Ethereal Value and the Cryptofuture: The Economic Definitions, #3

By Kirian "Deso" van Hest

Ethereal Value and the Cryptofuture is the final book in "The Economic Definitions" trilogy, after "The Definition of Money" and "The Definitions of Value"; which are required reading to fully understand this book. As it stands, traditional measurements of value have trouble dealing with describing value in the information realm. Yet we still value some digital things. Where does that value come from? And what is it based on? Those are the values I've dubbed Ethereal Values; values that don't exist within reality in any way, shape or form, but nonetheless do exist. Using this newfound knowledge, I reveal the first quantifiable ethereal value, meaning the very first value that we all commonly share as a species, put into numbers. A value that, because we all share it deeply, has a universal value to us, and therefore can serve as a backing for the first true completely digital sound money system.

 

Cryptocurrency is used to do it, hence the second part of the title. Yet I also use a chapter in my book to explain exactly what is wrong with first generation cryptocurrency. But rather than do away with "Proof-of-work", the labor performed by the computers is redirected, intertwining two systems together in order to justify the value of the work performed, thereby inventing Proof-of-work 2.0: "Proof-of-Value", as the work done to verify the network is value-justified.

 

With this, it becomes possible for a cryptocurrency like Bitcoin to scale in speed, security AND decentralization at the same time. It is considered the holy grail of crypto, and this system achieves it. But it goes beyond this. It takes into account economic realities, and bases the size of its money stock directly on economic activity automatically. The larger the economy grows, the larger the money stock grows. If the economy shrinks, the money stock shrinks. Through this system, Inflation and Deflation become solved.

 

Ultimately, using the properties inherent to the base network, an interconnected 2nd layer system is created which invents and allows for Trustless Central Nodes, through yet another new concept called Distributed Functionality; allowing anybody with a spare computer to set up a trusted central processing node, and grow big enough to challenge VISA and PayPal in the end. The system scales profitably, while using the base network for forced trustless mathematical audits to ensure trustless operation.

 

Yet, it's still not an exact set way of doing things. I offer an economic framework within which multiple ways of doing things can co-exist. It uses Bitcoin and other open source software as a base, specifically so many existing cryptocurrency could adjust their system to the knowledge found in this book.

 

As long as one adheres to the rules laid out in the books, anyone with programming skills could set up a currency that CAN compete with Gold, Fiat, or ANY OTHER SYSTEM to become the next global reserve currency! It is superior money, even to gold, that could even power The Federation of Planets!

Even if one wishes to stay out of the future power struggle altogether, this book will still allow one gain a much deeper understanding of how value should apply to cryptocurrency and virtual assets in general. If nothing else, it's the end to a fascinating character study of humanity, ending in describing the very core of all problems in western society today.

• Language: English
• Publisher: Kirian "Deso" van Hest
• Release date: Aug 1, 2021
• ISBN: 9798201465063

Book preview

Foreword

This book is dedicated to the smile i put on my sister’s face with 4 stuffed animals purchased for about half an ounce of silver in value and paid for in worthless papers.

True value cannot be measured.

Never forget why we live.

- Kirian Deso van Hest

Chapter 1: The Definition of Ethereal Value

This book will end up being more technical towards the end, as i'll be explaining my design for an actual cryptocurrency. Not to worry, i'm not a programmer or mathematician, so it's all conceptual and still possible to follow for the regular person; though the basic implementation is more then complete enough for anyone with the necessary practical skills to implement the system, so that money too can be democratized.

But before that, there's still a little bit of theory we need to get through, as it's very important to anything digital. And that is the concept of Ethereal Value.

Let’s start with the definition:

Ethereal Value is the Intrinsic Value we ascribe to a Unquantifiable Desire.

Nearly always in economics, people speak of supply and demand. But hardly anyone ever asks what is Demand made of?. This because, for math, that question is irrelevant. Math merely seeks numbers to manipulate. If you cannot arrive at a number, I.E. something is unquantifiable, math doesn't know what to do. Often a best guess is used, or chance calculations. But those always include some major assumptions the mathematicians get very shifty about when asked.

Demand is effectively human desire. The act of demanding a good comes at the end of the process of wanting to possess that good in the first place. To the measurable economy, since that involves a point of sale, it gives us a mathematical point to calculate with. But since it's the end point of the process, it offers absolutely no predictive capabilities as to how the process develops. Effectively, when we measure demand, we're always measuring past-desire: The person who desired the good, already obtained it, and that act of obtaining it is what we call the point of sale and was measured after the fact.

As always though, humans rarely if ever do something in a vacuum. Even desires have a source. They may not be measurable because they differ from individual to individual, but that doesn't mean that they aren't based on common values. Vanilla Icecream is very popular because it seems to be a taste that agrees with most humans, or atleast most people within a specific culture. Once the body of people that shares those values becomes large enough, they are measurable – if only through averages and circumstantial evidence. Sentiment trackers spring to mind.

The underlying reasons for these desires are Ethereal Values. They are still objective values; it's merely that their nominal value differs from person to person and we have no system to nominally express those values. Some people like vanilla icecream, some people REALLY like vanilla icecream, others think it's alright. The commonality is the Ethereal value of the taste of vanilla, but the unquantifiable part comes from the nominal difference from person to person. For example, saying a person 8.2 loves vanilla icecream while on average people 4.3 love it makes no sense to us, because there isn’t a system to universally quantify love into those numbers. The best we can do are circumstantial words like really or alright.

My favorite example to date remains a Haircut, because it's the most relatable event that involves pretty much all factors, including intrinsic values. We've all had to have haircuts at some points in our lives, so we can all relate to what getting one/having one is.

A haircut is a service. It doesn't produce any goods, as the only things produced are scraps of hair that have no economical value and are disposed. There is a base-level demand for this service, as people's hair regrows throughout their lives, so as long as there are humans there is a need for this service.

But, it is not a uniform service. If humans were to simply value the increased convenience of reduced length of hair, there would never be anything more then a few barbers with shears. There are $20 haircuts and $200 haircuts, with an equally stable demand for both. Sure, individual hairdressers and barbers might go out of service and nominal prices may change, but taken across the entire economy, both exist both in times of economic prosperity and decline.

There is no economic theory explaining this difference. As far as economic theory is concerned, that demand just exists, because it's always just existed, and it'll always just exist as long as humans are around. But if the difference exists, there must be a reason for it to exist.

That reason (maybe obviously) is how humans value the looks of a haircut. The thing that gives a $200 haircut its value is other people's appreciation of the looks of said haircut. Many will think it's not worth $200, many will think it's worth spending $200 on the same hairdresser for the same beautiful look.

Beauty is the underlying reason for the value of the $200 haircut. Some people value looking their best, even if that value is based on nothing but their own understanding of beauty. To others it's a competition, looking better then other people necessitates alot of attention spent on ones looks. Obviously, part of the pricetag is what you pay for skill. To do anything well requires alot of training, and cutting hair is no exception, with added effort for keeping up with the latest fashion – an industry completely afloat on shifting Ethereal values.

Yet their skill wouldn't matter without any demand for the haircut. It's a necessary supply, but not what dictates the size of the market. Desire, and desire alone, is what determines the size of the market. If people don't desire it, there isn't a demand. Things go out of fashion continuously.

Marketeers know, atleast the good ones. That's why advertisements always employ people who look like someone you'd want to look like, living lives you'd want to live, expressing feelings you'd want to have, and then present a product to you with the implication of obtaining those the feelings being tied to obtaining the product. Since people desire the feelings expressed in the advert and are told how the product links to those desires, they ipso facto desire the product – which creates demand, and which is why marketing works at all.

At the same time, this is why so many marketeers suck at their job, because they don't have a clue how to speak to the general populace's ethereal values, controlled by you could say the Zeitgeist, or spirit of the times. They know what the product does, but they don't specifically know why anybody would want to use their product. Most of the time because many products these days are superfluous plastic crap that doesn’t actually serve a function. Hence emotional appeals such as the environment, fair trade, biological and quality seals, awards and so forth. ESG is a big buzzword right now, standing for Environmental, Social and corporate Governance.

Notice how Corporate is left out of the abbreviation. Why not ESCG or ESC? Well, corporate doesn't really appeal to people's emotions, as it is often thought of in a negative way (AKA corporate fat cats). You want people to care because you show that you care, and people don't care about corporate.

But Environment! Social! Governance! Yes these are important things i agree with! *nods head excessively*

Important note: It doesn't require an IQ test to own a wallet. Money isn't a guarantee of intelligence, good lord is it ever not. If anything, an abundance of money causes intellectual laziness, as the need to innovate in order to improve survival chances is lost.

Necessity is the mother of all invention.

Just wanted to write that down somewhere. Especially since i live in the multinational corporation era, with corporations too big to fail and too large to touch; none of which need to truly innovate to compete anymore – they can afford to continually buy up innovators and just take over the service, or copy it verbatim and delay the opponent in court for a decade until their own service is already established. With large marketing divisions as well, these corporations are masters of creating desire, rather then long lived well thought through products. Feel free to look up The Google Graveyard to see what i'm talking about.

This scattershot development approach is another symptom of the era of easy money. Development is hard to do, especially because most of the time it fails. This means that, if your resources are limited, you have to think about where and how you spend those resources. This is what ends up creating successful products for society, as smart innovators will look at societies unfulfilled desires, and create a product to fulfill those desires. Those who are capable of reading societies ethereal values innately are capable of seeing gaps in the market, and launch entirely new products within that gap – becoming wildly successful in the process.

The demand comes before the product. It just cannot be seen or measured before the product is created or sold, only inferred. But it is still there.

There's the old saying of build it and they will come, but this is a severely limited saying that is far too often broadly applied. This only counts for NEW and USEFUL inventions.

Markets develop in two ways, by Evolution and Revolution. 90% of the time, if not 99%, it's iterative evolution that progresses mankind. Revolutionary developments are far and few in between.  At the same time, if humans don't see it it's not there, humans don't look AND humans are scared of new things. There hasn't been a single revolutionary invention that hasn't been chastised and rejected upon creation, resulting in a long period until general acceptance across the population.

In the case of revolutionary technological development, people don't understand they desire it. Sounds weird, but it's true; humans live linear lives on a day to day basis, so they have no idea or oversight on how any technology might change their lives a month or a year from now. Evolutionary technology gives them some idea, because they have day to day experience with previous versions of it, which they can more or less extrapolate into the future – but many will remain permanently skeptical.

Revolutionary technology, as long as it's not understood, will always appear dangerous or unfamiliar. The only way to introduce it to society, is to familiarize society with it. The way to do that, is (very basically) to show humans that there's nothing to be scared of and it could be very beneficial, through hands-on experiences. In this case, Build it and they will come is true. Once humans are assured safety – mostly by throwing some idiot at the problem and seeing if he gets killed or not – curiosity wins out over fear.

And curiosity is the inroads to desire. If you wish to generate desire, you have to generate curiosity and alleviate fear. If both are achieved, the ethereal value of anything can be realized.

To bring this back around to hairdressers; the same process still applies. Once a new hairdresser gets started, especially an upscale one, clientele is the hardest thing to get going. No one trusts you, initially. Some idiot is