The Economic System build by Fiat Currency is obsolete
While we talk of global economy, fiat currency: USD, Euro, Yen are still local. Nowadays e-commerce giants like Amazon and Taobao operates all over the world. But the currency the customer pays is seldom the currency the producer receives. It means there are many currency exchange transactions hidden in a simple purchase. It creates friction and costs.
Secondly the major conduits in the fiat economy are banks. According to the statistic from world bank, 1.7 billion adults in the world are unbanked1. It means they do not have bank accounts. One reason is that banks often require a minimum amount to open an account. For the poor this requirement is often too high.
Thirdly the services from banks are not keeping pace with the digital economics. In many part of the world bank transfer is still slow and expensive. Not to mention while e-commerce operates 7/24, the banks don’t.
Lastly the current banking system is being abused and even weaponized. I have many friends whose bank accounts are closed without any reason provided by the banks. Bank accounts are often closed because the account holders engage in legitimate crypto transactions. The US is using its dominance in the SWIFT system to push forward its political agenda. Not to be outdone, China may well use its digital yuan to pursue national policy.
I believe there is a need for an alternative to the fiat currency. There is a strong case for tokens which are secure, global, decentralized and innovative.
Tokenomics is the future
Tokens allow the transfer of wealth without intermediaries. It not only reduces costs, but ensures that the payment system is transparent, robust and not to be used to pursue national interests. Tokens are transferred across the internet, making tokens truly universal currency.
The incorporation of smart contracts into utility tokens align the interests of the users and the token owners. The smart contracts can be programmed to distribute more tokens to the users.
Therefore the more you use the tokens, the more valuable the tokens are, the more wealth you create.
While critics attack Bitcoin as slow and inefficient, the problems are addressed as newer and more advanced blockchains are developed. For example, Ethereum 2.0 will remove proof of work in the validation protocol, significantly reducing operation cost. Even BTC have gone through many rounds of forking. Crypto-currencies have gone a long way since Bitcoin was launched in 2009.
Tokens allow innovative applications to be developed. One of them is DragonBite. DragonBite provides a versatile interface where users can consolidate all their digital assets, trade them for other assets and spend them at dedicated points of sales and merchants. Another application is the non-fungible tokens (NFT). All these applications utilize tokens to solve existing economic problems.
Tokenomics is replacing the old economics. And everyone should start learning.
Reference: “The Unbanked.” The World Bank. Accessed April 12, 2021. https://globalfindex.worldbank.org/chapters/unbanked.
Written by Dr. Kyle Wong, CFA, President of Association of Blockchain Development
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