The emergence of distributed ledger technology (DLT), of which blockchain is a form, could bring about a shift from a platform economy to a protocol economy. In this, data is the key to the economy, explained Ralph Wessels of ABN Amro in an article published by his employer on tokenisation, part of a three-part series on cryptocurrencies published by the bank.
Distributed ledger technology (DLT) is a decentralised, digital database, where consensus rules over the data. This allows information to be exchanged faster, without the intervention of a third party or intermediary.
According to Wessels, this elimination of intermediaries and the productivity improvement that DLT offers creates economic value. “It can even be compared to the birth of the Internet,” wrote the investment head. The economic value of the internet also lies in the disappearance of many intermediaries, inside and outside the financial services sector. Consumption and production have been optimised, travel agencies have virtually disappeared, physical shop space is decreasing because we order more online, fewer stocks are held and price comparison has improved. The Internet makes all this possible and has made many services (intermediaries) redundant.
Whereas the economic impact of the internet is mainly on consumer goods and services, according to ABN Amro DLT can do this for financial services, among others. :“If information about assets is easily accessible and is stored in a decentralised manner and securely, certain services will also disappear,” explained Wessels, “for example those of estate agents, solicitors, accountants, lawyers and bankers.”
The developments around the Internet have brought about a steady shift from a centrally managed economy, where little use was made of data, to a platform economy where the use of data has increased substantially.
Protocol economy
ABN Amro has estimated that, with the rise of the DLT, this will gradually shift further towards a protocol economy in which data is the key to the economy. Data will be prioritised and protected. The focus of the protocol economy is on building networks and limiting intermediaries.
As examples Wessels mentioned the raising of money or financing through digital contracts. A precondition is that the creation of such a digital certificate is transparent and controlled. The system only works if the input is reliable and of high quality.
In two earlier presentations on cryptocurrencies published by ABN Amro, the head of investment strategy wrote about investing in cryptos and about bitcoin in particular. In a conversation that Fondsnieuws (Investment Officer Luxembourg’s sister publication) had with Wessels on the subject, he said that clients regularly ask if and how they can invest in bitcoin or other cryptos. At the time, he said he found bitcoin a difficult investment case.