Different Scalability in Different Circumstances

(Part 2 of The future of payments and the social/political implications of crypto-currencies.)

Our societies and economies are impacted heavily by technological change, they always have been. While some technologies – like the bitcoin protocol – allow for smaller economic actors to be relatively more economically viable then before other developments go in different directions. Suggesting a homogeneous trend to smaller scale business is at least tendentious.

Some posts ago I did bring to your attention a very read-worthy article on The Next Web: „Bitcoin: It’s the platform, not the currency, stupid!”. It covers many topics discussed here at RPD. I will address several topics raised and discussed by the article in a series of posts. The first post dealt with „trust”.

Core to the article is the notion that the Bitcoin protocol is enabling a new way of exchanging ownership on the internet. It should not be mistaken for the bitcoin as a currency which has been in the limelight for some time now and amply covered here as well. As described by Duivenstein and Savalle:

Bitcoin is a decentralized way of recording and transferring ownership rights (not just money) in the presence of untrustworthy parties, without the need for a trusted intermediary.

Exchange in the end is just functional to allow for efficient specialization which is at the core of the development of our society through history. So if the means to exchange change and allows for more efficient specialization it will help us humans as a super organism to create more prosperity for more people and add to the collaborability potential. (NB I have made references at RPD to John Hicks – one of the great economic theorists of the previous century and Nobel prize winner for economics in 1972 – who postulated the key role of the rise of markets and the exchange economy in the development of our society through history.)

Being able to exchange values between actors directly will have a profound effect on how we collaborate. This is the core notion which is shared by Duivenstein and Savalle as well and that starts off pretty much all of their extrapolations of the effects attributed to the establishment of the „collaborate economy”:

As we head into 2014, one trend will tower above them all: the power shift from big, centralized, bureaucratic hierarchies to technology driven distributed networks of individuals and communities. It’s the democratization of technology.

In a nutshell the trend portrayed is „from big to small”. A new economy is prevailing:

Bitcoin could ultimately give rise to a completely new generation, economy even, of distributed and decentralized companies and services.

Combined with decentralized production technology such as social collaboration they can even be virtually leaderless, self-organising corporations.

Yes, new technology (not only the bitcoin protocol) allows for the inclusion of billions around the world. And yes the internet has made it possible to share and collaborate more easily with others then ever before. (NB I even postulated the law of Mars on the doubling of the effective reach of the network every two years). But at the same time we see economic scales increase in many areas of technology and industries as well.

NB Scalability is often considered a synonym for “economies of scale”. But scalability has an other manifestation as well:scaling down to the smallest common denominator. This is not the same as “dis-economies of scale” where negative network effects are putting a reverse power to the otherwise limitless growth of the economies of scale.

Even though I do not disagree with the stated perse I again have the impression that real life dynamics and the resilience to change by individuals, companies and governments/societies alike are not considered sufficiently by both authors. The world will change over time but not everything will change into the same monolith environment. It will not change overnight either, even though the ramifications of a decentralized and direct way to exchange values between people, businesses and machines are potentially colossal.

NB I have been writing on scalability at RPD: „Scalability and the uneven dispersion of Collaborability” and „Scalability is not one-dimensional nor is it evenly spread” or Trend of scaling down hits wall of regulations or Marketplaces as driver for scalability.

Part 3: Will the „middle man” disappear?