The Density Paradox

In every aspect of today’s world, humans exist and operate inside centralized pockets of density.

For example, of the roughly 325 million people living in America, more than 80 percent live in cities as opposed to more isolated rural areas. Consider, also, the way we exist and operate online. There are billions of users of social media around the world, but most of us gravitate to high-profile influencers who boast millions of followers and exert outsized influence.

The importance of density is most easily witnessed, however, in the economy.

There’s a network effect that takes place in areas of concentrated economic activity. The larger and more robust a marketplace, the more opportunities exist for business and partnership. Ultimately, there emerges a critical mass in which the dense economic centers impose their own kind of gravitational force, attracting opportunity, talent, and creativity.

In time, we grow to trust these density centers — cities, economic hubs, Instagram influencers — as sources of truth. If you want to engage in the financial business, the logic goes, you gravitate to the local primary economic center.

This is, quite simply, the way human beings live.

But underlying this ultimate truth is a paradox: all density centers depend on smaller, disparate non-local marketplaces to help them survive.

The pockets of density that govern and dictate human life themselves rely on smaller nodes that exist outside of those central masses.

Cities cannot exist without farms to provide food and without the systems of transit operating in between. Capital markets cannot survive without auxillary exchanges.

Ultimately, centers of density, exerting economic and social gravity, would bifurcate and fall apart without smaller, more isolated sources of profit — of fuel.

This is critical for us to keep in mind as we seek to engender emerging industries born from new technology, including that of the blockchain.

The blockchain is, truly, a new economy starting from scratch. The key difference is that it’s being built on a digital, decentralized, and potentially revolutionary infrastructure.

Yet just like other industries of influence, those born on the blockchain will eventually have to determine which of its marketplaces are to become the densest sources of truth, credibility, and activity. Eventually, there will be blockchains that become the accepted, trusted marketplaces where everyone flocks. But the blockchain will also, then, need smaller markets and exchanges in order to survive.

In other words, it will need to submit to the density paradox.

That yin and yang has to exist for the ecosystem to be balanced.

Ultimately, the blockchain will take one of two paths.

There will either be one blockchain that “rules them all,” or one source-of-truth blockchain for each industry per that industry’s specific standards (my personal preference and crystal ball investment).

The former represents a massive shift, as it essentially entails replacing banks along with the various mechanisms of trust built into every step of the supply chain — all the processes required of completing a transaction. It might be too large of an undertaking, which is why I believe the most likely scenario will be the latter. Each industry will, in time, become decentralized on its own terms.

That means the textile industry will have its own blockchain. The financial industry will have its own blockchain, and so on. And each will have its own languages and protocols — its own value set.

Still, no one really knows how the future structure of the blockchain is going to play out.

Regardless of what becomes of the blockchain, those of us who stand to be impacted by it (which is basically all of us) should keep in mind the rules of the density paradox, along with how it dictates our lives — whether it be on Wall Street, on Instagram, or in the digital marketplace.

This knowledge will help us best utilize the new opportunities sure to be availed by future innovations, be they digital, decentralized, or otherwise.