Eliminating the inherent weaknesses of the traditional barter economy, a digital barter economy makes it easier to trade both physical and virtual items anywhere in the world.
What Is A Digital Barter Economy?
A barter economy is the direct exchange of goods and services against each other, for example, paying for a taxi ride with two packets of cigarettes. This model works as a medium of exchange, like fiat currency, and is one of the oldest, most natural forms of economy in human history. While this works perfectly in a local environment with physical proximity, these sorts of economies do not work on a larger scale, thanks to the obvious issues of distance and lack of standard units of measure.
Digital barter takes the fundamentals of a traditional physical barter economy and brings it into the 21st century with blockchain technology, providing solutions to these physical and standard unit barriers that stand in the way of bartering at scale.
Blockchain allows you to digitize physical goods and services with tokens, and thus solves the problem of physical proximity. Using the original example, you can essentially pay your taxi ride token with cigarette tokens from anywhere in the world. Both tokens are digital, and both are placeholders for the real asset and can be used to redeem the goods or services. As well as digitizing physical goods, blockchain also further bolsters digital barter by offering ways to trade tokens you have for the tokens you want, for example, trading taxi ride tokens for cigarette tokens through decentralized marketplaces.
Another innovation is that digital barter economies can include goods that aren’t physical, such as a patent or intellectual property, or items that are physical but too large to be used as a means of payment in their physical shape. Once digital assets are created on blockchain they can essentially be fragmented digitally, something that in the physical world would be impossible because it would mean the destruction and devaluation of the underlying physical asset.
Because of this flexibility, in a digital barter economy, it is therefore theoretically possible to pay for that taxi ride with something like, if accepted as payment, a revenue share token, or a tokenized fragment of a famous painting.
Author:
Johannes Schweifer is the CEO of CoreLedger, a company empowering businesses of all sizes to access the benefits of blockchain technology. Schweifer co-founded several blockchain start-ups, including Bitcoin Suisse. He’s a passionate problem solver, holding a master’s degree in Chemistry and a PhD in distributed computing and quantum chemistry.
