Daniel Mark Harrison

Synthetic Virtualised Integration

The Need For Decentralised Asset Management Frameworks

supply chain economies, vertical integration is a form of manufacturer and retailer consolidation by a single entity. In vertically-integrated supply chains, both the manufacturer and the retailer are owned by the same entity or cooperative.

In Blockchain economies, there is little consideration given to integrated management structures as almost all the attention is focused on the technological integration of the systems. Blockchains are value coevals: this means they are a simultaneous value chains, value shops and value networks. Thus, integrating such supplier-retailer entities is a more complex process.

To vertically-integrate Blockchain processes, we must start with the observation that the value coeval compels us to consider what sort of vertical we are attempting to integrate. In one sense it may be a decentralised cryptocurrency or cryptocurrency application. But that is only the product-part of the vertical integration exercise: the reality is, there is a community and an engineering and a virtual interface that all need configuration along the vertically-integrated pathway.

How does this pathway look and what do we call it?

First, assume the Blockchain is a digital network. We use the word Blockchain here generally, and not specifically to any one Blockchain, as it is ordinarily used. As a result of the introduction of the Blockchain there is a reconfiguration of value: a fact I first pointed out in a series of presentations I gave in late 2014 and early 2015. This reconfigured value has more dimensions of value than one in an ordinary economy. Specifically, it has the fourth dimension of value, which is Value/Utility and the fifth dimension of value, which is Value*Utility. Ordinary frameworks within economies of all scales are resigned to utility, in the first dimension — what we refer to as commodification — value, in the second dimension — a process we often call monetisation — and Utility/Value — a process we frequently refer to as securitisation. The fourth dimension of value is what we here call cryptography while the fifth dimension of value we refer to as meta. All five dimensions are in a sense states of being of a given asset — it starts out as a commodity, proceeds on to become a form of monetary use (to collateralise a loan for example), to become a securitised unit traded on an international derivatives or stock exchange (e.g. a REIT), to then becoming in a temporary form a type of alternately cryptographically represented unit of value, as energy spent (which is what a crypto is) and ultimately to become spent energy multiplying the form of value we have to trade. This process is one that few still even remotely understand, but it would behove a regulator or two to pick up my literature on the subject some day. They might find they learn a great deal that helps them with their everyday job.

Because of this post-3D value artifice, we must necessarily distinguish between pre-3D and post-3D economies; thus we say, physical and digital economies. Digital economies that utilise 4D value dimensions as a model are hardly very efficient however — at least as far as value creation on them is concerned they are not. For unlike with physical economies, digital ones that run on Blockchain networks fractionalise value creation exponentially. Even if you limit supply or such of digital assets, their mechanism is one predisposed to fractionalisation of value. This means that they distribute all the value created on them out across the network by mere existence of the network itself. Thus it becomes highly deflationary as an economic purchase environment. Therefore, in order to operate retail businesses on Blockchain we must progress this digital network onto one that looks more like a virtual network. In one sense, this is what exchanges have begun to do with the fractional reserve holdings of cryptocurrency they hold against that which is represented on their volume statistics: they have found that otherwise, cryptocurrencies rise to hard against one another, limiting the influx of new players.

The Synthchain is a type of network specifically designed to integrate the Blockchain’s heavily-deflationary / value-reductive qualities into one where value is congruous and exponential. It multiplies the value across the network over time as opposed to reducing it as the weight of utility becomes more significant a growth factor. By employing a synthchain things such as vertical integration can take shape. Suddenly, it is entirely possible, for example, for a supplier to own a transparent manufacturer of cryptocurrencies and a separately-aligned retail trading platform, via the interposition of decentralised asset management (in the current Blockchain-only economy exchanges manufacturing cryptos in the form of virtual currency units are not approved of or value-additive in any sense of that term).

So, to summarise then: Synthchains allow for the value reductive aspect of virtual economies run on Blockchain networks to become value exponential. It’s really that simple.

Co-Founder of Zurcoin. E-Mail me at daniel@zurcoin.org.