The Austrian School of Economics has become super fashionable since the cryptocurrency uproar and the gradual tokenization of world economies began. The problem is that it’s being cited by guys who don't have the slightest idea of what it is, and who didn't read anything other than what some pseudo-gurus say in the newspapers, sometimes shouting, but they are deeply unaware of the structure of the Austrian speech.
We know what the mass media and its power of influence mean, and the tendency of people not to use critical thinking and to parrot what they say to the morning on TV and radio.
For my part, I find the Austrians' proposal fascinating to explain the coordination that everyday practice (praxeology) is showing in the cryptocurrency markets.
Before analyzing today's two tokens, let's get a little Austrian and briefly see what the fundamental premises are.
The Austrian School was born in Vienna in 1871 with the publication of Carl Menger's Principles of Economics. It is a heterodox position based mainly on "methodological individualism" and "subjectivism".
It is necessary to remember these two concepts, because they are the structural key of this school and on this, their assumptions are based.
Their economic policy recommendations are usually anti-interventionist and tend to promote economic liberalism, but in no way can the Austrians be related to neoliberalism, since the latter needs the State for its institutions and to control the issuance of currency from a Central bank.
Although its origin is usually dated to 1871 by the publication of Carl Menger's Principles of Economics, the Austrian School is often considered the continuation of other trends such as the School of Salamanca, or also of economists such as Jean-Baptiste Say or Frederic Bastiat. (Although no direct influence has been found, the School of Salamanca has been compared many times with the Austrian School).
In the 1970s it experienced a resurgence with the award of the Nobel Prize in Economics to the Austrian economist F.A. Hayek.
The basis of the Austrian School is methodological individualism, that is, that all social phenomena are explicable by the actions of individuals. Following this method, they reject the mathematization of economics and empiricism, opting to make deductions from self-evident axioms or irrefutable facts. This method, developed by Ludwig von Mises in his “The Human Action”, (probably the school Bible) is called "praxeology." Economics, then, becomes "just" one part of a much larger science called "praxeology" that studies "human action."
An example: when one speaks of “young people born after the year 2000”, one is referring to a generic, because it is evident that not all are the same (this is an irrefutable axiom). One cannot say, according to the Austrians, that all young people born after 2000 have such behavior and remain calm with the traditional economic analysis. You can study what an individual does, but not what the generic “young people born after 2000” does.
That is, it is necessary to analyze the individual and not the mass. This is methodological individualism, and it is difficult for traditional economists to assimilate, accustomed to speaking of the "market" as generic, as if it were a being in itself and not a collection of individuals, some of whom behave diametrically different from the others, trying to explain their behavior by crossing supply and demand curves and believing that this explains human action. A widely accepted total absurdity.
You are never going to see an Austrian drawing a sketch with supply and demand curves, because according to them, that doesn't explain anything. You won't find charts in Austrian books.
Image of Mediamodifier in Pixabay
Also the Austrians reject the division between macroeconomics and microeconomics, since they consider that the second should explain the first.
The findings of the Austrian School often lead to advocating non-interventionist liberal economic policies. They conclude that the market produces and distributes resources better than the State. (and this, od course, is like music to the neoliberal ears)
Carl Menger, founder of the school, was one of the authors who developed the marginalist revolution. Menger explained that the value of a good depended on the utility that each agent will assign to it. This utility is subjective and will depend on the intensity of the needs that each individual wishes to satisfy. With the development of the theory of subjective value, the different theories of objective value were put to an end, especially those with the value of work, the basis of the Marxist system, coming from classical economists like David Ricardo.
Another contribution, the result of constant criticism of other schools of thought, is the theorem of the impossibility of socialism. Developed primarily by Mises and Hayek, the theorem says that socialism is theoretically unfeasible due to the information problems it presents. According to these authors, prices collect a large amount of individual, subjective and tacit information about the valuations that allow individuals decide the allocation of resources. In the absence of market prices and profits, socialist planners will not be able to obtain this information and will inevitably allocate resources inefficiently.
But one of the most important contributions of the Austrian School is its explanation of the business cycle.
According to Austrian business cycle theory, cycles are initiated by an artificial expansion of credit not supported by prior saving. This is what happens when central banks lower interest rates or print money. (Do you know any examples of this?). Low interest rates lead to overinvestment in activities that, with interest rates at normal levels, would not have been viable. This creates a false economic boom, a bubble, which is punctured when cheap credit is cut. The resources (capital and labor) destined to the bubble must be reallocated to really productive projects. But since capital goods are heterogeneous and cannot easily be reallocated from one sector to another, the adjustment will lead to losses in value and thus a depression.
As you would realize, it is impossible to cover Austrian thought in a single post. While it is true that I quite disagree with many things about the Austrian School, it could be said that I am closer to this school than to all the others, so we can deepen in future posts.
In fact, the way in which the coiners are coordinating their activities in the crypto-sphere is ultimately a concrete sample of "human action", without any kind of guide or rule, only spontaneous order, a theoretical pill that, for the first time in history, can be tested in practice through the tokenization of world economies.
One very creative thing that I found on YouTube is "Hayek and Keynes Rap". Two actors who personify both sacred monsters, tell in a "rapper" style the differences between the Austrians and the Keynesians. Look at it here, it's very funny.
With that said, let's move on to today's two tokens.
HNT
?Can you imagine millions and millions of data being transmitted to millions and millions of devices around the planet in the so-called IOT ecosystem, controlled by just a couple of gigantic companies, in the same way that today Google and Facebook control our entire information?
It would make several Austrians very nervous, wouldn't it?
IOT is a billion dollar industry, growing every day, as applications and use cases have to do with our entire daily life: appliances, tracking pets, education, health, tracking of merchandise, the list goes on.
Most IOT devices have to connect to the internet to work. But current solutions such as cellular, WiFi and Bluetooth are very expensive, consume a lot of power and are very limited in range.
The Helium network is a decentralized wireless network that allows any device anywhere in the world to connect to the Internet and self-geolocate without the need for expensive satellite solutions or expensive cellular plans.
Helium is a blockchain with a native token, HNT, that incentivizes the market between coverage providers and coverage consumers. It is a way to decentralize an industry controlled by monopolies. Developers have an open-source platform that allows them to create low-power applications connected to very low-cost IOT devices. Helium is the first decentralized wireless network of its kind.
We know that the world is moving steadily towards decentralization. Many traditional Internet services such as file storage, identity verification, and the domain name system are rapidly being replaced by similar services but based on blockchain technology. The software moved fast, but the hardware of the physical networks does not seem to evolve much. That is where the issue Helium points to.
The Helium blockchain runs on a new consensus protocol, called the Helium Consensus Protocol, and a new test called Proof-of-Coverage. The miners that provide wireless network coverage in a cryptographically verified location and transmit tests to the Helium network on time, and the miners that transmit the best tests, are chosen for an asynchronous byzantine fault tolerant group for a given epoch. Members of the consensus group receive transactions submitted by other miners and shape blocks, at a very high transaction rate.
Proof-of-Coverage is a unique working algorithm that uses radio waves to validate that Hotspots are providing legitimate wireless coverage.
For this validation work, Hotspots earn HNT by verifying network transactions, adding blocks to the blockchain, and carrying out other tasks.
The Helium network was launched in 2019, originally only for US customers. The mining device is called Helium Hotspot. It was built to show that mining equipment can be simple to operate. Helium's vision is to build the “People’s Network”.
The Helium Hotspot is controlled and managed with the Helium App, to monitor the tokenomics and the status. The Helium blockchain constitutes a new form of incentives. Anyone can earn HNT for helping build a massive low-cost wireless infrastructure. HNT is mined and distributed to Hotspot owners, Helium Inc and investors. There is no pre-mined HNT and the max supply is 223M HNT.
The network uses as fuel the so-called “Data Credits”, which allow data bytes to be transferred via Helium LongFi and to pay transaction fees. The price of Data Credits is set in USD:
1 Data Credit = $ 0.00001
Like prepaid cell phone minutes, or airline miles, Data Credits are non-transferable and can only be used by the original owners. To acquire Data Credits, network users convert HNTs or obtain them from an HNT owner. Each HNT converted to Data Credits is permanently burned and disappears from the circulating supply. Tokenomics therefore consists of a balance between two types of tokens. The more devices use Data Credits, the more HNT will be burned.
Hotspots earn HNTs according to the type of work they do:
- Proof-of-Coverage. Hotspots on the network are randomly and automatically assigned tests to complete. Passing the tests they earn HNT.
- Retransmitting data from the device. The more data a Hotspot transfers, the more HNT earns.
- Consensus groups. Trusted Hotspots are randomly chosen to earn HNTs to validate transactions and add blocks to the blockchain.
More than 20,000 Helium Hotspots have been sold to more than 2,000 cities. The so-called People’s Network is the world's first P2P wireless network that enables a secure and low-cost way for IOT low-power devices to send and receive data from the Internet. The blockchain works as a "cryptographic notary", since the data of the devices includes the time and the location, recording them in the blockchain and making them immutable, inspectable and resistant to censorship.
The activity generated on the network can be monitored through a mobile application or through a Network Visualizer.
Helium was founded in 2013 by Shawn Fanning, Amir Haleem, and Sean Carey, with a vision to make connecting devices easy.
Shawn Fanning was the founder of Napster, so he doesn't need much of an introduction in the P2P world. Amir Haleem made his career in the video game industry. Other visible faces of the team are Marc Nijdam, with more than 25 years of experience in design, scalability and resilience of technological products, and Frank Mong, head of marketing and sales, with 20 years in the cyber-security industry.
Helium raised equity funding from several of the major VCs, including Khosla Ventures, FirstMark Capital, GV, and HSB / Munich Re Ventures.
Conclusion. Connecting the huge universe of IOT at a low price is undoubtedly a cyclopean and challenging task. The People’s Network promises security, ubiquity and low-cost wireless connectivity, which would allow companies to focus on connecting IOT devices, without the need for network infrastructure expertise. If the Helium project grows as planned, it will be a tough opponent of the telcom companies. With Helium, companies would not have to pay for sim cards, comply with data limits, or pay extra fees for going beyond the agreed package. The People’s Network creates an entirely new wireless economy, flipping the traditional centralized model of telcoms. Breaking a titanic model like that is similar to breaking the traditional banking model that we all dream of.
ELA
An operating system for networks?
About 35 years ago, the Internet was designed as a decentralized network that anyone could connect to and no one controlled. But as more and more people came online, problems that hadn't been taken into account, and dangerous opportunities from a centralizing corporate point of view, began to appear.
Users can access countless free services, search, chat, email, shopping, pay bills, and even run their own businesses. But, as we all know, “there is no free lunch”. Beneath that apparent little red riding hood of generous kindness for letting us do things for free, the big bad wolf was hiding. The total amount of millions of data of our identity, property and behavior was being stored and classified for later being sold, without our knowledge, by centralized corporations that became giants in the data industry.
Image of Pixaline in Pixabay
Not only did hackers permanently steal our information at the request of governments, corporations and criminals, but extraordinary algorithms were also created to describe our behavior as individuals and as a society, primarily to feed the communication and advertising industry. In effect, the Internet became a huge field of observation and harvesting of information for marketing, without us knowing anything.
During the last few years a very clear perception has been created by almost everyone, that data is the most important resource on the planet. Whoever controls the data, controls the wealth and future of the entire humanity. The Internet enriched gigantic corporations at the expense of our privacy. The data can predict behavior through carefully designed algorithms put in the hands of voracious controllers. Those algorithms may be responsible for the dystopias that many authors envisioned, and turn us into robots that are predictable and manageable like a herd. We have become products ourselves, and they buy and sell us through surveys, seemingly harmless little games, and many other strategies.
In the same way that television indoctrinates and teaches how to consume, and manipulates the information consumed by the masses, the control of the data remains imperceptible for most Internet users, who then do not know that they are being manipulated, bought and sold.
Image of Vidmir Raic in Pixabay
But there's no need to be so apocalyptic. We can give much simpler examples. Today there is an infinite offer of digital books, movies, music, games. But people don't necessarily have their digital property. You can buy a digital book, but you cannot sell it to someone else. So are you really an owner? Elastos aims to make digital goods scarce, identifiable, traceable and tradeable. The intention is to build a World Wide Web that respects the digital property rights of each individual.
Through the use of blockchain technology, Elastos provides IDs to digital content, making it possible to know who has the digital rights to that content. For example, on the Elastos Internet, a film director will be able to know how many times his / her film was seen, in P2P form, without a centralized entity that controls this data.
Elastos creates an architecture (Elastos Smart Web) in which the purchase, sale or viewing of a digital film is subject to the written rules of a smart contract. The creator of digital content can determine the number of copies (digital assets) he / she want to produce. An author, for example, may decide that he / she only wants only 7,000 copies of his / her book printed to circulate on the Smart Web. This produces a shortage for the product. If the book is very successful, all owners of the book will see an increase in the value of the asset they own, having bet early on the success of the author. Then they can sell it if they want at a higher price. The same can be said for video games. After playing those games, bought as limited editions, they can be sold in a secondary market, if they are in high demand. This is neither more nor less than the concept of NFT.
Moviemakers can write a smart contract that says that every time someone watches their film, the holders of a given token will have a small share of the fee. With another smart contract, they can regulate that every time someone sells the digital property of their film, a commission is received. All of these issues promote and incentivize the development, purchase, and sale of rare and unique digital assets.
Image of Clker-Free-Vector-Images in Pixabay
In the late 90s, Rong Chen, then a Microsoft engineer with experience in operating systems, realized where the Internet was going to, and how a few companies could take over all the millions of transactions that would be done "freely" on the network of networks. Rong Chen left Microsoft to start work on an infrastructure that would maintain the decentralized roots of the initial concept of the Internet, while maintaining the protection normally provided by centralized companies.
His plan was from the beginning, to create a "network operating system," an operating system built not for one device but for the entire Internet. Users should be able to communicate with each other and store their own data in a decentralized way, without the need for centralized services and intermediaries that become “data vampires”.
In 2017, Rong Chen combined his network operating system with blockchain technology and created Elastos, an infrastructure for the Internet that allows full decentralization, property rights and security for all data, making the data "identifiable" and, therefore scarce. For the first time in the history of the Internet, the property right over data can be taken advantage of by each one of the users, using a completely P2P, secure and decentralized mechanism. Users can own their data, store it, control how many copies of their data exist, and monetize it, without depending on anyone, while all this is done with the necessary security.
The White Paper shows a series of issues for which Elastos thinks that the dApps developed on the Ethereum network have several limitations:
- Storage and Speed. No application can be faster than the blockchain, which has shown great congestion in recent times.
- Bugs. Once executed, smart contracts cannot be stopped or reviewed. This is good for the parties involved, but the bugs inside cannot be eliminated.
- Cost. Many nodes can be doing the same tasks at the same time. Every time a task is done, Ethereum requires the payment of a fee, so executing contracts in Ethereum is today a very expensive task.
- Junk data. Once published, a smart contract is recorded forever. Also bad code. This can have a very negative influence on the future of the network.
- Lack of Flexibility. The blockchain-EVM (Ethereum Virtual Machine) pair is inseparable. Anything that is modified in one of them, affects the other and vice versa.
- Security. Contracts that run on the Ethereum network are subject to attack by middlemen when they leave the blockchain and head to other sites.
These issues are what make Elastos think that it is not convenient for users to read digital books, play games and chat encrypted with Ethereum smart contracts. People are more and more used to using their smartphones to run applications, and they should be able to access blockchain's trust based systems with the devices they are using today.
The following table in the White Paper is very explanatory:
- Bitcoin = Trustworthy Ledger
- Ethereum = Trustworthy LEDGER + Smart Contracts
- Elastos = Trustworthy Ledger + Smart Contracts + Monetizable dApps and Digital Assets
The ELA token is the intrinsic token of the Elastos blockchain. It is used to trade, invest in digital assets, pay process fees on the blockchain, and various other things. ELA is the basic unit, but in honor of Stoshi Nakamoto, Elastos instituted SELA (Satoshi ELA). 1 Ela is equivalent to 108 SELA. Elastos will issue a meager amount of ELA, a total of 33 million ELA.
Taking into account that blockchain technology is just in its infancy, and that one of the most necessary resources in the coming years will be the talent of developers, Elastos started the program "We are All Satoshi Nakamoto", and there is a large amount of material and developer tools available on the website.
Cyber Republic is the community that grew naturally around Elastos. CR consists of the token holders, Elastos Foundation Members, Elastos ecosystem partners and all the individuals who in one way or another contribute to developing the new Internet. The purpose of CR is to provide a consensus-based community governance mechanism, dispute resolution, and the management of community assets. In addition, it is the basic infrastructure for the development of the Elastos dApps ecosystem.
Conclusion. Elastos aims to create a new kind of Internet, an Internet that changes the paradigm of the current centralization that leaves all our data, activities and purchases in the hands of giants corporations who trade with them, as if they were the owners. It is a vulgar robbery. In this new Internet, users are going to be the owners of their data and are going to monetize it as they want, without having to go through any browser or third-party search engine, in the same way that cryptocurrencies exempt us from going through banks to take care of our money. The objective is to create an Internet in which the owners of digital assets can exercise their property rights, without going through entities that charge commissions, installments or that, surreptitiously, store the data and then sell them. If you click on a URL today you will get data. Elastos is creating a web of applications. When you click a URL here, you get code. A totally different world within everyone's reach, I hope, in a short time.
As usual, none of the things written in this post are financial advisoring and are not intended to replace personal research.
I am interested in showing in this blog the fundamentals of cryptocurrency projects that may mean a paradigm shift in the near and not so near future. This approach may be different and complementary to the posts of other talented colleagues at PUBLISH0X that show shorter-term variables and which I follow with great interest, since I, of course, am also interested in the short term and in putting together a solid portfolio.
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