While digital currencies and the new digital economy remain an enigma for many, and the source of both legitimate and nefarious investment schemes, there are many great minds working diligently behind the scenes to bring legitimacy and clarity to this important and paradigm-shifting new asset class. We believe Lori Jo Underhill is one such mind, and in her new book "Defining the Digital Economy: The Structure of the Digitial Economy in Focus", she has undertaken nothing less than a full on definition and structure for this new asset class. Well worth the read if you are serious about understanding our economy moving forward.
Cindy Taylor/Publisher
From "Defining the Digital Economy: The Structure of the Digital Economy in Focus"
By Lori Jo Underhill, Digital Economist
CHAPTER 7 - INCUMBENT ASSETS VERSUS DIGITAL ASSETS
DIGITAL CURRENCIES
Digital Currency is like fiat currency in that it has some operative value within its underlying economy, generally serving as the underlying economy’s native and most widely accepted transaction and/or payment tender (term of art offered for context), and Store of Value creating or transferring value within the underlying economy. Similarly, it may, or may not, have any value outside of the underlying economy, and is fungible.
Distinctively, fiat currency generally has limiting use as only a Store of Value transaction and/or payment tender. Digital Currency offers further value in its capacity to offer enhanced economic value through function, utility, or technology in addition to serving as its native transactional payment tender and Store of Value. This multi-use function and/or utility characteristic capability within, and possibly outside, of its own blockchain, distributed ledger, digital ledger, or interledger connected economy, is the most difficult for people to grasp and the major distinction between Incumbent (fiat) versus Digital Currency. However, not all Digital Currency has multi-characteristic value.
Blockchains and Digital Ledgers are the transactional areas and operational basis for the micro economies operating in the worldwide Digital Economy. Blockchains and Digital Ledgers are the “area sovereigns” (term of art offered for context) governing the transactional terms and parameters for the Digital Currencies accepted within their underlying economies, exactly the way fiat currencies operate within their economies.
The value of a Digital Currency within its own micro Digital Economy also causes confusion, as its value could be derived from one or more financial, economic, functional, utilitarian, and technological characteristic. For example, in addition to operating as a transaction and/or payment tender and Store of Value, a Digital Currency could function as an envelope that delivers digital content; serve as a payment Store of Value within its own economy; deliver transaction information from one point to another; represent reward points; serve as a digital vote in an election; represent a measure of solar energy; operate as a data reference store; offer a technology enhancement; be an interledger protocol; be a cybersecurity technology; transmit internet of things or geolocation data points from one place to another; or allow a transaction in a bumble bee or cannabis ecosystem, etc.
On the date of this writing, there were over 1500 Digital Currencies operating within their own economies worldwide in 24 economic sectors, and over 250 subsectors. These currencies are both Inherent Stores of Value on open exchange traded markets, and offer financial, economic, or utilitarian value within the underlying micro economies where they operate.
This is the most important characteristic of a Digital Currency. Distinct from a fiat currency, a Digital Currency is a Store of Value within its own economy, with characteristic potential to offer financial, utilitarian, functional, or technological value within its own micro economy, and possibly beyond its own economy, apart from operating as the native transactional and/or payment tender of its micro economy.
Digital Currencies are distinctive from Digital Units in that Digital Currencies have financial value within, and possibly outside, of their underlying economies; where Digital Units do not have financial value, having only functional or utilitarian value; which arguably could be measured as economic value using different metrics, an analysis outside the scope of this writing.