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Culturally there is a global transformation taking place, and a New Killer App is appearing. This is going to be big! – Michael Noel – Author – Tokenomics is not Economics –
#blockchain #bizbuildermike #tokenomics #thankyou
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In Chapter Nine, we established a few things, such as,
- In j
Chapter 10 Wisps and why they were made illegal.
Buying a cell phone from one of the 3 major carriers is a joke. The distributorships fly the badge of the major carriers, but in reality, you are purchasing from a small locally run operation, with very little value added, In the mobile Store in Flagstaff, for instance, it’s okay to insult customers.
Be sure to follow or subscribe so I can let you know when I publish the next in the series.
Michael Noel CBP
aka Biz Builder Mike Twitter – @BizBuilderMike Youtube @BlockchainWeekly
eschew obfuscation, espouse elucidation
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Culturally there is a global transformation taking place, and a New Killer App is appearing. This is going to be big! – Michael Noel – Author – Tokenomics is not Economics –
#blockchain #bizbuildermike #tokenomics #thankyou
Please Share!
In Chapter ten we established a few things, such as,
- In j
Chapter 11
In just a few months, globally, in just about every industrial sector customer loyalty will be up for grabs.
Customer experience is the challenge of the recovery.
Whether it’s more tailored products, greater digital parity with analog services, or faster turnaround, customer expectations of what great customer experience (CX) looks like have shifted significantly.
Be sure to follow or subscribe so I can let you know when I publish the next in the series.
Michael Noel CBP
aka Biz Builder Mike Twitter – @BizBuilderMike Youtube @BlockchainWeekly
eschew obfuscation, espouse elucidation
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Culturally there is a global transformation taking place, and a New Killer App is appearing. This is going to be big! – Michael Noel – Author – Tokenomics is not Economics – #blockchain #bizbuildermike #tokenomics #thankyou
Please Share!
In Chapter eleven we established a few things, such as,
- In j
Chapter 12 Chapter 12
The Solow Residual and why Tokenomics is not economics –
What are the conclusions of the Solow model?
The main conclusion of the Solow growth model is that the accumulation of physical capital cannot account for either the vast growth over time in output per person and accumulation of capital creates growth in the long run only to the extent that it embodies improved technology
What does a residual analysis tell you?
Residuals are differences between the one-step-predicted output from the model and the measured output from the validation data set. Thus, residuals represent the portion of the validation data not explained by the model.
What does the Solow model fail to explain?
The fundamental criticism of Solow’s growth model is that it fails to explain long-run growth: The per capita income does not grow at all in the long run; The aggregate income grows at an exogenously given rate n, which the model does not attempt to explain.
Why do we analyze residuals?
The ‘Analysis of Residuals’ provides a more sophisticated approach for deciding if a regression model is a good fit.
And it is not, yet we continue to teach this fundamentally in economics.
Flashback to Crypto Kitties
In January 2018, ETH hit a then-all-time high of over one thousand U.S. dollars and the platform became almost unusable.
I know this because, in 2017 and early 2018, Blockchain Consultants LLC, a company I founded was spinning up DLT-architected organizations as fast as we could. We were implementing DLT workflows that functioned amazingly well. Transaction fees were inexpensive, and settlement was fast.
Then the disaster happened on November 28, 2017. The Canadian studio Axiom Zen released a blockchain game on Ethereum called CryptoKitties. Shortly after launch, there were concerns that CryptoKitties was crowding out other businesses that use the Ethereum platform. The game caused an increase in pending transactions on Ethereum, and at one point accounted for over 10% of network traffic on Ethereum.
A perfect storm ensued over the following months that almost decimated the ETH platform. The game’s popularity in December 2017 congested the Ethereum network, causing it to reach an all-time high in the number of transactions and slowing it down significantly. The game’s popularity also caused a massive inflow of speculators to the ETH platform who drove the price of ETH to a peak in January of 2018 of over one thousand US dollars. This affected transaction fees (the cost to record data on the chain) as fees went through the roof. The cost of a transaction went from 40 cents at the beginning of 2018 to well over 40 dollars in some cases toward the end of 2018.
ETH Developers began to have discussions about the viability and future of ETH. The platform just was not scalable. Yet on May 12, 2018, a CryptoKitty was sold for $140,000. Speculation and the greater fool theory had won out over sound logic.
The ETH platform became almost unusable. We learned firsthand that Tokenomics is Not Economics.
Economics = You buy stock in ATT. When ATT increases sales the stock price goes up.
Tokenomics = You buy ETH. When the value of ETH goes up, the cost of a transaction goes up. With higher transaction fees, fewer organizations are willing to record transactions. The result is fewer transactions recorded. Even though the market cap increased, the useful value of the platform decreased.
Economics = Speculators begin to pump ATT stock and the price of your ATT stock goes up. So does the price-to-earnings ratio. ATT P/E currently hovers around 14.83 times earnings no company ever created is worth more than 6 times earnings in my estimation.
Tokenomics = Speculators begin to pump ETH prices and the price of your ETH goes up. So do transaction fees. The result is fewer transactions recorded. Even though the market cap is higher, the useful value of the platform goes down.
Tokenomics is Not Economics.
Today we are repeating the mistake. Today, ETH is once again over the one-thousand-dollar mark. Speculators see tremendous potential in digital currencies and they are driving the cost up. All the while reducing the fundamental value of the token they have bought.
Once again, for most normal people, the blockchain is pretty much unusable for average-size transactions. Recently, sending an ERC20 token today could cost over US$60. To complete a simple UniSwap trade can run between $60 and $100 for each transaction. Unless you’re willing to pay $100-$200, you can forget about a complex smart contract interaction — it’s a financial nightmare.
This is not true with ETH priced at around $200.00. At that price point, developers could begin to move forward with FinTech, MedTech, AgriTech, and many other industries that need Disintermediation to thrive in the coming decentralized economic environment.
Digital Currencies are ushering in a new paradigm and Consensus is at its core. If you haven’t spent time learning what Consensus is, it is time to do so.
Unfettered Global transactions are the promise and Disintermediation is the tool. The sooner we cumulatively begin to realize that we can not take traditional economic theory into the digital realm the better.
The Yin and Yang of Money Creation,
In Ancient Chinese philosophy, yin and yang is a concept of dualism, describing how seemingly opposite or contrary forces may be complementary, interconnected, and interdependent in the natural world, and how they may interrelate to one another.
We see these relationships, the yin, and the yang, in everyday life,
Day and Night — Every day as the Earth rotates, you experience a yin and yang cycle.
Seasons — Seasons are another example of yin and yang as the Earth travels around the sun.
We even see these relationships in economics, although economists tend to ignore them.
As an example, The Consumer Price Index, (CPI) is a misleading measure of inflation. Why? Well, CPI isn’t measuring the rate of Asset Price inflation (API) which is the Yang for the CPI yin.
Asset Price Inflation Means You Can Now Buy fewer House Than You Could Before.
When we inflate the money supply by 20%, (we just did this by the way) it means that on Wall Street, people who own assets did nothing to make 20% more money (purchasing power).
And that means on Main Street, people that create things for a living, those who manufacture things, had to work 20% harder to get nothing.
Manufacturing must now generate 20% more cash flow this year just to remain where things were the year before. Manufacturing must now do 20% more work to have the same purchasing power that they had a year ago. Therefore Manufacturing must now raise prices or expand the customer base or find efficiencies.
And on Wall Street, if you own that asset, you had to do nothing. You could have sat on the Beach in Belize and watched the stock market and you would have 20% more purchasing power.
That is the dichotomy.
And when the money supply expands 20% a year, your business has zero value.
Why?
Because now your company and employees both have to earn more than the yearly dilution of the currency to add value over the prior period. If your employees are getting diluted by 20% every year, you’ll likely have no employees’ leftover time.
As the rate of money supply expands over time, any assets that are based upon future cash flows develop diminishing returns.
This is where the economy is today, on the brink of hyperinflation. Wherever you look, prices for consumer goods, real estate, stocks, and bonds are on the rise. That means that the purchasing power of money is on the decline. For if, say, stock prices go up, your money unit can buy fewer stocks. What it also means is that although people holding assets, whose prices increase, become “richer,” people holding money get “poorer.”
Economists generally go off the rails trying to explain this.
Why?
The Yin and the yang, generally rising prices the Yin of the Fiat Money system yang.
In today’s fiat money system, banks, relentlessly increase the quantity of money through credit expansion. They extend credit which creates new money out of thin air, money that is not backed by anything.
The borrowers of this new money are the beneficiaries because they can use their new money to buy products at uninflated prices. As this new money is passed from hand to hand over time, the demand for products increases, which drives prices up.
As the cycle continues over time, receivers can only buy at inflated prices.
The income and wealth of the early receivers increase at the expense of the late receivers, not to mention all those people who do not gain anything from the increase in the money supply.
The issuance of fiat money creates winners and losers. With fiat, the early receivers reap a “windfall profit” at the expense of all those who come later in line.
This is unlike what happens in a genuinely free market, in which people trade voluntarily with one another, and both parties benefit.
As things stand, there is no escape. If you destroy a free market you create a black market.
If you make ten thousand regulations you destroy all respect for the law.
~ Winston Churchill.
Nation States have monopolized money production, and people use the governments’ fiat money. “Digital Currencies” have either been outlawed or made uncompetitive by legal tender laws and/or by subjecting them to taxes and/or VATs (value-added taxes).
The issuance of fiat money cannot be, and is not meant to be, beneficial for all; it is done to favor some at the expense of others.
In general, those who have easy access to bank credit belong to those who benefit: governments, commercial and investment banks, big businesses, and the financial industry at large. (The 1%)
The disadvantaged are, generally speaking, the rest of us. (99%)
This is unlike what happens in a genuinely free market, in which people trade voluntarily with one another, and both parties benefit. A consequence is that artificial booms are set in motion. The increase in credit supply not backed by real savings pushes the market interest rate down to an artificially low level, which in turn discourages savings, increases consumption, and it also fuels additional investment.
The painful news is that the boom brings overconsumption and malinvestment.
People live beyond their means. They consume more and save less compared to what they would have if the market interest rate had not been artificially lowered.
Firms engage in investments that under unhampered market conditions are not profitable.
However, as long as the market interest rates remain artificially lowered through injections of fiat money issued through credit expansion, the boom is upheld.
When the inflow of additional credit and money dries up, however, and the market interest rate returns to its normal level, the boom will turn to bust.
People enjoy the boom, and they loathe the bust. So, once they have initiated the boom, central banks can count on support from politicians, banks, industrial firms, unions, employees, and even pensioners to take all kinds of measures to keep it going. No one wants to pay the tab run up by the boom.
As a result, the central bank brings interest rates to ever lower levels and pumps ever more credit and money into the system to keep the boom going.
Sound Familiar?
Change is coming and it is not what you think it is.
The future is decentralized.
I’m ready for it, are you?
Next Up Tokenomics is not Economics –
Digital Twins and The New General Purpose Platform
Michael Noel CBP
aka Biz Builder Mike Twitter – @BizBuilderMike Youtube @BlockchainWeekly
eschew obfuscation, espouse elucidation
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