Recently, I've been residing on a small island. Every day, I venture to the beach to gaze at the distant red ferries. When the sun rises, the ferry's smoke billows, loaded with barrels of oil, as it starts its journey across the Straits of Malacca. As the sun sets, amidst the fiery red hues, it anchors again. Days transition from sunrise to sunset, and ships come and go, marking the passage of time. Every morning, I lean on the island's railing. In the distance, there are always three upright oil barrels, storing energy soon to be consumed in the cities. In the traditional internet world, tales of scams and innovations intertwine. Some things feel changed with the times, yet others feel just the same.
Today, let's delve into the notion of "value" in this new world. The term "Web3" is a broad descriptor for this new era and space, which I won't detail here (I've covered it in previous posts).
If we consult Wikipedia on the definition of "value", it broadly refers to the positive significance and utility an object presents to a subject. Simply put, value can be bifurcated into two categories: the economic sense, referring to the use and exchange value of commodities, and the sociological sense, often used to assess the optimal behaviors or lifestyles, describing the importance of an object or action.
In narrow terms, value refers to the present economic definition, i.e., use value and exchange value. In a more intermediate sense, it gauges an object's significance to society, what could be termed social value. In the broadest sense, we can refer to it as "universal value", which speaks to the general significance or utility of an object or action.
Clearly, not all these types of values are easily quantifiable. While it's harder to measure some, we may be more interested today in how new scientific and technological advancements quantify value.
In layman's terms, today we'll discuss quantifiable values, including intrinsic, social, and universal values.
Historical debates, like Charlie Munger's criticism of Bitcoin as evil, foolish, and unproductive, argue that Bitcoin's ultimate value is zero. Meanwhile, Vitalik Buterin labeled the BAYC NFT hitting 3 million USD as "gambling", and Elon Musk indirectly sparked debates with meme coins like Doge and Shiba Inu. Furthermore, many classic Web3 use-cases often get branded with the signs of Ponzi schemes in an attempt to determine their value.
Today, we don't aim to take a stance on these debates. However, events over the past decade invite us to question if traditional value definitions and investment frameworks still hold relevance. Or, more boldly, have modern theoretical systems and technology redefined our understanding of value?
Has the new decentralized theoretical system and technology revolutionized our definition of value?
Traditionally, value investing involved comparing asset fundamentals to market values. This practice dominates our understanding of value, based on asset fundamentals. But this approach is based on three assumptions: it's grounded in fiat currency, traditional asset definitions, and existing economic rules, like accounting standards. For instance, Apple stock's value comes from its products' widespread use, global exchange, and satisfying certain profit and cash flow standards, making it valuable.
The question is, have modern theoretical systems and technologies significantly changed these three conditions?
Firstly, the reliance on fiat currency is certainly being challenged. Bitcoin, through decentralized technology, has redefined currency. Currently, Bitcoin's market cap is 425.9 billion USD, while the total Crypto market cap is 1.234 trillion USD. Given Bitcoin's performance, this change is hard to ignore. The Crypto market clearly indicates a freely competitive currency market. This change, facilitated by decentralized technology encompassing cryptography, distributed systems, and self-incentive systems, has undoubtedly shattered traditional currency limitations. We can't predict the future, but one thing is certain: whether currencies flourish collectively or singularly, the condition of a freely competitive currency market is unlocked, likely giving us a novel way to measure value.
Secondly, based on assets defined in the past, has been almost revolutionized by decentralized technology. The emergence of NFTs was indeed unexpected. Many leaders in the decentralized industry didn't anticipate that the ERC721 standard would bring about such surprising changes. In fact, when decentralized systems transitioned from a money-focused scenario to a financial one, and when this system opened up to scripting languages and smart contracts, the uncertainty over asset definitions emerged. NFT is not the end, but merely a tiny beginning. The $17 billion market of NFT today merely confirms that decentralized computing systems can inspire more innovations regarding asset categories. That is to say, we can't define new assets based on the outdated assets formed by past economic systems. A simple estimate would be that while "everything is an NFT" might be too absolute, we will certainly have new XFTs, XXTs, etc. Chances are we might have three categories: assets simply mimicking traditional ones like Tokens; assets that existed on the Internet but were never defined as assets, which can still be mimicked, like NFTs; and assets that didn't even exist traditionally, but defined through overlaying categories or iterative methods different from mimicry - let's call them XXT for now. Remember, what limits our thinking is not our imagination but the lack of it. Of course, not all these innovations will succeed, and most will probably fail, but even a one-in-ten-thousand choice, after free competition, might surprise us. Just look at the profile pictures of people around you.
Thirdly, the third point concerns the reform of economic norms. Many are attempting to explain Bitcoin, public chains, and NFTs using different economic models. While there's no conclusion yet, it's evident that past economic rules are ineffective for this market. Particularly for Ethereum, some in the market are trying to value it using foreign exchange models, likening it to evaluating a country. The diversity of Tokens determines that these economic norms will take time to emerge. Clearly, old rules from past economies are not applicable. We haven't yet formed a widely accepted standard because we're still in the early phase of crypto development. The formation of these measuring standards will inevitably differ from the past, and given the volatile nature of these standards, we must tread carefully when evaluating such intrinsic value. Fortunately, the transparency of transaction data in decentralized systems ensures our data's authenticity. Interestingly, 14 years have passed, and we still haven't reached a consensus on an economic method to describe these decentralized systems. We always say we deserve better, but are we truly seeking it, or are we lost in pointless debates?
Of course, there's also the underlying social order. Despite modern Memes, DAOs, and Desociety starting open explorations into public events and affairs, decentralized systems still lack foundational support for DAOs and decentralized societies. We can't confidently say that existing social orders will definitely be revolutionized by decentralized systems. However, we can always bravely believe in uncertainties. After all, the future is made of them, and a little more courage might reveal even more surprises.
In short, decentralized systems have redefined or changed the basic constraints on value from various dimensions. The definition of value, especially calculable value, is no longer what it used to be. We will have more calculable values on different dimensions.
In reality, it's hard to give value a completely new definition because it's constantly changing. It's being written collectively by creators, thinkers, skeptics, holders, speculators, users, and many more. Simply put, it's defined by our thoughts and actions. Let's be even bolder: can we consider using the word "consensus" in place of "value"?
That is, when the word "consensus" was first written by Satoshi Nakamoto in the Bitcoin whitepaper, when Ethereum attempted to change from POW to POS consensus, and when more crypto builders proposed different consensus algorithms, did we start to have a more calculable or measurable standard of value? We won't delve too much into the word "consensus" today. It's just a bold idea, because clearly, when "consensus" was written into decentralized computer systems, we got a new definition of consensus - a definition much simpler and more elegant than the old definition of value. We can be sure we'll have different consensus algorithms, and universally applicable descriptions based on these different consensus algorithms will emerge.
Perhaps in the not-so-distant future, we'll evaluate economic systems based on the utility of consensus algorithms, guide our actions and choices with a calculable consensus, and witness a world where every flower blossoms, every leaf is a bodhi, and consensus flourishes in all its forms. Maybe, on our journey of exploration, more unexpected concepts will arise.
Clearly, we can almost be certain: we know nothing about the future. But at least, we can boldly start discussing this interesting thing called "consensus."