With the world on the brink of a digital revolution, innovation is disrupting our way of doing everything from using tools and gadgets to performing financial transactions.
New resource class
The digital economy is growing rapidly around the world. The current digital economy is characterized by the creation of new asset classes and the digitization of traditional assets. Emerging technologies, such as blockchain, artificial intelligence (AI), the Internet of Things (IoT) and 3D printing, are playing an important role in this growth.
New technologies have the potential to dominate the world economy in the future. Blockchain, for example, has virtual coins and tokens whose popularity has grown rapidly in a short period of time.
Big players are entering the game
Blockchain enables users to transact securely and much faster than traditional methods. Blockchain features have attracted many prominent technology and finance companies, including IBM, Oracle, JPMorgan Chase and Boeing. For example, IBM recently launched a dollar-backed cryptocurrency called Stronghold USD in partnership with Stronghold, a financial technology company. This virtual currency is an example of how consumer confidence in a traditional asset (in this case fiat-currency USD) is used to support a digital asset.
There are also instances where companies are combining two new technologies to provide solutions for the future. Aerospace giant Boeing recently announced a partnership with artificial intelligence company Sparkcognition to create a blockchain-using traffic management solution for unmanned aerial vehicles.
Asset tokenization is not limited to traditional assets such as currency. New markets can use the underlying value of different types of assets to provide security tokens. Blockchain security can be a distinguishing factor between tokens and traditional securities. The use of smart contracts in blockchain eliminates the need for an intermediary, thus reducing transfer costs. This usability of blockchain has the potential to significantly affect the traditional banking system. It can also eliminate the need for money as a medium exchange, as all resources are liquid, instantly available and divisible.
Automation and artificial intelligence have already made their mark in many markets. Trading algorithms have surpassed human traders. In the manufacturing sector, machines have taken on many functions previously performed by humans.
Need for a new framework
In this rapidly changing economy, it is no longer possible to rely on traditional models and decision-making methods. To keep pace with new developments like DAO, AI, VR, P2P and M2M, we need to create a new framework. In other words, we need to move beyond Munger’s mental model and focus on digital models, such as network theory and index growth models.
The digitization of our economy is accelerating. Over time, we will get a clearer picture of what developments will dominate this new Web 3.0 economy, but it is clear that this economic revolution is happening worldwide.