Imagine a world where you can buy a house online instantly on the very couch you’re sitting on without the need for countless certifications and verifications of papers and contracts. Imagine not needing any more lawyers to secure documents and not having the hassle of going to government offices and banks to settle taxes, mortgages and deed of sale. Imagine having the whole transaction done from contract to payment in just one tap while at the same time being 100% assured that you are free from scams and fraudulent claims, and that all your assets would return to you right away in case your contract has been breached. Everything you need to know and have is in your device, in a secure network that cannot be compromised.
Seems like an ideal world, isn’t it?
But what if I told you that all this is already achievable with the existing technologies we have today? This is the concept of Smart Economy that NEO (formerly known as AntShares), the largest blockchain platform in China, is trying to advocate in the global market. NEO stated in their website that Smart Economy can be achieved with three factors: Smart Contracts, digital assets and digital identity. All these are made possible by the blockchain protocol. Through blockchain technology, the decentralized and highly secure system of cryptocurrency, record-keeping and smart contracts have been deeply rooted on the ground and have created itself an economy comprised of various digital ecosystems.
So why isn’t it globally adopted, then?
Take cars, for example. Cars are one of the most widespread and universally-used technology in the world. Cars have become a vital part of the modern lifestyle. Everyone uses cars. The interesting thing, however, is that not everyone who uses cars knows how cars exactly work. The thing that keeps cars relevant is that cars do what they’re supposed to do and they do it efficiently. Now let’s take a look at cryptocurrency: full understanding of cryptocurrency requires tremendous knowledge in computing, programming and economics, but it only takes a simple tap or click to use it. Cryptocurrency, like cars, does what it’s supposed to do efficiently. So why isn’t cryptocurrency as widespread as cars? The reason may not be because of the complicated nature of cryptocurrency but instead because of the problem of tangibility.
ENTER MICROECONOMIC RITUALISM
Ritualism is a sociological concept which refers to the constant observance of a practice or a ritual with no regard to its significance and/or function. In a theological aspect, ritualism is often observed in religious people who are devoted in performing religious practices but fail to live their spiritual implications and moral significance, case and point the need for images and statues to represent deities and divine figures.
So what does ritualism have to do with cryptoeconomy?
Ritualism is the proof that it is human nature to have a need for a tangible representation (or equivalent) in order to grasp something that is abstract or intangible. The brain is wired to have a stronger sense of reality in tangibility, which explains why it is easier to trust a paper dollar than a virtual bitcoin.
In the case of the car-cryptocurrency analogy, cars are easier to trust because cars are tangible. Tangibility is what gives the absolute assurance that cars are a technology that is real, making its service instantly trustworthy—an advantage that cryptocurrency does not possess.
Digital economy isn’t a problem in a macroeconomic standpoint as many large-scale corporations, markets and governments now rely on this system since it proves to be an exponentially effective system when it comes to dealing with such overwhelming numbers. The problem lies, however, in the very foundation of the economy itself—the household.
Households, unlike corporations and governments, have little knowledge in these economic concepts and thus are more susceptible to ritualism—hence the term microeconomic ritualism. Smart economy struggles to find its way to the common folk because people have grown to trust centralization since the existing centralized tangible economic system provides a stronghold (the central authority) and tangible proof (tangible currency and paper documents) which give people a sense of security that their assets and transactions continue to exist. Vis-a-vis, cryptoeconomy has its own stronghold (the decentralized blockchain) for people to rely on and irrefutable proof (each of the immutable blocks that secures all the records, assets and transactions) for them to trust. But since these lack a tangible and observable form, despite being actually more secure than paper economy, it still loses its integrity in the eyes of the misinformed.
Let’s take a step back. When we look at a paper bill, it’s nothing more than a piece of paper with a promised value. It has no intrinsic value. It’s just paper. But paper money circulates naturally in our daily lives to the point that questioning how currency works does not even occur to our minds. This is because the tangible proof (the piece of paper) has assured us that the bill represents a certain value that a central governing body owes us that we trust them to have (the gold standard; the actual value). Now, if we put it side by side with cryptocurrency, what difference do they have other than the former is in physical form and the latter, digital? Both are just mere representations of a value yet we trust one more than the other. This is a clear case of microeconomic ritualism.
The lengthy processes of contracts, documents and middlemen adds even further to a sense of security by having a sense of achievement by going through frivolous and time-consuming processes and ‘formalities,’ and tangible proof which now have alternative and more efficient means of achieving. With smart contracts, all these are possible in one click or tap, as a matter of fact, but the former method still dominates. Perhaps it’s because an observable process creates an illusion that it’s easier to understand. Perhaps it’s the comfort and security of conforming to tradition. Perhaps it’s both. Nonetheless, these are all factors of microeconomic ritualism, which is why digital transition is difficult to achieve.
How do we solve this, then?
FINDING THE SWEET SPOT BETWEEN TANGIBLE AND DIGITAL ECONOMY
If I keep on asserting that the digitalization of economy is obligatory to the modern society, I might as well just say that people should stop being humans. Although, undeniably, the concept of digital economy is the most efficient system out there, human nature cannot be altered. People will always need to have tangible proof. Even at some point, digital economy enthusiasts will still need tangible evidence in order for them to trust. And so, perhaps, abolishing microeconomic ritualism isn’t the key for digitalization, but instead is the other way around. The digital economy must find a way in order to satisfy ritualism by finding a bridge that would seamlessly connect the traditional system and the digital.
Just as the federally mandated adoption of Electronic Logging Devices (ELD) for trucking logistics in the US, a full compliance to a digital system isn’t done overnight. There are phases to this in order to achieve a fully digitalized system and fully replace the preexisting traditional system. In the mandate, the first phase involves a nationwide campaign to raise awareness and understanding towards the existing technology as well as encouraging trucking companies to voluntarily use ELDs. Second is the transition phase, implementing a partial implementation of ELDs alongside traditional methods. The final phase is the full compliance phase, wherein the traditional method is replaced entirely. This takes a full 4 years (2015-2019) in order for a complete transition to take place. This kind of transition serves as a good example if we look forward to a modernized economy in the near future.
Digital economy must first synergize with tangible economy in order to abolish its alienating reputation towards the masses. After all, we already have a glimpse of digitalization in centralized economies with the emergence of online banking as well as debit/credit cards.
The use of traditional record-keeping techniques and paper contracts and documents can be used alongside digital transactions. Though indeed trivial, redundant and unnecessary, traditional methods are maintained in digital economy for the sake of safekeeping and constant assurance of security. Take it as “totems” from the movie “Inception,” which exists for the sole purpose of assuring the person that he/she is in reality and not in the dream world.
As we slowly make digital transactions as common as paper bill exchange, we also slowly erase tradition and build the common folk’s trust on the new system. And when decentralized digital economy has proven itself incomparable with paper economy, this might even catch the attention of central governing bodies and markets, adopting it, and even possibly making it the mandated standard just like ELDs.
WINNER TAKES ALL
It is the cycle of history that every once in a while a technology will emerge that will serve as an undisputed standard means in the society, given that it proves itself worthy enough of earning such a title. All Smart Economy needs is to prove itself as incomparably secure, accessible and efficient than all other forms of alternative economies, and it will, in no time, effortlessly make a fully-digitalized economy the norm of the modern society—even despite the challenge of microeconomic ritualism.