Galia Benartzi is a founder of Bancor, a Swiss-based non-profit focused on solving the liquidity challenge in asset exchange. Previously, she was founder and CEO of Particle Code, a cross-platform development technology for mobile and social games acquired by Appcelerator.
In this opinion piece, Benartzi discusses why she believes the ability of blockchain technologies to create many currencies could create a ‘long tail’ of new commerce opportunities.
Money moves human energy, skills and time between us, in different ‘containers’, or stores of value. National stores of value, like the US dollar, have historically been controlled by governments and distributed by banks.
This, of course, happens with limited transparency, a combined domestic and international monetary policy agenda, and political considerations throughout.
Naturally, this model is far more inflexible and inaccessible than newer cryptocurrency solutions, made possible by blockchain database technology that can theoretically enable anyone to issue and distribute a digital store of value.
In fact, we’re just beginning to see the blockchain ecosystem give rise to these new forms of money that can be issued at little to no cost.
Because cryptocurrencies allow us to account and transfer value securely between one another without the need for an intermediary, such as a bank, we can finally join and create local and group value networks that operate reliably, with little overhead or tedious monitoring.
The big change
Communities of any flavor can now be empowered to agree on credit-issuing policies and governance structures, and enjoy internal marketplaces from which to buy and sell goods or services, without relying on access to national money.
Today’s first use cases are produced by early adopters, and already we see hundreds, nearing thousands, of cryptocurrencies on the market and counting.
But as technical barriers to entry are removed, we are on the precipice of millions of user-generated currencies, of all shapes and sizes. This is similar to inflection points in user-generated content we saw with the rise of WordPress for blogs and YouTube for video.
Similarly, the long tail of value creation will produce a large variety of monetary diversity and abundance from greatly enhanced collaboration between people.
In business, the ‘long tail’ describes content and products in low demand or with low sales or view volume that, collectively, make up a market share exceeding that of current top performers combined.
Internet history shows us that with the digital long tail, the accumulation of all niche contributions is actually two to three orders of magnitude greater than the hits. Think of all the Instagram accounts after the 1,000 most followed, or all the status updates beyond the most viral.
In cryptocurrency, the long tail points to hundreds of billions in potential value when combining all small and niche currencies beyond the few largest.
It’s an idea that’s been tried before.
For example, my founding team previously built technology for local currency initiatives. One of our most successful projects became the largest alternative currency in Israel where it was used.
There, a community of new mothers issued a currency called ‘Hearts’ that allowed thousands of active moms to buy and sell from each other in a mobile app which combined a currency wallet and trusted peer-to-peer marketplace.
The community generated hundreds of transactions every day for years, with millions of dollars-worth of value changing hands, including jewelry, apparel, household and children’s goods and lifestyle services.
Over time, as other currencies were issued in neighboring communities, it became clear that being able to exchange these stores of value for each other would give them even greater usage, as new products and services would be available in other networks beyond yours.
Many local businesses were eager to offer their products for their customers’ community currencies, which would further enhance product selection, but their inability to liquidate these back to national money was a barrier.
Even though these currencies were creating value for users, they were too small to achieve the trade volume needed for liquidity.
This is the main reason we haven’t yet seen the user-generated-currency inflection point. Combined with the technical difficulty still involved in the creation of a cryptocurrency, what you see today are early adopters limited to crypto startups with deep development expertise and a business strategy for liquidity.
When technical barriers are lowered and the liquidity problem is solved, the emergence of the user-generated-currency long tail may end up being the greatest long tail in internet history.
Its combined volume won’t represent the profit or traffic of its enabler (such as YouTube’s ownership of the video long-tail) but rather the collective abundance, as measured by the velocities and market caps of these currencies, accruing directly to their users.
This access to diverse capital may usher in a more even distribution curve of wealth in society. And we will measure that wealth not only in dollars or euros, or even bitcoins, but in the transfer of goods and services within each network and community, unconstrained by structural monetary inefficiencies.