Michael J Casey is chairman of CoinDesk’s advisory board and a senior advisor of blockchain research at MIT’s Digital Currency Initiative.

In this opinion piece, the first of a weekly series of columns, Casey outlines why he believes tokens, despite the excessive fervor and hype around ICOs, could hold the key to solving some of humanity’s most pressing problems. The secret? It’s all about incentives and collaboration.

A surefire way to be accused of over-hyping blockchain technology is to make some sweeping, breathless statement like, “It can solve climate change!” Even better: declare you have a token that can do that.

Well, bring it on.

The more I’ve thought about this technology, the more I’ve come to believe that saving the environment is exactly the kind of problem that energetic crypto minds should be focused on. It’s why I recently hosted a #Hack4Climate workshop at MIT Media Lab, one of 17 worldwide promoting a “climate change and blockchain” hackathon at the United Nation’s forthcoming COP 23 climate conference in Bonn, Germany.

Of course, a distributed ledger of transactions can’t directly resolve the planet’s climate problems. If our home survives this threat, it will be thanks to experts in energy, forestry, vehicle design and urban planning.

What blockchain technology and crypto tokens can help with, however, is the political problem – the core challenge of how to get mistrusting people and institutions to work together in pursuit of a common goal.

In short, it might finally enable us to unite and implement the steps those scientists have been urging us to take.

The problem of trust

What does this have to do with blockchains and digital assets, you might ask? Well, it comes down to how this technology tackles the root cause of humanity’s inaction over this environmental crisis: mistrust.

The reason it took 27 years after the 1988 founding of the Intergovernmental Panel on Climate Change for the world to agree on a common set of targets and policies at the COP 21 in Paris, 2015, is not because scientists didn’t know what to do. It’s because people, companies and governments don’t trust each other.

With no international authority ordering governments around, states that were otherwise willing to take growth-constraining action couldn’t trust that others would follow suit, which made it hard for them to commit.

It was a classic misalignment of interests, consistent with what the ecologist Garrett Hardin called the “Tragedy of the Commons” – the idea that mistrust and self-interest prevent communities from properly protecting public resources even when not doing so goes against their long-term interest.

It’s also a problem that’s been with us through human history and that is closely related to another long-lasting economic dilemma: the failure to price “externalities.” The departure of the world’s largest economy from the Paris agreement reminds us that, when it comes to climate change, these problems will persist.

Yet, it’s here where blockchains and tokens can help. The core, transformative feature of this technology is that it confronts the deep human challenge of how to intermediate trust and incentivize collective action.

To me, the most remarkable aspect of bitcoin is that it solves the Tragedy of the Commons, albeit in one specific use case.

We can think of the blockchain ledger as bitcoin’s “commons,” a public resource that the entire community of users depends upon. And whereas traditional economic theory tells us that actors pursuing self-interest aren’t incentivized to protect that resource, absent external government intervention, that’s not the case with bitcoin.

Embedding rules into money

Bitcoin does have rules for protecting its commons – strict ones, in fact. It’s just that the “governance” isn’t external, it’s baked into the system.

Compelled to follow the protocol’s instructions, miners, seeking personal profit and nothing else, constantly maintain the public ledger, the bitcoin commons. It’s hard to overstate how much of a breakthrough this coincidence of interests represents.

The question is whether this concept can be extended beyond value transfer to other types of “commons.” I think the answer may lie in developing what’s being described as the “token economy” – which, not coincidentally, is the name we’ve decided to give to this new weekly column.

This, and not the crazy dollars generated by initial coin offerings (ICOs), is what makes tokens interesting.

With cryptographic tokens, rules are embedded into the smart contracts that dictate their use. This opens the door to programmable money, in which the governance of a community’s interests is contained within the medium of exchange itself.

It’s a concept that’s impossible with non-crypto fiat currencies, which are agnostic as to the community’s interests – and, in places like Venezuela, can even be hostile to them. (It’s worth remembering that money is merely a technology, a tool humans developed to enable wider exchange; it has changed its form many times through history and will continue to do so.)

A community of shared values

Under this new model, all who share the interests of a community should, in theory, be acting in those interests whenever they exchange tokens. And as more people do the same, the token’s value should rise in line with its network effect.

The hope is that a positive feedback loop of rising value creation emerges, one that serves both the interests of the community and the token holders.

This, in essence, is what Filecoin is doing as it incentivizes people to collectively build the file-sharing commons of the InterPlanetary File System (IPFS). It explains Brave’s bet that the Basic Asset Token (BAT) can improve the market for user attention – the hitherto poorly managed commons of the online ad industry. And it’s why Augur and other blockchain-based prediction markets that feature reputation tokens can be thought of as encouraging the commons of honesty.

It’s also the idea behind a “Climate Coin” proposed by a team from Coin Circle, UCLA and the World Economic Forum, which would rise in value as tokens are “burned” in response to proven environmental improvements.

This is all theory right now, of course. And it’s not clear that the current reality of the token market is yet in line with it. Are all those excited ICO investors intending to use the token or just hoard it for profit? Does that deplete its ability to solve the commons’ needs?

With a series of rapid-fire, nine-digit ICOs and $1.8 billion raised in total, not to mention talk of scams and “vaporware,” there’s a wide gulf between the utopian vision I’ve laid out and the get-rich-quick mania of ICO-land in 2017.

Still, as the fallout continues and as regulators in China and the U.S. warn of risks to investors, we risk missing the forest for the trees. Of course, this industry needs to breed more confidence among investors, but whatever the policy or self-governance solution, it should not lose sight of the huge potential this technology poses for fixing the biggest problems in economics.

Whether it’s the encouragement of cross-company collaboration, the efficient use of materials within a supply chain or the shared protection of vital natural resources, tokens point to a complete redesign for capitalism, one that could bring it in line with the digital, globalized, environmentally challenged economy of the 21st century.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Brave.

Climate change protest image via Shutterstock