The “Traditional” Economic Loop
Traditional economic systems generate a “loop” where the markers (or tokens) of value are introduced by a third party. The loop system is typically designed to create a scarcity of, and thus generate demand for, such tokens.
In David Graeber’s seminal work Debt: The Last 5000 Years, Graeber describes just such a mechanism taking place with the introduction of metal coinage—(1) conquering armies melt down statues and religious idols of the conquered to mint coins, (2) the new rulers pay their armies in this currency, (3) and the new rulers require tributes or taxes to be paid by the conquered populace in this currency, creating demand for this currency so that (4) the conquered populace needs to acquire the currency from those employed in the armies by providing them with goods and services.
The Data Economic Loop
In a data economic system, on the other hand, the people or entities who do the actual work for the economy and produce desired outcomes also generate the economy’s tokens of value using the digitized proofs of such outcomes. The tools used to generate the economy’s tokens of value reside in the hands of the economy’s participants rather than those of a central entity.
Furthermore, each participant in the economy can introduce their own type or class of digital economic token—a Data Asset—to represent the specific types of outcomes that the participant wants to prove to the rest of the economy. The participant and the rest of the economy can subsequently utilize such Data Asset-based economic tokens.
The digital network that connects the participants in a data economic system (or a data economy) is a Data Economic Network (or DENET). A DENET not only allows participants to generate, trade, utilize, or otherwise transact Data Asset-based economic tokens, but also allows each participant to independently verify the proofs of outcomes associated with the creation and transaction of each Data Asset (using distributed ledger technology or a derivative thereof).
This token generation method empowers the producers of these outcomes to gain new value simply by doing the work to produce valuable outcomes for the economy and by subsequently capturing digitized proofs of such outcomes as Data Assets. This economic value structure is in direct contrast to the “traditional economic loop” described by Graeber in which a central entity is in sole control of introducing new economic tokens into the economy and determining the value of such tokens.
Impact of Inverting the Traditional Economic Loop with Data Economic Networks
As these DENETs form, a new layer is created between the traditional coupling of currencies or financial systems and goods or services. Until now, only one type of connection could easily express value: direct connections between goods or services and money. A data economic system, however, allows for multiple connections that generate and express value: Data Assets can be used to value and to trade for goods, services, money, or even other Data Assets.
Within a data economic system represented by a DENET, the primary economic activity becomes the generation of new Data Asset-based economic tokens—each representing the outcomes of completed work that the economy values—and the marketing of these Data Assets among the participants in the data economy to maximize the potential value and utility of their Data Assets within the economy.
A simple analogy for such a data economic system is a coffee shop that offers loyalty cards so that every 5th coffee purchased makes the customer eligible for a 6th (“free”) coffee. To gain this 6th coffee, the customer must exchange the loyalty card (in this case the Data Asset-based economic token) with the coffee shop. To maximize the use of their loyalty cards, the coffee shop would need to market their loyalty card Data Assets and their potential value and utility (“every 5 coffee purchases gets you a free 6th coffee”) to attract more customers to generate their own loyalty cards. It’s also imaginable that customers who already have partial or fully generated loyalty cards may want to market and trade these cards to other customers.
Looking Ahead: Formation of the Data Economic Internet
We believe that the relationships and connections between DENETs trading valuable Data Asset-backed economic tokens will develop over time to create a network of networks in a similar manner to the development of the Internet. What we envision is a data economic internet layered over the existing one, allowing for alternative and additional sources of value that our traditional economic framework has, as of yet, been limited in its ability to capture.
Thus, the process of value creation and transaction in a data economy radically departs from that of the “traditional economic loop”, the immense potential possibilities of which might be explored for years to come.