Ecosystems in nature have little concept of debt. Nature has deep concepts of mutual dependency that create incredibly complex, beautifully emergent, and quite anti-fragile systems. Such a relationship much closer resembles equity relationships.
Debt is a useful tool that creates leverage at the cost of fragility. As interest payments are unforgiving, those that take on debt are ever on the hook for paying it back. There is no room for error.
As we created more complex societies and moved away from small tribes where mutual dependency was inherent in social relationships, we invented finance as a way to coordinate asynchronously through time. In this world, finance was almost entirely debt. There was no legal or technological tooling by which we could mimic anything that represented a distribution of risks and rewards.
Early societies saw the inherent fragility and inequality present in debt financing and hedged against it. In Mosaic law, the debt jubilee was an event every 50 years that wiped out debt for everyone. Eventually, we were able to create shared ownership models through the joint-stock corporation that enabled tiny territories in Europe to coordinate much more effectively than anyone else and conquer vast swaths of the world.
As a coordination tool, the joint-stock model was incredibly impressive. But history didn’t end there. That first domino eventually lead to the market structures we see today. One can imagine the modern state, complete with its great investments in public goods, as sort of an equity play. The state makes money on taxes, which increase when citizens generate more wealth, and uses those taxes to fund programs that [ideally] improve the lives of their citizens. Venture capital commands more AUM than it ever has and has been enormously successful at funding groundbreaking technologies that need the anti-fragility of equity in order to succeed.
With the advent of Ethereum, the individual has the power to issue and distribute tokens frictionlessly. Tokens are to stocks what websites are to books. A coordination tool that lets lending protocols compete with trading desks, DEXs compete with Coinbase, and communities compete with companies. PFP NFTs certainly represent a flavor of this token design as well.
It is an equity-based coordination tool that we are just beginning to explore. Tokens represent the next chapter in the story of coordination in the world as societies move away from fragile debt financing systems to anti-fragile equity financing models.
The economic version of the singularity looks like a massive, interwoven web of tokens representing individuals and organizations. These tokens will be programmed in complex ways to support the development of ambitious, world-changing projects that don’t need a giant bureaucratic organization to make things happen. We saw this initially with airdrops, then with liquidity mining, then with much smarter iterations of both.
At Holon, we want to explore what this means in the context of housing. How can we turn the systems around housing that let rich individuals with access to a ton of credit buy up homes and reduce affordability for those without that capital? What does a mortgage without debt look like?
The future is exciting. Let’s reject the idea that we’ll own nothing and be happy. Instead, everyone will own a little bit of everything and be free.
This post is a part of a sequence of smaller articles I will be writing around ideas I have every day. They will not be as polished. Please forgive any typos and errors!