The Digital Nomad
Thank you for joining us for this edition of the NovaBlock newsletter. Here, we explore the intersection of technology, finance, politics, and of course, the crypto asset space.
Our world is increasingly becoming digitized. Every aspect of how we interact with our surroundings is changing, untethering us from our attachment to physical goods in favor of the digital domain. Developments in virtual reality, cryptocurrency, social media, and peer-to-peer marketplaces erode personal and national borders and enable us to be more mobile. Trends in remote work, homeownership, investing, and commerce all point to the transition from the physical to the digital.
Let’s start with the future of work.
As developing countries increase GDP and productivity, their economies tend to transition from heavy industry to knowledge sectors. Manufacturing and production of basic materials requiring intensive cheap labor gradually morphs to services-focused labor requiring specialization of knowledge to write software, provide financial advice, prepare tax returns, and offer legal counsel. Advancements in teleconferencing, virtual reality, and other collaboration and communication tools (Slack, Zoom, Skype, Github, Trello, Asana, Google Docs, etc.) are reducing the need to have centralized workforces and office buildings. Due to this phenomenon, remote work has grown tremendously and will be normalized over the course of the 2020s.
Source: https://www.flexjobs.com/blog/post/remote-work-statistics/
Similarly, the freelance economy has been picking up steam. In 2018, 53 million workers in the US, or 34% of the national workforce, were actively engaged in freelance work. Freelancers have the freedom to pursue as much or as little work as they’d like and seek alternatives to the typical 40-hour work week culture. Freelancers contributed an estimated $715 billion in earnings to the economy. Rather than tie themselves to a physical desk, Freelancers and remote workers are optimizing for freedom and flexibility, enabling them to make decisions on their own terms.
These work trends are one piece of a larger picture in which younger generations are making different decisions on how they spend their hard-earned money.
The Millennial generation prioritizes personal experiences more than acquiring “stuff”. Based on one study, 78% of Millennials would choose to spend money on a desirable experience or event rather than buy something desirable. Instead of purchasing homes, cars, and TVs Millennials are renting scooters, exploring Thailand, and hiking Machu Picchu, sharing their experiences on Instagram and Twitter. The sharing economy allows Millennials to make use of Seamless, Kayak, Airbnb, Uber, and Turo on their phones to find instant food, transportation, accommodations, and activities.
Homeownership has taken a nosedive amongst Millennials as well. Opting to be where the action is, Millennials are signing short term leases and flocking to cities. This study analyzed the net migration of young adults who were 15 to 24 years old in the beginning year of each decade over the time period 1980 – 2010, and turned 25 to 35 years old in the ending year of each decade. Over the three decades, each passing cohort of young adults became progressively more urban. This surge in demand caused urban real estate values to skyrocket, making the option to purchase a home in many urban areas out of reach for most.
Enacted by the policies of President Bill Clinton and his HUD secretary Andrew Cuomo, homeownership became a national goal in the 1990s as new policies encouraged banks to give loans to people with poor and non-existent credit histories. Although it reached its absurdist extreme during the Great Recession of 2008, homeownership served as a primary savings and wealth vehicle for the average American for decades.
Since younger generations are not committing themselves to buying homes and taking on 30-year mortgages (and may not be able to afford one in the first place), they are choosing to store their wealth elsewhere in the digital realm. Bitcoin was the first manifestation of digital scarcity, and other representations of digital value have followed.
Decentraland, the virtual world built on Ethereum, fully launched last week after three years of development. The virtual reality platform allows users to claim ownership of virtual land on a blockchain-based ledger of parcels. Landowners control what content is published on their portion of land, and content can range from static 3D scenes to interactive experiences and games.
Users can trade these parcels of land using cryptocurrencies as the primary medium of exchange. According to Nonfungible.com, Decentraland users completed 488 sales and had over $600,000 in transactional volume of virtual parcels of land in the past month. These digital non-fungible tokens demonstrate the first glimmer of digital value that future generations will utilize as vehicles to store their wealth. Virtual goods are just another arrow in the quiver of the Sovereign Investor to expand her investment toolkit.
Younger generations have never known a world devoid of the digital realm, and they are expressing their desire for flexibility as they elect to connect, work, play, transact, and invest digitally. As these new digital technologies continue to develop and improve, physical geographical differences are becoming less and less important. This will affect all aspects of our lives: how we work, decide where to live, interact with one another, procure everyday goods and services, and store our wealth.
Quick Bits
The Libra Association is considering a shift to a US dollar-backed stablecoin. The move could assuage the concerns of regulators and lawmakers skeptical of the Switzerland-based and Facebook-led initiative. A large concern for Libra was the constituent components of the stablecoin: what national currencies, treasuries, bonds, etc. would be included and how they would be weighted. This would give the Libra Association members unprecedented influence over monetary policy as they launch their private currency. However, the transition to a purely dollar-backed stablecoin would appear to remove much of this concern.
Amid the ongoing coronavirus epidemic, China has turned to blockchain technology to manage medical data, track the supply of virus prevention materials, and consult the public. For the first two weeks of February, China saw the launch of ~20 blockchain-based applications designed to help fight the coronavirus outbreak. Most of the apps are used to manage citizens’ personal data as many people are returning to work this month. Following President Xi’s endorsement of blockchain technology late last year, it is encouraging to see new blockchain deployments being used to help fight the spread of the virus.
Ethereum-based DeFi trading platform bZx lost ~$1,000,000 in two exploits over the course of one week. As Larry Cermak of theBlock explained, the attack involved taking out a “flash” loan of 7,500 ETH, moving it to various DeFi trading platforms like Kyber and Uniswap and opening loans with too little collateral. DeFi is in its infancy and these types of attacks represent growing pains for the space. The DeFi money legos contain structural risks that must be addressed before the space can combat the incumbent banking behemoths.