Capital, in essence, represents the ability to organize the economic resources of a social system, and its value is a function of the amount of those resources that can be directed to the benefit of the owner.
This understanding reveals the inherent value of managing cryptocurrency as capital, and helps us understand tokens with governance rights as a new type of capital asset.
All forms of capital offer some form of control over the distribution of economic resources among a group of people—in effect, judgment over that group of resources. Productive capital and human capital, for example, affect the goods and services provided in the economy (and thus how income is ultimately distributed), financial capital determines the distribution of purchasing power, and social capital governs how company resources are used.
Intangible forms of capital show this characteristic as well: political capital, for example, governs the rules of markets, and social capital directs human attention (and thus behaviour).
This idea that capital is government (and vice versa) leads us to the source of its intrinsic value. Whoever controls a group of important resources also has the ability to direct some of these resources to his advantage. So the value of the system’s capital is proportional to the value of the resources it governs.
Relationships between capital and the value of the resources it governs
This relationship is very clear in the case of social capitalismwhere the value of the stock (which is essentially a voting instrument) is based on its right to a share of the company’s books and earnings, the “assets under authority,” so to speak.
The relationship is less clear in the intangible domain, where capital does not take the form of tradable assets that can be valued by the market, but still exist.
For example, we can look at the global cost of corruption (about $3.6 trillion per year, or 5% of the economy) to partially assess the value of political capital, even though “political capital” is not built to achieve direct economic benefits to its owners.
In the same way, We can look at the ability of social media influencers to capitalize on their famealthough having many followers does not in itself guarantee the right to an economic benefit.
Cryptoeconomic models and governance in cryptocurrencies
Both The pillars of trust in cryptocurrency are crypto-economy and governance models.
Model crypto economy It defines the “rules” of the system (what the business unit is, how users are paid, how miners are compensated, the token supply model, etc.), while the governance model determines who has the power to change these rules and under what circumstances.
If capital is the ability to organize economic resources, then the ability to change the rules of cryptocurrency constitutes its capital. And when that power takes the form of a token, it can be traded, priced, and shaped by the market.
In this context, the network’s “power-powered assets” include the token itself, which is controlled by encryption policyproductive resources, which are controlled by the definition of “business” (for example, the consensus protocol), and the flows of value, which are controlled by the regulation of payment mechanisms and other incentives for miners, users and investors.
As the value of these resources grows, so does the value of the capital that governs them.
some Proof of Stake Systems are good examples of this idea. In them, miners are required to lock a certain number of tokens to have the right to work on the network. The value that flows from the users to the collector is then distributed to the miners in proportion to their share.
Tokens as a form of capital
In this way, the file icons It is a form of capital to the extent that it represents the ability to organize some of the economic resources of the network, such as production capacity and income distribution.
Ultimately, it is a form of governance, meaning staking is a mechanism for determining how revenue is allocated among miners. Thus, as the value of that revenue grows with user demand, the value of the tokens that can be collected also increases.
for example, In Decred, 30% of the block reward is reserved for users who participate in their consensus layer The trial and those bonuses are apportioned in proportion to the amount of DCR that each participant bet on.
In this case, the DCR is a form of capital, as it has power over how a portion of the block reward is distributed. But as Decred also allows the PoS layer to vote on the use of its own community fund (which is funded at 10% of each block), as well as protocol updates, the value of the DCR as a capital asset is extended further. Related to income from block rewards.
This strength is difficult to quantify and therefore evaluate, but it is still an important value factor that we can consider as a kind of “governance premium”.
Conclusions
The basic principle behind power tokens is that they combine the characteristics of “utility tokens” and “governance tokens,” which really means the combination of currency and capital – with the function of capital being the long-term driver of value. We’ll delve into power tokens, the nuances, and why this combination is so important in the next post in the series on crypto capitalism.
But right now, the basic idea is that what we’re trying to do in creating these new assets is create new forms of capital, network capital, that’s digital native, that’s cheap to distribute — and that’s important.
Original article by Joel Monegro for https://www.placeholder.vc/blog/