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The best way to think about cryptocurrencies? Ask what new institutional capacities they create.
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The author, Dr. Nicholas Adams Judge, is a cofounder of RootProject. The other cofounder is Chris Place, a Y Combinator alumnus. Their nonprofit’s pre-ICO started July 10, 2017.
I’m a political economist. I wrote my doctoral dissertation on models of currency markets. The power of cryptocurrencies is greater than even those in the cryptocurrency community have understood.
I write ‘political economist’ instead of plain ‘economist’ because I focus on institutions as well as markets. Institutions determine who wins wars, what countries get to be free, and the pace of economic growth. The best way to think about cryptocurrencies? Ask what new institutional capacities they create.
To do that, put away your theory, put away your ideology. No one cares. Instead, think about feedback loops. Raise .99 to a large number, you get zero. Raise 1.01 to a large number, you approach infinity. If each day an institution’s efforts multiply its last day’s effects by 99%, it fails. If that number becomes 101%, it scales, it becomes a Google or Apple – until something pushes that number back below 1.
The genius of cryptocurrencies is that a liquid asset can be designed along with a new institution to create a currency value—institutional size feedback loop.
Call it the Feedback Loop theory of cryptocurrencies. Its most exciting consequence: Value can be created for investors from non profit-seeking behavior. The cryptocurrency brings the power of markets, and investor self-interest to the table; the nonprofit brings the moral relevance.
That does create dangers for nonprofits – but that’s like saying bitcoin can be used by smugglers, so let’s give it up. It misses the bigger story.
Let’s illustrate the major story here by what we’re doing at RootProject, whose pre-ICO is currently under way. Each part is simple. How they come together is illustrated in the figure above.
Organic demand enters a system. That’s good: People who need jobs and exposure to things like shelters and medical care get them (more on that in our whitepaper). But what makes it really exciting is that that demand doesn’t just go away in a one-off event. It enters, by design, a feedback loop where it grows and grows, multiplying off itself.
It wouldn’t be possible without a cryptocurrency, and that fundamentally changes the institutional economics of nonprofit activity. Help us get this off the ground, and we’ll prove out a model where nonprofit work has the same market power as massive global profit-seeking corporations.
Our Pre-ICO runs this week. It’s a great investment for you and it will save people from freezing to death on the street. Be cynical if you want. Or help us build a new world.
Company name: RootProject
Company site: https://rootproject.co
Company contacts: email@example.com
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One fine body…