Beyond tech: the token economy as a governance tool?

Aug 6, 2019 by

In the afternoon of the 2nd of August, 2019, we had the pleasure to attend a very insightful lecture by Dr. Shermin Voshmgir, the founder and director of the Research Institute for Cryptoeconomics at the WU Vienna University of Economics and Business, on the topic of the Token Economy. Why should we talk about it? Because, according to Voshmgir, in today’s economy we need to understand technologies such as blockchain given that more than a technological issue, this is a governance one. In other words, it is an issue dealing with power and politics – such issues cannot be ignored by people interested in building an alternative ecological economy.

Shermin’s main research interest is on how to program a sustainable future, i.e. how to explore the blockchain technology with the purpose of fostering sustainability as well as to promote token economics and token engineering as a scientific discipline. They argue that we live in an era in which the antique diatribe between capitalism and communism can be overcome by the new token economy working through blockchain technology.

After a brief introduction on the history of the internet (web 1 and web 2, the latter being dominant at the moment in platforms like Facebook and Amazon) we moved on to explore the features of the web 3: the blockchain revolution. The latter consists of decentralized data management. Tokens, in the end, are nothing more than tools for accounting data. And in the web 3, creating tokens becomes very easy. The real question we need to ask ourselves then is: ‘What kind of tokens do we want to create?’. But this, Shermin remarked, is more of a governance question than a technological one, and the governance questions we need to ask ourselves are on the line of ‘What is the purpose of the token?’, ‘What are its properties?’ and ‘What is the business model / governance rules?’.

The blockchain, after all, is just a tool, and more precisely a token rights management tool. It provides us with the opportunity of shifting away from traditional top-down organizations towards a distributed network of autonomous stakeholders where no centralized legal entities exist. There is a point of centralization though, which in Marxian terms corresponds to ‘Who owns the means of production of the code?’. This then is a question of knowledge of the system and on its possibilities. The ultimate question in light of the tokenization of the world is: ‘Do we need state money at all?’ A useful way of thinking of tokens is to consider it as programmable money. Then, simultaneously, we need to consider how we can program money in a way that promotes sustainability by rewarding sustainable behaviours while still preserving privacy in a manner that can’t be used to control people. Ultimately, we can use tokens to visualize what we want to give value to in our society.

To the challenging question, posed by the audience about the high energy use of bitcoin, Voshmgir answered with an argument based on innovation and transparency: At least we know how much this energy is, whereas we don’t know anything about how much energy is consumed by conventional bank money.

Overall, this was a very insightful lecture about a technology that is very likely to revolutionize the way we do things – although I would not take it as a given. How many times have we thought that technologies would open unimaginable possibilities and yet they didn’t? The main question we need to ask ourselves, always, is what do we want. Technologies will never be a panacea, but at best a tool to help us to get there. The future is full of possibilities and we can’t be sure of where we are heading, but this is ultimately a very good reason to investigate technologies better to understand how they were to be used for either desired purposes (such as promoting sustainability, equality, a pluralist and decentralized economy) or undesired ones (controlling, reinforcing the power of banks and getting rid of the political).

Written by: Lorenzo Velotti

Based on the lecture “Digital currencies and money” held by Shermin Voshmgir during AEMS 2019.