“Price is what you pay. Value is what you get.” Successful American Investor, Omaha NE, circa end 20th century.
I have written about distributed ledgers extensively recently and this post is the latest in a series of four.
Part I dealt with the limitations of the bitcoin blockchain as a solution for the financial services industry, see here.
Part II dealt with the intricacies of clearing & settlement and how the bitcoin blockchain is ill equipped as a solution, see here.
Part III dealt with the tokenization of assets and its shortfall as applied to the bitcoin blockchain to represent accurately financial assets, see here.
This post deals with the internet of value – IoV.
There is only one internet, THE internet. TCP/IP is the single foundational protocol – granted there are other specialized protocols that complement TCP/IP. This singularity of TCP/IP works because the internet has been dealing to date with information and information is value neutral in the context of what value is in the financial services industry. Even if information is value neutral there have been and continue to be bumps such as privacy, net neutrality, censorship within jurisdictions and across jurisdictions. Even with the bumps, we still have one protocol to run it all because at the root of the protocol with a fairly “simple” governance structure which is somewhat removed from major commercial and political influence – read ICANN. Again information is value neutral.
Now, assets are not value neutral. Valuation of assets is not neutral. Frameworks to rule, maintain and govern assets are not neutral. Value introduces economic policy, fiscal policy, legislation, law and jurisprudence, regulatory oversight and plain old political intervention. All these vectors are mighty taken individually. As a whole they are either deadly or near impossible to move with any degree of nimbleness to achieve optimal results. It is bad enough when you deal with all these vectors to achieve harmonization in one jurisdiction. Think of the exponential levels of friction when dealing with multi jurisdictions. Inevitably the governance of networks of value will have to incorporate commercial and political interests in ways the governance of the internet never had to.
With this in mind, I fail to understand how practicable a sole blockchain can become the only protocol, THE blockchain, to deliver a unique internet of value, THE internet of value.
Governance is of particular import here. The bitcoin blockchain governance is shaky due to its stakeholder construct and its technology. It is already proving to be very difficult to push through change. Imagine the impossible task of managing change with a multitude of real world stakeholders who all have different and sometimes competing interests when it comes to value. If not impossible it may prove a strenuously difficult task.
This again leads me to the conclusion that a multitude of distributed ledgers is the solution, some public, some private, some decentralized, some centralized, some permissionless, some permissioned depending on a variety of industry needs and requirements, jurisdictions and legal frameworks. Makes for more targeted solutions, easier governance, easier change management and maintenance. Internets of Values based on a multiplicity of distributed ledgers.
Here is another way to think about it. Start with building individual distributed ledgers of value with their own governance, then think about interoperability and intra-governance linkages across ledgers rather than start building a unified global network of value with a unified governance.