The Theory of a Blockchain Circular Economy

William Mougayar
Aug 6, 2016 at 18:13 UTC  |  Updated  Aug 8, 2016 at 19:31 UTC

William Mougayar is the author of "The Business Blockchain", and a board advisor to the Ethereum Foundation, the non-profit that oversees the development of one of two blockchains seeking to popularize the software.

In this opinion piece, Mougayar offers his thoughts on the how blockchains and digital currency could change the way we work and how we are compensated.

Gears, cogs

We are in the early stages of a new chapter in the nature of work. The blockchain will enable us to do our jobs and be compensated inside new circular economies that have their own currency units and their own work units.

This, I believe, is one of the greatest themes to emerge from blockchain technology.

Most work today is compensated via bilateral agreements between a worker and an employer according to a simple contract: you work in X job, and we will compensate you in Y currency.

But what if we had greater autonomy over how we choose our own work? With more control, we would then be able to perform new types of tasks that may or may not resemble what is traditionally considered labor, and earn cryptocurrency instead of fiat currency.

As a result, instead of doing one job we could hold several paying jobs that are diversified, while not being tied down by the constraints of a single employer.

Already, a number of blockchain based businesses are compensating users for their 'work' via digital tokens.

Steemit for example, rewards users who vote-up or write posts on its decentralized content platform.

The theory of decentralized transportation platform La'Zooz is that you earn Zooz points, just by driving your car while the app collects data about your driving patterns.

A healthcare research entity could pay patients or normal people who share their medical data, in exchange for the collective wisdom that is gained by aggregating that information, and returning personalized or comparative insights.

At the heart of making this possible, is the relationship between actual work done, value created, and value received.

William Mougayar's Blockchain Marketplace

Let us dissect what is happening here:

  1. Users perform some work, either passive (driving and sharing data), or active (voting a post, or making a decision).
  2. Each marketplace has its own 'unit of work', consisting of a variety of activities.
  3. Each unit of work generates value for the marketplace, for other users and for the end-user themselves. This is an expansion of the network effect theory where each user's actions benefits other users.
  4. In return for that value, users are rewarded with a native token currency, the marketplace's own currency.
  5. That currency can be spent inside the marketplace on another transaction or service (eg taking a ride, promoting content), or it can be exchanged outside the marketplace against another cryptocurrency or fiat money.
  6. The value of the marketplace as a whole increases proportionally with the amount of activity and value that are generated inside of it.

A new system of work

There is a new system of work that is unfolding, and blockchains are enabling it.

This is not a Ponzi scheme, but rather a new way to generate economic value. Of course, some companies will try to abuse this system, but others that have thought carefully about its mechanics and operations will benefit and enable their users to also partake in their success via the sharing of network equity.

The most important elements that have to be done right are:

  1. the work being done must be varied
  2. work being done must be valuable and valued
  3. users should be able to spend their earned currency internally in order to generate more value.

What is happening here is the creation of mini circular economies that are self-contained. Some of these models will be created by new companies, while others will be spun out of existing companies.

The models coming out of existing companies will be interesting to watch because most companies and their users create an excess of value that is not well captured. Linking the critical elements together as depicted in my diagram would give a new life to a new economic model.

Could this be the future of work and wealth creation? Possibly.

This article originally appeared on Mougayar's blog, Startup Management, and has been republished here with his permission.

Image of gears via Shutterstock

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