Establishing a universal standard for economic value with blockchain technology

On 14 October 1960, the General Conference on Weights and Measures met in Paris to discuss a set of proposals put forward by the International Committee for Weights and Measures. The result was a historical moment, a universal system of units of measurements based on internationally agreed standards, the Système International d’Unités (SI). The dramatically inconsistent units of measurements used by different nations, and even different regions or towns, was replaced by six units based on universal constants found in nature (Metre:Distance; Kilogram:Mass; Second:Time; Kelvin:Temperature; Candela:Luminosity, Ampere:Electric current). Although scientifically-based, the SI is in fact of central importance to the functioning of the globalised economy. A universally applicable unit of measurement is necessary for the human mind to make sense of complex matters, such as cross-border trade and supply chains. 

Money, much like the SI, is an arbitrary increment on an abstract scale. In other words, it is also a unit of measurement. Whereas the metre measures distance, money measures economic value. The issue is that, unlike for the six basic units mentioned above, there is no internationally agreed standard for measuring economic value. Similar to the inconsistencies found in units of measurements used across the world pre-1960, establishing a standard of economic value remains at the discretion of national governments. For example, the Pound in the UK and the Yen in Japan. 

Money’s purpose, it can be argued, is to represent a universal economic value, which allows individuals to carry out transactions, such as negotiating a sale or agreeing to a wage, without having to refer to a centralised authority. However, since different jurisdictions support different monetary policies, money, and the standard of economic value it represents, is decided by centralised authorities, e.g. central banks. Much like the studying of this world is made more efficient and yields more results thanks to the scientific community adhering to a common set of measurements, so would a common standard for economic value reinvigorate the globalised economy. The challenge is that political realities make it unlikely for such a standard to be agreed by an international committee, and even less likely to be enforced across the globe. Blockchain technology, by contrast, could produce a cryptocurrency, such as Bitcoin, that could represent a decentralised and international standard for economic value. Rather than have this value depend on which powerful leviathan or intermediary stands between transacting parties, all transactions would ultimately be based on this decentralised unit of measure. Blockchain, by virtue of how it functions, would prevent this standard being controlled by any one group. As a result, it could be argued that it has a better case for being the internationally agreed unit to measure economic value than other candidates, such as the U.S. Dollar.

Recent regulatory news already point to central banks around the world assessing the use of a central bank digital currency (CBDC). A truly decentralised form of money, powered by blockchain, and representing an agreed universal standard of economic value, could be the next logical step beyond CBDCs.