Traditional economics is more of an art than a science because it lacks the efficient measurement and control technologies of engineering.
Economic systems are complex and have many internal states which are mostly unobservable and/or uncontrollable. Economic systems are too complicated to be modelled because of myriad non-linear human factors, uncertainty (i.e. coronavirus outbreak), and decentralized governance (i.e. democracy).
However, optimal control theory has been exploited in economics in examples such as the FRB/US model and Taylor rule, which are used for monetary policy.
For these models to be effective, accurate measurements such as cash flow and currency velocity are needed. Unfortunately, it is not possible to have real-time measurements. For example, currency velocity is measured as a multiplier, which can only be weighed after a long time. As a result, just-in-time control is impossible.
In the absence of accurate and timely data, economic policies based on intuition and experience are inevitable as long as these ‘dumb’ coins and bills are used. They are circulated in the markets and some fractions of them are even saved under mattresses!
On the other hand, cryptocurrency is smart, transparent, measurable, and enforceable. Our future generations will use cryptocurrencies like Bitcoin or Libra instead of cash. Cryptocurrency fits their taste and is entirely familiar to them.
Cryptocurrency flows are transparently recorded into the blockchain, a digital ledger open to the public. Thus, anyone can instantly measure the speed of cryptocurrency. Real-time measurement can make a significant contribution to improving economic efficiency.
Cryptocurrency is programmable and executable according to the smart contract. A smart contract is a computer program that facilitates, verifies, enforces, and executes the contracts. It is said to be smart because of its digital nature. The smart contract is misnamed, however, as it is more of a notice than a contract. We all know that if you try to trick your father to get more pocket money, you will fail. Similarly, smart contracts are just like clever fathers in that they can set limits on cryptocurrency use – such as only in bookstores, restaurants and pharmacies, but not in bars or gambling rooms.
The circulation speed of cryptocurrency can be controlled based on the smart contract. Cryptocurrency holders can enforce the non-payment of cryptocurrency at illegitimate places such as black markets. In addition, smart contracts can ensure that rent and monthly installments are autonomously, automatically, periodically and correctly paid.
Coronavirus is disrupting and breaking solid vested interests. Like in a state of war, ideas that policy makers didn't dare to try before are now possible. Discussions about online education, telemedicine, and universal basic income have become the norm. Even talk of a digital dollar bill has surfaced in the US Senate.
It is inevitable that smart digital currency will be the new-normal sooner than later. This currency will have all the pros of cryptocurrency with much improved cons. This is a good time for central banks to issue cryptocurrency to support nations with basic income relief and test the feasibility of the CBDC (central bank digital currency), which is the digital form of fiat currency to be issued in the near future by the central bank.
Nations do not have time to wait for new debit cards to be made. Instead, anybody can instantly download smartphone apps anytime and exchange cryptocurrency immediately.
Of course, there is still more work to do. Users have concerns about privacy issues. Also, the poor user interface needs to be improved. However, these issues will be resolved before becoming the entirely cashless society that will soon be the new normal.
In the history of money, there has never been a currency that is both programmable and measurable - until now. This precise measurability and control of cryptocurrency will transform the imprecision of economics into the exactness of engineering.