Cryptoeconomics has grown to become a very vibrant research field lately. However, the research of blockchain technology is seen as something too important to be left to computer scientists alone.
This is due to the fact that blockchain technology has the ability to change numerous industries. Almost every area of the modern life can be affected by it in one way or the other. This includes complex areas such as public policy, sociology, law, economics, political economy, and much more.
Because of this, it is believed that blockchain is a new institutional technology, instead of simply being a general purpose technology. The difference might not seem big or important at first. However, it is.
General purpose technology allows us to improve upon the things that we can already do. This technology provides us with a way to do these things faster, better, and often cheaper as well. However, when it comes to blockchain tech, this is not an old technology. In fact, it is still quite new and unexplored, despite the fact that it has been studied for almost a decade now.
This is a new mechanism that can coordinate economic activities and also help individuals communicate and cooperate better. Blockchain technology opens up almost an infinite amount of new opportunities, which is why it may be the most important thing that we will discover for a long time.
The Old Way Of Thinking
Whenever a new institutional technology is discovered, there are usually pretty high expectations of it. The same is true for blockchain technology. We expect it to disrupt and change things such as social organization and economic activity. However, blockchain is still evolving and trying to find its true form. Institutional cryptoeconomics is an analytic framework that studies such processes.
In order to understand and explain the blockchain, many are using the transaction cost approach of Oliver Williamson as the best theoretical framework. Williamson's focus was on understanding one important decision that companies have to make, and that is whether to make the product they lack, or to buy it.
By making this choice, the firm in question would define its limits. As a consequence, their decision-making process would change as well. Williamson describes a key determinant of those limits as “opportunism” or “self-interest seeking with guile”. He also claims that opportunism, combined with asset specificity, means that large corporations are experiencing quite complex economic behavior.
Now, blockchain technology has the ability to break this relationship between asset specificity, size, and opportunism. It can do this quite easily by simply eliminating opportunism and allowing different assets to be deployed in small businesses by using human capital.
This is why blockchain technology can redefine to limits of firms, and allow people to offer their skills and talents in an environment that doesn't depend on large businesses. While this is something that has been expected to arrive for a long time, this is the first time that we are actually close to achieving such a goal.
Of course, a change of this size will have serious effects which will reflect on the economy and society. Things like employment, political power, inequality, and the regulatory state will be under pressure, and new opportunities will emerge. This is what many consider to be a blockchain revolution, and it is institutional cryptoeconomics that offers a way to understand what features will be replaced by those of a superior blockchain technology.