordination. We predict that these institutional economic dynamics undercut the historical rationale for much modern economic policy, originally formulated to enable capitalism to cope with market power, to control hierarchy, and to furnish public infrastructure for trust. We argue that capitalism built on distributed ledger technology requires different economic policy settings to industrial capitalism, based on centralized ledger technology. We formulate the institutional logic of this dynamic co-evolutionary model, and discuss policy settings for an economy coordinated with blockchain infrastructure and associated distributed digital technologies for economic coordination (Web3, Industry 4.0). We find that much modern economic policy will be differently instantiated (e.g. hard-coded in platforms) or variously no longer necessary (because of new institutional solutions to problems of trust and coordination). We argue that the institutional innovation of blockchain engenders a new post-industrial economic era that requires new policy rules. This paper seeks to explain why this change will occur, and to explore a new framework for economic policy adapted to economic infrastructure built on distributed ledgers.