Global | Scarcity in the digital era

Summary

Scarcity raises the price of a good. This economic law has been drummed into us as a result of the numerous booms and slumps that have molded our societies over the centuries.

Key points

• Key points:
• Because of this, many people associate price stability with a stable level of supply over time, a maxim which these days underpins the value proposition of many digital assets, in the same way it did in the past with shells, gold, stamps and tulips.
• However, it is now over well over a century ago since Alfred Marshall drew our attention to a second factor in price determination: demand. A good is not only valuable because it is scarce, nor is its price stable only because its supply is fixed at any particular moment. For this very reason, central banks are currently attempting to adjust demand to supply, in order to control inflation.
• Blockchain technology can bring us many benefits — such as decentralization and smart contracts — and could be used to improve a great deal of processes.
• In this context, the current regulatory wave in cryptocurrency markets is vital to ensure the transparency and development of these value propositions; and identify those that are innovative, of great interest and promise far more than mere scarcity.

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