Google – World Institute of Diginomics

Scarcity, the idea that some one thing is finite, has been thus far not applicable to the digital realm. Until the arrival of bitcoin, nearly anything that was of digital nature could be duplicated without recourse. Due to the ease of reproducing computer code, the problem of double-spending was the unsolved mystery of viable digital money. However, the innovation of the blockchain ledger has added a potent economic function to the equation of online exchange: digital scarcity.

The Introduction of Digital Scarcity

Beyond the realm of money supply, bitcoin has enabled everything from informational products, media, art, and more to be delivered in a manner where ownership is mathematically verified. Because digital ownership can now be determined, it proliferates a scarce quantity of goods. Digital scarcity marks the emergence of a new cohort of potential business models.

“Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.”

– Eric Schmidt, CEO of Google

The attribute of scarcity in bitcoin is not necessarily derived from the actual file information itself, but the method in which the information is stored. The difficulty in reworking the cryptographic proof-of-work which has hashed and timestamped the property with the creator’s digital signature represents the construct of scarcity. The difficulty of reworking this cryptographic chain then, is directly correlated with the difficulty of duplication (double-spending), as more hash power would be required to retroactively alter the information’s assigned ownership. Information hashed at the very beginning of the blockchain for example (such as the genesis block), could be viewed as nearly unforgeable in comparison to information hashed in the last 10 minute block because it would take magnitudes more computational power to rework that section of the chain.

The Digital Economy’s Missing Layer

Scarcity is a fundamental layer of any economic system. Without scarcity, there be no need for money. In a perfectly abundant world, resources would be limitless and money would serve no need because exchange would be entirely unnecessary.

Bitcoin introducing digital scarcity represents a milestone in the development of a totally digital economy, one which has the capacity to stand independent of national economies. In the years ahead, it is likely we will see new business models arise from the potent characteristic of digital scarcity.

“Will that be by cash, credit, check … phone or watch?”

Francisco Gonzalez, BBVA Bank chairman, predicts his bank’s chief competitors in the future will not be the likes of Chase Manhattan, Bank of America or J. P. Morgan, but software behemoths like Apple, Samsung, Google and Amazon. The new emphasis, he says, is in mobile payments. “Mobile has emerged as the driving force for disruptive innovation in banking,” he said at the Mobile World Congress in Barcelona the first week of March 2015.

He should know. “The number of BBVA mobile customers has increased 14-fold in three years and totaled 4.3 million at the end of 2014,” he reported.

Not Your Grandpa’s World Anymore

“The days of carrying wads of cash and paper check books are quickly fading,” reports Nielsen Newswire in December 2014, in a post: Digital Money Management: Millennials and Boomers. “The world has gone digital, and payment methodologies are rapidly gaining prominence among savvy consumers.” The report goes on to say that these “savvy” consumers do “live with their smartphones, which means their high ownership rates could be a key to future use” in the mobile payments & banking industry.

Interesting enough, according to Nielsen, leading the pack in the digital, mobile payment revolution is the generation on whose watch the whole thing got started … the Boomers, who are now today’s senior citizens.

“The vast majority (92%) of mass affluent Boomers indicate online banking is their preferred channel for paying bills,” Nielsen reports. Comparatively, “about two-thirds (65%) of mass affluent Millennials pay bills online.”

Mobile Diginomics to Replace Physical Money?

In a Pew Research survey released on May 6, 2015, 64% of U.S. adults own a smartphone. 57% use their smartphones for online banking services. Fifteen percent claim to “have limited options for online access other than a cell phone.”

Even more succinct to the “Diginomic Age,” in 2014, according to Comscore.com, mobile app usage accounted for “half of all U.S. digital media consumption” and, in March of 2015, “the number of mobile-only adult Internet users exceeded the number of desktop-only Internet users.”

“Mobile transactions are estimated to reach $670 billion within about three years. Digital goods are expected to comprise about 40% of this digital market,” says AccessPaymentSystems.com. “In an ever-changing technological world, physical money and credit or debit cards may become obsolete. Easy to lose and easy to have stolen, these ‘old-fashioned’ ways of paying for goods and services may be going the way of the older trade systems.”