Components of Coordination

Trust producing mechanisms diffuse slowly because they need to be socially validated over time. We are currently in the early stages of the social diffusion process.

You may be thinking: “But the number of fiat currencies is tiny compared to the number of cryptocurrencies, of which there are thousands.” There’s an important distinction. The vast majority of cryptoassets adhere to just a few base layer standards, and those standards are quickly becoming interoperable using software adapters like KEEP, Axelar, an... See more

New digitally-native trust producing mechanisms are rising up to meet these new demands and cryptoeconomic systems are the centerpiece. Crypto networks create a perfectly competitive global market for producing trust, bringing the price of trust down to the marginal cost of production.

... transactions prior to 1840 were largely based on trust engendered by cultural similarities and recurrent interactions. People in the same community dealt with each other repeatedly, and these repeated transactions were the trust producing mechanism.

Financial markets, the banking system, the insurance industry, and securities and corporate regulations, all grew in prominence during this era. These institutions were really good at producing trust. Trust became a saleable good and trust production became a big business.

In contrast, fiat currencies, which are jurisdictional standards, commonly require adapters that extract rents. Financial intermediaries serve as adapters that coordinate economic activity across political boundaries.