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Public Blockchains Are the New National Economies of the Metaverse

Wired: “When we speak of an economy, we usually refer to a country or a region where interrelated activities of production, consumption, and trade happen. When we speak of blockchains, we speak of decentralized computer networks. On the surface, these two seem unrelated. But with on-chain activities growing at warp speed, the ecosystems of layer 1 public blockchains (the foundational blockchain protocols where decentralized databases and computer programs are run) are starting to look more and more similar to national economies—except the nation in this case is not a physical territory but a decentralized digital network. The trustless and programmable nature of public blockchains have made it possible to implement new “fiscal” and “monetary” policy tools in the blockchain economies, which in many cases have advantages over the traditional economic policy tools of national governments. In addition, the proof-of-stake mechanism adopted by second-generation public blockchains introduces a de facto “universal basic capital income” for their network “citizens.” This could be a major innovation in how economic systems distribute values among participants, with broader income-distribution implications for years to come as blockchain economies grow. (Disclosure: I hold cryptocurrency and have previously advised crypto funds.) Public blockchains allow anyone to deploy decentralized applications (DApps) on top, which users can interact with. Currently, decentralized finance (DeFi) applications and non-fungible token assets (NFTs) are the two main economic activities on layer 1 blockchains and associated layer 2 chains. (Layer 2 chains are secondary blockchain networks that rely on the underlying layer 1 for security, but typically offer faster and cheaper transactions.) Both activities have grown tremendously in the past couple of years. At the end of November 2021, gross total value locked from DeFi in the top 10 layer 1 blockchain platforms exceeded $250 billion, a year-over-year growth of 1,400 percent. And according to, the market cap of NFT projects on Ethereum alone reached over $7 billion in November, increasing over 14,500 percent from a year before…”

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