Blockchain Pushes Information Economics to the Next Stage, Trust Economics

Prof. Eric Maskin of Harvard University and Chen Long, Luohan Academy Executive Director, discuss the operation and mechanism design of blockchain technology, information asymmetry, signaling and other economic issues.

Highlights

Micro-information economics and asymmetric information

Information economics is a branch of information science that studies the economic phenomena of information and its movement characteristics. Research on the market under incomplete information has gradually developed into micro-information economics. The asymmetric information environment is one of the important conditions of micro-information economics.

Central bank digital currency

Bitcoin cannot replace the currency issued by the central bank because there is no credit support system provided by the government.  A smarter version of encrypted currency which has memory, provides more information, and can do more things, can play a role in improving efficiency and solving the problem of trust in information. Central bank digital currencies can play a role in cross-border payments. 

Blockchain helps reduce the problem of information asymmetry

The most exciting feature of blockchain does not lie in cryptocurrencies such as Bitcoin, but in its vast potential to alleviate the lack of trust through the digitization of trust. Information is a new form of collateral, and more information means more trust. Blockchain has the potential to increase transaction volume, thereby increasing global output significantly.

The impact of blockchain on contracts and corporate organizations

Blockchain will improve cooperation between institutions. Smart contracts improve the efficiency of performance and reduce risk. The cost of verification and execution becomes very low. 

Blockchain, inequality and signaling mechanisms

Information asymmetry is one of the basic obstacles to successful transactions and one of the leading causes of inequality. Bockchain can be a weapon against inequality. It will change the signaling mechanism.