Lesson 13. Cryptoeconomics and Web3

In the 1970s, the US dollar floated off the Gold Standard. Since then, national (aka fiat) currencies are not based on assets but on debt. Debt-based systems are wonderful for expanding the economy because borrowing money increases money’s velocity. However, debt-based systems rely on inflationary prices. A business can borrow $1 million, and as long as the economy grows, that same $1 million ten years later is easier to pay back. However, this all crashes if you have a deflationary economy. And what the governments didn’t realize back in the 1970s was that technology is deflationary. A $1,000 TV today will be worth $500 in a year, following Moore’s Law. A debt-based system is not compatible with technology deflation.

Canadian entrepreneur Jeff Booth, author of The Price of Tomorrow, has pointed out this weakness. “We live in a world of abundance, bounded by a financial system built on scarcity.” 

In a staggering observation, Jeff observes that, over the past few decades, every $1 increase in global GDP has come with an increase of $4 in debt. In other words, for decades now, we have been growing the global economy by borrowing from the future. Needless to say, this is not sustainable. And, Booth adds, this is not soft debt, like the kind you can write off with refinancing or bankruptcy. No, this is real, hard debt, the kind you can’t write off. It must be paid back. But because governments are short-term thinkers, they are kicking that can down the road—and printing more money instead.

That’s why Booth is excited about Bitcoin.“Bitcoin,” he says, “gives you money velocity without debt.”

With crypto, we now have a debt-free engine that, combined with Web3, smart contracts, and gamification, provides a new, truly democratic, financial and regulatory regime that will dominate human engagement over the next decades.

More recently, MicroStrategy CEO and Bitcoin proponent Michael Saylor (who is also Peter’s fraternity brother), announced a product to deliver a Bitcoin wallet and Lightning address to every corporate account holder, enabling the quick and easy deployment of Bitcoin rewards (in the form of Sats, or Satoshis) to employees, customers, prospects, and partners. He calls the system and the methodology “MicroStrategy Lightening Rewards,” a mechanism to pay for good behavior and incentivize customers’ attention.