As an engineer, I always tend to apprehend a new topic with a technologist point of view. It might not mean anything framed this way, but I'm essentially trying to point out to the fact that I'm mostly trying to understand the structure, and the forces in presence. I'm also trying to view things with the lens of what I know in other sectors. It might be even less clear now, so let's directly jump to it.
I think that Moore's law holds a fundamental truth on a lot of phenomenons in our lives: a lot of variations are exponential, and the human brain can really only comprehend linear variations. From the very first application of Moore's law to the number of transistors on integrated circuits to literally anything in tech: AI, data storage, network capacity and globally anything in the world with radioactivity decay, light intensity, population growth etc. All of this to say that I try to apprehend a new subject through this law, which is also something very helpful for the entrepreneur that needs to understand where the scaling factor is, and how to build this exponential growth.
So when I entered the space of economy through Von Mises' books, I tried to see where this law apply, and so where exponential improvement is. And it was a tough spot: if you think about money itself, of course it went from commodity money (gold), to credit money, fiat and finally digital fiat, but nothing exponential. The only improvements are structural, on very long time frames due to the underlying infrastructure: commodity money is hard to move around (gold is heavy), credit money is lighter, but adds intermediaries, and fiat money with the digital world is even cheaper to move around, but subject to even more intermediaries. If you look into human action, and human organization, the same holds true. It is closely linked to money itself, but we went from nomad, to the separation of work, to more organized structures with cities, and centralized power, to decentralizing further the power, enable sole proprietorship companies, and finally LLC and all the structures we know today.
Maybe we can take a look at human productivity, but here again nothing exponential, just slowly linear, and probably not linked to any improvement in human organization, but to the means.
So I started to wonder why is that, and can we find a scaling factor. About the why, of course we will be able to provide only supposition, because causality is hard (impossible?) to prove, but let's try. Where does exponentials come from? The answer is mostly compounding. Let's take as an example population growth, each generation of organisms reproduces, leading to a larger number of offspring in each successive generation.
Which can be modelized by the function P(t) below, with P0 the initial population, r the growth rate and t the time.
This, is compounding, and it translates into an exponential variation. And it applies to many subjects because knowledge compounds. Now the question is why can't we have some sort of compounding in money, or organizations? And my answer would be it is because everything is highly subjective and thus subject to complex consensus, and politics. Thus no compounding is possible, because compounding comes from the specialization and the use of previous knowledge, which is not possible here, because of the slowness of the consensus, and the fact that nothing is specializing, as politics are moving around, and always changing directions.
But as much as organizations are subject to politics, money isn't. Of course the two are very linked, and even more today as the central banks are forced to bail out part of the government debts, as most of the western countries have an over 1 debt to GDP ratio. But it shouldn't be the case, because it entails the monetary policy to precisely the slowness of policies.
And that's where crypto is compelling: not only to separate the politics to the money itself, but also to pair the technological improvement of the underlying infrastructure to the monetary improvement. Think about the improvements of money up until now: it was always a gain of efficiency in terms of transportability. If we tie the transportability to the Moore's law of blockchains on TPS, and overall infra, we could potentially envision a future where money and its efficiency itself improves exponentially, because of the infrastructure being improved - outside of politics and inefficiencies.