Dear Mr. Syracuse,
I invite you for a moment to imagine a child with a computer who has just heard about the amazing things you can do with distributed networks. She begins to type and soon has created a program that sends one digital token, “an ecocoin” to someone’s wallet whenever turns off the light switch, a small experiment in incentivized conservation.
Suddenly the cops rush in, grab the computer, and cart this child (we shall call her Alice) away to some detention center where she is tried as an illegal money transmitter and declared an “enemy of the state.”
While admittedly dystopian, the Bitlicense regulatory framework as currently proposed takes us down the road in which experimentation around any sort of digital currencies is not only actively discouraged, it is simply declared illegal. What child can afford to hire a compliance officer before she sits down to write a few lines of code?
Let us imagine another future. In the same example, Alice goes and shares her creation with her friends through a network dedicated to distributed technology. They find it an fascinating way to incentivize ecologically positive behavior and begin experimenting with her code in their own homes. Through a series of experiments, they find children who have these little bits of digital currency added to their allowance develop patterns of behavior that greatly increase energy efficiency.
This enthusiastic community then decides that this little experiment could be scaled to much larger audience, and creates another digital token that represents the success of Alice’s project. Much like a distributed kickstarter, people put in bits of money that allow them to participate in the project. Much like investing, they also get some tiny bit back of coins time some of this “allowance” is distributed.
This new financing allows Alice to promote and perfect this toolkit, such that it becomes standard practice in households across the world, creating new visions. Alice’s project is able to go from experiment to mass distribution without passing through any centralized middleman. Projects are able to be funded by people who care about their success and who can benefit from its success.
How much better would this be than our current infrastructure? It’s a world of untapped imagination and dream fulfillment that surpasses the functionality of today’s financial system, in which each person must go to a venture capital firm and fill out an application in order to be considered worthy for funding.
Liquid funding models are not the only exciting possibility arising from decentralized networks, there are many others. Multi-signature technology, micropayments, decentralized due dilligence, trustless escrow, and voting systems all present dazzling possibilities that perhaps could be stopped via overzealous regulators, but, could, at the same time, be the basis for future innovation.
One crucial aspect of this is that the primary use of these future innovations no longer extends this principle of incentivized behavior into new realms. This functionality then is no longer focus on money itself, it is creating incentivization for some other type of behavior, as in the example of ecologically focused micropayments.
While there are certainly people that are simply replicating existing models in the crypto space, like collateralized collateral or other derivatives of derivatives of empty air, these people for the most part are unimaginative and, thankfully, are limited in their ability to defraud people by the difficulty of accessing their technology.
Bright young innovators remember the prophetic words of Lawrence Lessig, that code is evolving to be law itself (http://harvardmagazine.com/2000/01/code-is-law-html). Even more important, decentralized networks provide the basis of a rapid process of experimentation and testing of ideas. These will be the backbone of services that provide a faster and easier and more secure way of allowing people people to realize their dreams, something we at Swarm call “magic money.”
The magic is that when we open up ourselves to the creative possibilities of this technology set, amazing things happen. My hope is that regulators leave an open door for such imagination and innovation, rather than setting us on the path of cutting off the water before these flowers have had a chance to blossom.
If not for any other reason, allow this so that all future Alices have a chance to fulfill their dreams.