Over the weekend CoinDesk published a thought-provoking opinion piece on the “long tail” of digital assets.
Galia Benartzi, founder of Bancor, argues that we are on the brink of an ecosystem of “user-generated currencies”, each with specific uses and characteristics.
“Communities of any flavor can now be empowered to agree on credit-issuing policies and governance structures, and enjoy internal marketplaces from which to buy and sell goods or services, without relying on access to national money.
…as technical barriers to entry are removed, we are on the precipice of millions of user-generated currencies, of all shapes and sizes.”
The author compares the potential with the impact that WordPress and YouTube had on user-generated content. The result was chaos and information overload, but also empowerment and freedom of expression.
The result of a proliferation of tokens (beyond the bewildering array we already have) is also likely to be chaos, information overload, empowerment and greater freedom.
It could also, however, imply less freedom.
For instance, through lack of fungibility. If I hold tokens issued by you that can only be used in your business or community, then I am tied in. With cash, I can use my notes and coins almost anywhere. (True, this is changing as we move towards a “cashless society”, but you get the idea.)
Also, digital transactions are more traceable. Activity around communities will be easier to monitor, and even anonymous tokens send an indirect message to those watching (nothing is more guaranteed to arouse suspicion than to deny access to information).
Finally, the resulting chaos could lead to loss of value through “leakage” – people not understanding the systems, misallocating resources and eventually dropping out. Several studies have shown that too much choice tends to paralyze consumers. When you’re talking about jam or detergent, the cost is not material (except to the manufacturers, I suppose). But when you’re talking about “money”, the cost – to the functioning of the economy – is greater.
The idea of a “long tail” of currencies is heartening and exciting. Personally, I love the stimulation of the “long tail” of music and books. But the proliferation of online information brought us blogs and fun videos, but also click-bait, fake news, trolling, piracy and identity theft. The end result of a blossoming diversity in means of exchange will also not be as empowering and uplifting as we had hoped.