Economics vs. Economy

Let’s make something clear first – our current society and economy, no matter how politically arranged – is centralized. They are centralized because they are all under the reign of a centralization apparatus – an entity called preordainment of value, commonly known as money. Our society and economy is structured and arranged through money. In this centralized society and economy, money is apolitical – it is beyond political – it is above everybody and everything. Yet money is not natural to society or economy – it is like a permanent scaffold that once established, cannot be taken away or taken down. Understanding this grand scheme about society and economy is essential to understand the whys of blockchain economy and blockchain economy as a paradigm shifting revolution in human history, its future and destiny.

Questioning the idea of money is heretical even within the blockchain community – until recently blockchain is almost a synonym to cryptocurrency. Cryptocurrency, or crypto-token, usually built and bound with blockchain, is often seen by many participants as a decentralized digital currency, as opposed to traditional currency issued and regulated by the banking system (central bank system). As shown in Part I of this discussion, the cryptocurrency as a currency

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path, is a dead end. However, if not treated as a currency, the crypto-token, which is endemic to any blockchain system (Metis DAO included), cries to be different – it is the building block for a blockchain native construct called mechanism, which constitutes the running machinery of decentralized blockchain functionalities, the very fabric of the dynamics of blockchain economy itself.

Is crypto-token money? Unfortunately, as our reality is a dualistic one between the centralized world and the decentralized one, the answer to such question must also be a dualistic one. The real question is, which one is more interesting? No new crypto-token can replace Bitcoin as digital gold, not even Ethereum – therefore crypto-token as the building block enabling the multifaceted blockchain economy, is definitely more exciting.

Many talk about blockchain economics, especially supply and demand aspects of crypto- tokens. However, that is quite a narrow and short-sighted application of traditional economics toward blockchain economy – honestly, supply and demand of crypto-tokens is the least interesting façade of a blockchain economy. People and what they do, as independent agents, bound only by incentive mechanism design of the blockchain system, would have been a much interesting and important direction in blockchain economics.

In a traditional economy, economics is the post-factum act to devise policy, in the hope to maybe affect economy at a macro level; on a micro level there is simply no place for policy and economics is less important than business models – you don’t need a degree in economics to start or thrive in business. Because of the centralized nature of this economy (and society) there is a big disconnect between its macro and micro levels – a lot of the times policy is detached from what’s happening at the ground level of business and what people do for a living – in a word, there is no policy accountability in a centralized economy.

On the other hand, in the blockchain economy, the distinctions between macro and micro levels vanish – mechanism design acts as both business model on the micro level as well as policy directive that directly affects blockchain economy on a macro level. Blockchain itself and blockchain economy is live, meaning that if a mechanism doesn’t work, the blockchain doesn’t work. So we can see that in the decentralized world, mechanism (policy) has a direct causal link to blockchain economy. There is no disconnect like in that of the centralized economy – in other words, there is strong accountability in a decentralized economy.

In this sense Metis DAO is the accountable business engine for DAC economy.