While building the new decentralized we will have to have billions if not trillions in value on the (Ethereum?) blockchain. There are only two ways they will get there: a) they are transferred onto the system and b) they are created within the system (blockchain) For some values (like houses) it will be necessary to transfer them from outside. The concept is basically: a real world good/commodity/real estate/… has a second representation on the blockchain and ownership of the blockchain token means at the same time ownership of the real world thing. This however requires some (centralized?) real world entity that enforces (in a conflict) the real world ownership change that results from blockchain interactions.
The same mechanics could work for money. In principal you could have entities that takes one $ and issue one $token on the ethereum network. Different of this entities could be interconnected and have exchangeable tokens in a ripple like system. However - this approach comes with at least two bis downsides:
- You still use centralized money systems like the $ where control over it lies in the hand of a few people. The second centralized component would be this entities sitting on billions of $ that are used within the blockchain. They would somehow be like the banks in a gold standard time.
- Adoption is much harder - basically people need an additional step to get into a new world.
The second option is that the value is created inside the blockchain system. This is what Bitcoin (or Ethereum?) maximalists hope for. People will buy into Bitcoin/Ethereum and therefor the hole amount of Bitcoin/Ether will gain the value of billions/trillions. This is not going to happen. The incentives for Millions/Billions of people that do not own Ether/Bitcoin today are just too bad to join a system and reward the early adopters astronomically.
Therefore a requirement for the success of the new decentralized ecosystem economy is a decentralized currency where the issues process is decentralized and where early adopters are favored a little bit but not by a lot of orders of magnitude (like Bitcoin and Ethereum). This is what Circles tries to solve. (besides establishing an global UBI)