It is difficult for people to trust each other and the cost of introducing trust is enormous. This is why we need peer-to-peer trading.
The first axiom of the peer-to-peer system is "Don't believe in anyone." This sentence should not be interpreted as "one must not believe in anyone", but should be understood as "people can trust anyone." A person has the right to choose the person he trusts. It may be wise to believe and trust everyone and everything, but wait until you get what you want and what the other person can give. This is the true meaning of the transaction.
As the Russian proverb says "no lie, there is no sale." The trick is to make lies undetectable and ethical. People have the right to seek “untrustworthy” solutions. Such an approach already exists, including the issue we are exploring – the collateral damage of economic activity (note: economics calls it “externality”).
Take the environmental damage compensation (carbon footprint) of air travel as an example. We must trust airlines, the International Civil Aviation Organization (ICAO), green NGOs that promote specific compensation programs, develop and fund developers and financial organizations that mitigate carbon emissions projects, issue auditors that verify results, approve audit results and issue compensation. Credit project standards, registration centers, over-the-counter brokers or exchanges. We must trust all these institutions and pay the fees, which is the cost of the system.
But obviously, using tax instead of volition has not completely reversed the situation. It’s just that people who extort money don’t have much room to live.
All of these institutions can be viewed as a company that works to reduce transaction costs until a more effective approach occurs.
Sometimes people tend to compare the scattered P2P technology with the existing technology before deciding whether to replace it. Often, this comparative analysis is often inappropriate because the decentralized P2P technology provides features that are not present in the current economic model. For example, anonymity or pseudonym, transparency, etc., and the need to eliminate middlemen and eliminate trust opponents.
Therefore, these advantages are considered to be disadvantages in many cases. For many people, especially those within the system, they are often useless or even harmful.
Economic activity or value transactions, whether unilateral, bilateral or multilateral, as long as they are reasonably present, are based on specific reasons and objectives, but are often not completely rational or “certainly calculated”. Many findings in the field of economics prove the irrationality of economic decision-making and behavior.
Social, behavioral, and emotional motivation are more important than cold calculations.
The bargaining process itself is a positive market interaction. Expectations of success, fear of failure, possessiveness of the value of rare items, values of society, attitudes of the public toward transactions (admiration, appreciation or envy) – these “distorting” factors are innumerable and cannot be avoided. They make traditional economic models naturally reject the decentralized "untrusted" P2P transaction model.
People must pay for new mechanisms and new features, including direct and secure P2P interaction. In any case, this price is much cheaper than the agency costs mentioned above.
However, once a transaction is made, the value exchange is no longer an end, and the purpose becomes a state that is more favorable to the subject. A decentralized, untrusted P2P model is essential for all trading entities.
As we have described before, subjective cognition is the intrinsic basis of economic choice, economic activity, transaction value or the transaction itself. Both parties must first ensure that the value they want exists under the control of the counterparty and that these values cannot be reused. They must also ensure that they not only understand the value that is available, but also understand the responsibilities they bear. Just like a person buying a car, he needs to take responsibility and risk, so he needs to buy insurance to deal with some of these risks.
Most of the things and values traded in the contemporary world are not physical existence in the true sense, but only represent ownership or use rights. They are assets that are stored in distributed ledgers or registries, repositories, or proven services, skills, and expertise. In the moment, such rights records are becoming more and more digital. Individual owners and value carriers are also becoming more and more digital. His identity attributes, social attributes, professional attributes, economic and financial attributes, geographic location and other attributes are stored in various forms in various databases. However, the identity authentication issue has not been fully resolved.
For trading purposes only, we don't need to know the identity of the counterparty, just verify the value we want. The identity of the counterparty may be anonymous, but the transaction is still executable. In most cases, value verification is not an entity, or service, working hours, etc., but a subjective cognition, that is, the relatively favorable state we want to achieve in the process of obtaining value. Due to the existence of differences in value perceptions in transactions, continuous improvement of standard contracts is only an expedient measure.
When you fill the tank with petrol, you get a material energy carrier, the quality and quantity can be quantified by reliable hardware, and the mileage is an objective standard.
But there is another commodity. People don't actually buy the hours of oil, gold, or professionals directly, they only buy the rights that are subject to the ups and downs of the exchanges that are enforced by specific agencies. Once the institutional carrier supporting the value fails, the value no longer exists.
The context of the origin of value should be the same as the context of its transaction. The incision of goods and services entering the market is a key point of potential fraud. As a result, many organizations are busy proving that goods and trade names are original, safe, and generally qualified. If the value is rooted in the same decentralized P2P space, the problem of verification and avoiding duplicate overhead can be solved. Since the background of origin and definition is the same, once the parties understand the difference in the value of their transactions, they will bargain for what they want.
The transition to a decentralized P2P model is technically feasible, but as a result, many traditional institutions lose their function and can no longer share a slice of it, so these institutions will do their utmost to subvert or slow down the process, and The “quasi-P2P” solution is sold smartly and ethically as a new technology.
Comparing the value of the sale with the perceived value obtained is a unilateral process. Anyone or anything can act as an agent. When it comes to proof of existence and origin, modern IT and communication technologies, especially public, programmable blockchain technologies, will facilitate the achievement of goals and significantly reduce institutional costs.
In the near future, trading robots, neural networks, and AI will be able to process transactions more efficiently than humans. However, they must first understand the subjective value of the “owner” in order to develop a trading strategy in order for the seller and the buyer to obtain more subjective value than the transaction value at the same time.
All in all, the spatial structure of these transactions exists. Although the "wormhole" to the new universe looks terrible, it is time to start trading with goods related to natural resources.
Attachment: Model based on P2P transaction
By matching leverage, the efficiency of third-party decentralized P2P funds will increase significantly;
The introduction of two-way negotiations between the seller and the buyer will effectively reduce the “free rider” phenomenon. The first step is to negotiate the compensation for negative impacts, and the second step is to negotiate the distribution of responsibilities between buyers and sellers;
Deal with the “sell-on” issue: Link the main transaction to the compensation agreement, for example, to purchase electricity with a compensation carbon footprint agreement.
Source: Encrypted Valley Live