The Parallel Economy: How to Build it - #308
TL;DR - Building a parallel economy with Bitcoin is key. Understand it, build communities, set prices in BTC, develop merchant networks, and improve infrastructure.
Reader,
Lot of talk about hard money this, soundest money that. Perfect savings technology and NgU (number go up). Blah, blah, blah…
Don't see a lot of talk about building the economy.
What is the economy anyways?
Simple terms, it's human behavior.
It's people. Pursuing their individual goals and values. It's not a separate entity or system. It's not some inhuman metric of production. It for sure ain't some mystical unicorn that only Harvard grads can understand.
The economy is us.
The "circular economy"
Reduce, reuse, recycle.
It's a closed loop system to lower resource waste.
The parallel economy
It's a secondary market, or informal economy, operating along official government regulated one. It's where individuals trade direct with each other.
The difference between the two
The circular economy is more focused on impacts to the environment, not the economy. The parallel economy has to do with direct trade running "parallel" regulated markets.
In cryptoland, we tend to mix the two. We mean the latter, but say the former.
The Austrian Economics Perspective on Parallel Economies
Individual choice and preference is the keystone in human action. One size fits all doesn't apply. The idea is freedom of choice in the market. The market, like the economy, is us. It also stresses the idea of entrepreneurialism and innovation. How the market, us, price these goods and services is how we communicate value and scarcity.
Government's role is to make sure we're all playing by agreed to rules. But then governments go on their own, makes new rules. When you need a license or permit to do basic things, it stifles economic activity.
From the Austrian view, parallel economies emerge when this happens.
Take the gig economy as an example. Excessive regulations and taxation cause individuals to take employment outside traditional markets.
Real-World Examples of Parallel Economies
The parallel economy isn't a mythical concept. It exists today.
Stock market
When a company issues new stock, it does it through an Initial Public Offering (IPO). It sells the IPOs direct to investors via an investment bank or underwriting company. A first market.
The secondary market is the stock market. The Nasdaq and an Over-The-Counter (OTC) trade desk are examples. Investors selling their stock to brokerage houses. They in turn sell to individual buyers on platforms like Fidelity.
Ride shares
Early 2000s. I lived in NYC. Before Uber, there was a transport service called "The $1 Bus." It rivaled the MTA on price, speed and destination. Unions and government regulations hampered the MTA into oblivion. The private system ran parallel to public ones. State regulations hadn't intervened, yet. "They road the bus 'til the wheels fell off." The $1 Bus disappeared.
Uber, in a way, is a parallel transport system. Regulated now, but it works in along side public systems.
Craigslist
We all know Craigslist. It's a peer to peer marketplace where you can trade goods, services and property.
Global economies
When you think about it: different countries have their own way of doing things. They use their own currency, have their own customs for doing business with each other. Austria's economy runs parallel to Japan's. The US's economy runs parallel to The UK.
Physical and digital economies
A clear example of parallel economies is right in front of you. Online stores running parallel to physical ones.
Bitcoin for bills
I'm bankless. Have been since early 2021. Paying bills and getting around was adventurous. Especially when traveling.
Needed to pay a phone bill. Went to a meetup group. Asked if anyone wanted to trade, phone bill for bitcoin. Had a couple takers. They got coin. I got a bill paid.
Did it this way for years. Until things shifted. But it works. Can work.
Benefits of a parallel economy
Increased competition
Better-quality goods and services at lower prices.
Promotes innovation
Individuals and companies looking to differentiate themselves by providing improvements.
Caters to preferences
Meets the underserved or specific needs of the market
More efficiency
Less red tape, more opportunities.
Building a bitcoin parallel economy
It's going to be a lot of work. As it is, Bitcoin needs a lot of improvement. True value comes from trust in the tool. More use, more acceptance, more trust.
Note: This can work with any sound money asset.
Step 1: Educate yourself
Understand bitcoin. Know the ins and outs. Don't need to be a professor. Need to know enough to help others.
Step 2: Build community
Join or organize meetups. Host workshops and seminars. Introduce the idea of a parallel economy. Connect with individuals, businesses and other organizations.
Step 3: Establish the currency
Set prices in bitcoin. Avoids volatility. Offer discounts for payments in bitcoin. Encourages use. The bigger the local economy, the more places to use, the more the coin circulates.
Step 4: Develop a Merchant Network
Create a directory of merchant services. Get them to accept bitcoin. Be their customers. Bring new ones in.
Step 5: Build payment infrastructure
People still have bills to pay. Help create bill pay systems. Use existing ones or create your own.
The Point of Sales (POS) systems currently are atrocious. We need better tools.
Step 6: Build better wallets
Bitcoin wallets suck. Needs better user interfaces. Smoother user experiences. Needs to be more human.
Step 7: Establish support systems
Trust and transparency. People need it. Build support systems. Help lines, support chats, in person assistance.
Step 8: Develop a marketing strategy
Educate people about the benefits. Make it approachable.
Step 9: Expand the economy
Encourage it. Create incentives. Offer discounts, rewards and more for using Bitcoin. Collaborate with others. Establish the trade routes.
Step 10: Adapt and evolve
Watch performance. Address issues. Tweak what's not working. Promote what is. Adapt and evolve.
Economies are complex and challenging. Build dedication, perseverance and understanding.
Benefits of a bitcoin-powered parallel economy
Privacy and security
A customer buys KYC bitcoin. Spends at a local shop. Shop owner spends on vendors and employees. Vendors and employees spend on goods and services. With every hop, privacy and security increases.
Reduced reliance on the system
By more places to spend keeps coins circulating. Less reliance on the current system needed.
Greater accessibility
Opens the doors for more participation in the economy. Accessibility creates more opportunity.
Increased competition
In an open market, more competition arises. More competition, more innovation and improvements in the market. Helps to create more efficiencies.
Conclusion
We've got to walk the walk. Not talk the talk. And talk is cheap.
Hardest money. Soundest money. Perfect money. All sound great. Without use, it's a digital Tomagachi toy. A pet rock.
"Don't sell your bitcoin…" for fiat. Sell it for goods. Use it for services.
It's going to take a long time to build a world built on bitcoin. There's been enough setbacks. Get building or stay as exit liquidity.
No one's going to make it for us.
Rare Passenger / block height 849 303