In 2008, the financial order almost crashed. If the governments had not saved the financial giants such as Merrill Lynch, AIG, and the Royal Bank of Scotland, the consequences would have been unimaginable. Pension funds and many individuals would have lost a majority of their savings. Companies would have lost access to their capital. A large fraction of the world trade would have stopped.
Economic crises are occurring fairly regularly, all around the world. They are not something that happen elsewhere. Sometimes they drive societies to full chaos. An ongoing example is Venezuela, with the world’s highest inflation, bloody street protests, and lack of basic necessities.
What have we learnt from these crises? Not much. For example, Donald Trump is trying to do his best to wreck the economy by cancelling the regulation that was explicitly put in place to address the stability problems and to make the financial system more robust. Simultaneously, the world is facing the highest ever level of debt, all of public, private and corporate debt.
Our current economic systems have several in-built assumptions. We implicitly assume eternal exponential growth. We assume that there is a direct link between productivity and demand increase.
Consider just a 3% annual growth, or doubling the value of production every 23 years. At the same time, automatisation is driving the prices down and we are facing a huge pressure to decrease the consumption. Furthermore, production growth is almost always associated with growing energy consumption. Based on basic physics, continuous 3% annual growth in energy consumption would boil the earth in just 400 years, as our energy consumption would increase to some 130 000 times the current level.
Without growth, debt accumulates, as has been happening continuously since 2008. When we collectively borrow with interest, the economy as a whole has to grow, so that we can pay the interests. Otherwise we have to pay the old debt with new, larger debt, leading to increasing levels of inequality.
Hence, sooner or later our assumptions about growth and debt must be radically reviewed. Assuming that growth, or increase in the production of goods and services, could continue forever while respecting planetary boundaries is insane. Simultaneously, assuming that increase in productivity, e.g. due to automation, would automatically mean widespread growth is unrealistic, at least in the developed countries where the basic needs and more are already fulfilled.
A new way to think about the concept of value
ValueCraft is an emerging platform to create ecosystems for multiple measures of value. ValueCraft is backed by us all, not by a central bank or any other central authority. It is based on “trustlines networks,” a new way of representing how much we are willing to respect our friends’ obligations.
The main principle of a trustlines network is that it allows secure exchange between strangers, by sending payments along chain of trusting friends. The basic idea is a network of people who have a mutual trust on each other. Anyone can create a trustline with a friend, allowing them to borrow or pay any amount up to a specified credit limit, expressed in anything considered valuable. For example, one can create a trustline for $100, for 10 hours of work, or for 4 beers.
At this basic level there is nothing new. People have always trusted their friends, lending things and providing services. The new thing is in scaling this up.
With trustlines networks, two strangers can exchange different measures of value by taking advantage of the trustlines they have both created with a mutual friend. Let’s say that Alice and Bob do not know each other, but both of them know Nick. Nick has in turn created a trustline for 4 beers with both Alice and Bob. Now Alice can buy Bob a beer so that Bob owes one to Nick and Nick one to Alice, with the expectation of getting the beer eventually back.
As the network and different measures of value grow, Bob does not actually need to buy a beer for Nick. For example, it is possible that Bob changes his tyres instead, cancelling the original debt (and perhaps creating a new one.) Since all the people in the world is connected by just 4 degrees, trustlines scales up quickly in communities and cities.
It is no longer necessary to exchange everything with just money. Computers and digitalisation are particularly good at accounting, having made it technically viable to keep track and exchange values of multiple sorts. Measuring multiple kinds of value make it possible for us to appreciate and endorse actions which are not directly producing monetary value.
The power of networks
The real value of ValueCraft comes through the network effect. As ValueCraft scales through the networks of people and different measures of value, these all become interoperable. An festival coin can be exchanged for a beer with a trusted friend of friend; the surplus production of a grocery store can be bought with time spent for helping a neighbour in cleaning.
Eventually, having multiple measures of value is a critical feature if we humans are willing to get rid of our growth addiction. Having an interface to appreciate multiple measures of value provides us with a tool to bootstrap from the value created in local ecosystems, incentivising different kinds of valuable behaviour.