Having become a ravenous consumer of Blockchain/Crypto articles I am swiftly concluding that those debating the legitimacy of cryptocurrencies are mostly missing the point. Typically they follow this pattern: what is a cryptocurrency, what gives it value, can it replace fiat currencies etc.
Just today, I was reading an article in The Guardian (Does blockchain offer hype or hope?) that did a great job about explaining the concepts, flirted with the fact they exist in domains outside of finance, then started talking about bubbles, troubles and hard landings.
To get to the bottom of how this will change everything, we need to re-frame the idea that a cryptocurrency is always equivalent to a fiat currency (i.e. a USD) with the fungibility (one of my favourite words) that goes with it. It is precisely the fact they are smart and can have deliberately limited fungibility that makes them so compelling.
What is fungibility? In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, e.g. since one ounce of pure gold is equivalent to any other ounce of pure gold; gold is fungible.
Whether they are called ‘app coins’, ‘utility tokens’ or a variety of other names, cryptocurrencies that are explicitly linked to a particular domain or purpose hold tremendous value. And I don’t mean speculative value merely to be traded, i.e. a coin that is only used to store or exchange value but has no other intrinsic use. I mean value derived from a network that has a purpose in mind where a token is used to access that functionality, information or something else useful – identify validation for example.
For me, the extension of this is the bringing to life of decentralised networks where ownership is not concentrated in a single party and the value created in the network is owned by those participating in it. And the applications for this are wide and varied.
I immediately see such applications in construction, facilities management and energy efficiency where traditional technology approaches are not sufficient to revolutionise but blockchain technology with network-enabled, domain-specific smart tokens, really can. It brings a whole new flavour to ownership, accountability and trust.