Economics Newsletter Edition #25

DUBAI KEYNES SOCIETY NEWSLETTER MARCH 2022 ISSUE

Contents

2 3 4 5 7 9 12 14 17 19 22 24

Editor's Note

Arjun, Sehaj & Viha

Memes!

Arjun, Sehaj & Viha

Econplusdal

Arjun, Sehaj & Viha

long-run viability of bitcoin Universal basic income why crypto sucks... kind of covid & the learning environment fast fashion the metaverse the dot-com bubble NFTs test your knowledge: quiz!

Matthew Campbell

Zaara Ahmad

Nandan Dhanesh

Inaaya Salim

Namya Manghnani

Iman Ameerzeb

Ahaan Punjabi

Tatum Muller

Editor's Note Dubai Keynes Society had another packed term with external speakers and students exploring extremely current topics through the lens of economics. We welcomed Ms. Ewa Karolewska, an environmental consultant from Goumbook to speak to DC students about food sustainability, food security and climate change from a local and global perspective. This allowed us to connect economic theories and its environmental implications in the real world. In a similar vein, Namya from Y12 spoke about the cult of fast fashion, and the tradeoff between excess consumption and production, and the exploitation of our world's resources, while also shedding light on ethical perils of outsourcing cheap labor. It was certainly an environmental and moral reality check for many DC students who purchased goods from popular websites like Shein.

Carrying on the theme of futuristic implications of ventures, Iman gave an extremely topical run-down on the economic implicatons of the Metaverse, a talk within which DKS hosted people not only interested in economics, but also computer science, politics and philosophy. This was a very new concept for many, therefore extremely compelling as we attempted to wrap our heads around what our future will look like! Ahaan looked to our past, talking about the historic dotcom bubble, occurring when most of us weren't even alive, but also showing us the relevance with technological advances today.

We would like to thank Mr. Christopher for devoting his time to help us organize the speakers as well as guide us when required. We are grateful for all the speakers, pupils who consistently attend and actively engage in the sessions for helping us run such an interesting club and hope to see you all next term!

- Arjun, Sehaj, Viha

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First... Time for some memes!

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On 19th and 20th of March 2022, DC welcomed the legendary Econplusdal, once again, along with 160 students from DESC and DC for a workshop on the entire A Level Economics course. On day 1, all year 12s and 13s were welcomed for a mastery workshop and energetic session covering all the topics from theme 1 and 2. His energy was infectious, with competitive games, group work and funny acronyms to keep students engaged and interested in the topic material (Team Keynes beat Team Friedman in the end!). Day 2 was just for year 13s, focusing on theme 3 and 4, and was equally captivating and fun! The 2 days were super helpful in preparing year 12s and 13s for their final A Level exams, plugging in gaps in knowledge, as well as remembering useful tips and tricks to help ace any essay that comes our way! Thank you Econplusdal, we were honoured to have you, and hope to see you again next year!

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CAN A PRIVATELY SUPPLIED CURRENCY, SUCH AS BITCOIN, BE VIABLE IN THE LONG RUN?

Matthew Campbell The last decade has seen cryptocurrency ascend into a trillion-dollar industry, one that has the potential to surpass the current fiat currency market. Traditional money functions as a medium of exchange, a unit of account, and a store of value. This is being broken down by privately supplied currency as some specialise to act as, exclusively, an exchange media or store of value, whilst some are packaged with separate functions to allow them to gather data for example. Privately supplied currency is much more expansive than fiat currency with a variety of uses and its ability to act as an asset, yet it also faces problems. One such problem is the volatility seen from cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH) – whilst their increase in value has been incredible over recent years, this has not been without major price drops. On top of this, to add a layer of stability to these currencies, they can be backed. This, however, has brought controversy as seen with Tether. The longterm viability of privately supplied currencies will be measured based on its ability to build upon the functions and uses seen from fiat currencies such as the dollar.

The functions and uses of cryptocurrencies bode well for their long-run capabilities. The primary function of any currency must be its ability to act as a medium for exchange. Privately supplied currency, such as BTC, has been in circulation for years as an online media of exchange. These transactions can be completed with ease yet, crucially, have very high levels of security. Due to the use of cryptography – the ability to exchange messages that can only be read by the intended recipient – and blockchain security, one of the main benefits of cryptocurrency is its safety in use. Bitcoin has the strongest security of any cryptocurrency; its high hash rate (resistance to hacking) may be a reason why it is so sought after and valuable. Along with ease and security in transactions, anonymity can be provided through public keys. This simply means avoiding using real names on crypto wallets. This may be considered a benefit for many, however, it has inevitably been exploited as a vehicle for criminal activity. This was most infamously seen in the online black market known as the ‘Silk Road’. This was used as a market for drugs, stolen credit cards, illegal data, and much more. When shut down by the FBI in 2013, 174,000 BTC were seized ($8.1 billion). Although anonymity can be provided, absolute privacy cannot as the location from which transactions are complete can be found. This shows how the use of privately supplied currency will allow for it to have long-term success. This may be most evidently seen through the emerging metaverse. ETH will be the most commonly used medium of exchange, with this new reality is rumoured to become a trillion-dollar industry, mirroring the once exponential rise of the internet. Overall, despite the dangers of anonymity surrounding cryptocurrency in a shroud of illegality, the functionality of cryptocurrency may allow for it to symbiotically pair itself with the new rising technology of the future.

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Another feature of privately supplied currency adding to its long-run viability is its function as an asset. The term ‘cryptoasset’ has been popularised with the increasing use of cryptocurrencies as a vessel for investment rather than a medium of exchange. When Bitcoin was introduced in 2009, it had a price of zero, a year later this jumped to $0.09. On June 7, 2011, the price had risen to $29.60 – a 2,960% increase. On November 7, 2021, Bitcoin reached an all-time high of $67,549.14. The viability for BTC to work as purely an asset has led 100,000 people to become millionaires through its ownership. Despite this, cryptocurrency is continuously scrutinised due to its volatility. This was seen on May 19, 2021, as not only did the price of BTC drop by 30%, the price of ETH dropped by 40%.

Although Bitcoin’s volatility is considered a trade-off for the distortion-free market it finds itself in, outside of a central bank or government intervention, it brings succinct dangers as a nascent asset.

To stray away from this volatility, Stablecoins, such as Tether, was created. These derive their value from an underlying external asset such as the US dollar. This allows investors to keep the value within the crypto market, without trading with assets that may see extreme price drops. This is not without its controversies however, Tether was forced to pay $41 million as a part of a settlement for falsely claiming to be fully backed by the US dollar. With $68 billion worth of Tether in circulation, their reserves of the US dollar would have to match that – something they can’t do. Overall, the role of privately supplied currencies as an asset may itself have viability, despite the apparent dangers of its investment, however, as a secondary function, this hinders its ability to act as a pure currency. Its volatility means it is less able to act as a medium for exchange as it is unable to store a stable value.

Although Stablecoins may be considered a quick fix for this, their problems in being completely backed by a fiat currency will reduce their viability, whilst adding to the viability of fiat currencies themselves. This means that as an asset, cryptocurrencies may struggle to have long-term stable viability.

In conclusion, whilst privately supplied currencies may see volatility as an asset, their functions and usage may see an increase in popularity in the long run. The direction in which technology is headed may mean that coins such as ETH are more commonly used. The metaverse may be a primary reason for this, yet, aside from that, as people begin to learn and understand more about the relatively young cryptocurrencies, their usage will only grow. Only recently has it been revealed that certain professional athletes are taking portions of their salaries in Bitcoin. The long-run viability is of these privately supplied currencies is only improving with each coming day and innovation.

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UNIVERSAL BASIC INCOME

Zaara Ahmad Globally women have been carrying the burden of domestic work for centuries. Going unrecognised, women have been working diligently at home to keep our societies running; they have been doing work which leaves them unpaid and vulnerable in our society and it is our job to put an end to all of that. The empowerment of women through economic policy is an urgent matter. A possible solution is to issue an individual income such as a universal basic income which would help guarantee women's economic independence in the face of ongoing discrimination in employment; as well as the potential to increase women’s power in and beyond families and communities whilst allowing women to escape domestic abuse and lift people out of absolute poverty.

When issued with a basic income no one would be forced to be a masculinised 'breadwinner' or a feminised 'caretaker' in order to enjoy income stability to a certain degree, some feminist proponents of UBI see it as a way to reform oppressive gender norms around paid work and unpaid care. The issuing a UBI would essentially empower women by allowing them to make a decision on whether or not they would they want to join the workforce; women would not be forced to stay at home as caretakers. When paired with the provision of inexpensive, high-quality health-care services, UBI has the potential to promote a more gender-equal distribution of care. Others suggest that a universal basic income would raise the value of a variety of non-profit services, such as volunteering and creative endeavours. Because UBI is paid to people regardless of their relationships and family status and done on an individual level rather than a household level, it might enable a variety of family structures as well, including cohabiting and extended families, as well as 'families of choice' founded by many LGBTQ people. Whether and to what extent these benefits manifest will be largely determined by specific design characteristics, such as whether the UBI's benefit amount allows for appropriate living standards.

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The UBI would be a secure and reliable individual source of income, rather than a household income, and it is especially important for women; who are often victims of abusive relationships but are unfortunately unable to leave their abusers because they are completely financially dependent. If a UBI was issued it would help cushion the financial shocks of divorce, which disproportionately affect women. Women’s household income falls, along with their credit score, 41% after a divorce, which is more than twice as much as men’s. It has been proven that a regular flow of cash can mitigate intimate partner violence as a whole as well by improving both emotional and mental well-being as a result of less economic stress. The introduction of universal basic income would also empower women enough to allow them to leave exploitive working conditions and unlike when unemployment benefits are issued, welfare recipients would not risk losing their benefits should they increase their labour participation. Although it does remain a concern that perhaps women in particular may choose to opt out of the labour force entirely if they have of flow of income.

Even though no UBI scheme has been carried out to such a large extent, SEWA, which is a women's trade union in India, with two million members working in the informal economy, carried out a similar scheme which allowed them to address such concerns and see the benefits first hand. First, there were welfare effects; girls especially, had a higher standard of health, nutrition and schooling and the registration and attendance of high school rose significantly during the experiment. The second effect was described as equity, people in lower cost households seemed to gain the most because the income was a way out of their exploitive debt. Third, there was no change in women's overall labour force participation during their experiment however it was seen that the sort of work which women did change to increase their incomes.

Situations where women engage in multiple activities grew which raised household earnings and further increased economic security. UBI also helped women gain power in their relationships, families and communities. It was reported that the UBI enabled them to make more household decisions.

Given the lack of research into full UBI schemes and the fact that those that do exist are rarely studied for gender consequences, debates remain hypothetical. The extent to which UBI's promise for decreasing gender and other inequities will be achieved is dependent on its specific design features, such as the amount of benefit delivered, its financing mechanism, and its interaction with existing tax and social security systems. UBI could have negative consequences for gender equality and social justice if it is not accompanied by investments in high-quality public services and greater support for workers' rights.

However, a well-designed UBI scheme that is integrated into a complete system of social protection, public services, and labour market laws could improve women's financial security, reduce poverty, and reduce wealth disparities.

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WHY CRYPTO SUCKS... KIND OF

Nandan Dhanesh Cryptocurrencies. Symbols like BTC, ETH and DOGE dominate headlines today. But why exactly is that the case? As a computer science student, it’s easy to get excited about cryptocurrencies. The underlying blockchain technology is truly fascinating and does have important potential use cases for the future. However, as an economics student, one must critically evaluate the actual feasibility of cryptocurrencies as a money replacement.

Now, cryptocurrency and blockchain technologies aren’t inherent problems when it comes to creating a feasible money replacement. The issue arises with the current utilization of cryptocurrencies. In its current state, the majority of crypto transactions are purely speculative.

The rapid price appreciation of new cryptocurrencies and the volatility that exists in markets for existing ones proves this. How else could it be justified to have 2 different cryptocurrencies, each with market caps exceeding 12 billion dollars, based on the same breed of small Japanese hunting dog. Frankly, the ever-changing state of crypto markets is largely reliant on retail investors putting their money into something they do not fully understand, after hearing something good from a friend or seeing a headline on Bloomberg. This is what lies at the heart of the problem with crypto as a money replacement.

First of all, what is money? This is often a difficult question to answer as money can take many forms. One commonly accepted definition is for something to ‘be money’, it must be able to fulfill certain ‘functions of money’. While what these functions are exactly can also be debated, let’s assume money must serve four distinct functions: medium of exchange, unit of account, store of value and standard of deferred payment. A US Dollar can fulfill all of these functions, but cryptocurrencies cannot – let’s explore why.

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The first function is medium of exchange. By fulfilling this function, money acts as an intermediary between buyer and seller. This eliminates the problem of a double coincidence of wants present in a barter system – when both agents involved in a transaction want the exact same good or service that the other can provide. Cryptocurrencies can fulfill this function to some extent – as long as both parties have access to electricity, computing power, an internet connection, and a suitable wallet for their crypto.

Medium of exchange is also only fulfilled if the form of money is widely accepted between most, if not all, buyers and sellers in the economy. Currently, there are a very limited number of firms in the developed world that accept cryptocurrencies as a form of payment, and drastically fewer in the developing world.

However, this is not an existential threat to crypto’s candidacy as a new form of money. As the world becomes increasingly more digital, more economic agents are gaining access to the resources needed to take part in the trade and exchange of cryptocurrencies. Whether more sellers adopt it as a method of payment, that is to be seen, but it certainly seems to be trending in that way. So, cryptocurrencies do fulfill the first function of money – to some degree. Let’s explore the second function – unit of account.

Unit of account implies money can be used as a ruler by which other values are measured. All goods and services sold within the economy can be measured by a common denominator, allowing people to compare the relative values of various items. This may be the function cryptocurrencies perform the best at. They act much in the same way to existing legal tender forms of money like the US Dollar. If you hold some amount of a cryptocurrency and want to purchase a good or service from a seller that accepts it, you are likely going to pay prices for items relative to their same prices in conventional currency and the relative price of each product compared to others is likely to be similar. Then, if cryptocurrencies can perform the first two functions of money relatively well, then why can’t they ‘be money’ in their current state? We have to look at the last two functions – store of value and standard of deferred payment.

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Store of value. This is where the argument for cryptocurrencies as ‘new money’ weakens significantly. Frankly put, the enormous volatility seen in cryptocurrency markets today – driven by the excessive speculative use of crypto trading – makes cryptocurrencies a very poor store of value. As of the 18th of March 2022, the price of Bitcoin has fallen 29.23% over the last year. While cash stuffed under your mattress will lose some of its value over time due to inflation, in a developed economy like the United States, your dollars definitely won’t lose nearly 30% of their purchasing power in any year soon. Again, this is not inherently a problem with the underlying technology or concept of cryptocurrencies, it is a problem with the state of the cryptocurrency market. Rampant speculation creates enormous volatility which in turn decimates any notion of price stability. This is one of the main reasons that cryptocurrencies, in their current state, simply cannot adequately fulfill all functions of money. Another reason can be seen with standard of deferred payment.

Standard of deferred payment means that money must be usable to make purchases today that will be paid for in the future. This enables the provision of credit to economic agents, allowing them to spend money today and repay their debt with money in the future. For the same reason as with store of value, cryptocurrencies cannot fulfill this function. Using Bitcoin as an example again, if you borrowed some number of Bitcoin a year ago with the agreement to repay its principal amount today, interest payments aside, by paying the same number of Bitcoin today, your lender is receiving 29.23% less purchasing power than they lended to you one year ago. This means that credit settled with cryptocurrencies will basically be non-existent as lenders don’t know the value of what they’ll be getting back, and borrowers don’t know the value of what they’ll have to pay back.

Crypto sucks… kind of. In its current state, it cannot fulfill the functions of money adequately enough to be widely used as a form of money. The highly, almost purely, speculative nature of cryptocurrency markets today mean the volatility of cryptocurrencies is simply too great to overcome as a challenge for making crypto a new form of money. However, this is not a problem with the underlying technology, which in and of itself, is quite remarkable. As the world becomes more digitized, there is a significant place for crypto and the blockchain in modern economies. At this moment in time however, I don’t believe cryptocurrencies are a viable new form of money.

The potential for cryptocurrencies is real, but for now, I’d leave my savings in dollars and not DOGE.

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HAS THE PANDEMIC LEFT EVERLASTING EFFECTS ON THE LEARNING ENVIRONMENT?

Inaaya Salim Join call. Camera on. Unmute. The repetitive cycle that students have become all too accustomed to. Ever since March 2020, life as we knew it changed forever; education, air travel, entertainment and restaurants became a distant memory as we were trapped in our own confinements during the lockdown. Every sector of the economy was forced to adapt to the uncertain times and enforce the changes required to accommodate them. Schools were no longer the same social and academic environments of enrichment, but rather a digitalised world where interactions became limited and learning suffered.

(Options presented when joining an online call: Microsoft Teams) At its peak, 94% of students lost the ability to call themselves as such, as they were forced out of school.

The cause of this varied from inaccessibility to resources - such as a tablet to join virtual lessons - to a shortage of teachers (because of earlier retirement rates, redundancies as a result of firms’ costs of production increasing and so forth). In California, a study found that there has been a 26% increase in the number of teachers who retired in the spring of 2020 compared to the previous spring. This has had detrimental effects on the progress, potential success, and wellbeing of students. Stripping away the opportunity for children to learn in a stimulating and nurturing environment with other like-minded individuals may affect their ability to socialise, enrich their knowledge to its full potential, and reinforce this understanding by sharing ideas with others. Externalities of the transition to a virtual learning environment extend to teachers too, however, where the longer working hours, need to cover extra classes and additional responsibilities undertaken have resulted in a fall in productivity and wellbeing.

It is important to understand that this sudden unforeseen shift to a completely foreign method of learning, for which students and staff alike were not prepared, requires a strong line of communication between all members of a school to be maintained, in order to understand how each of us can help make the transition as seamless as possible. A slogan that would be beneficial to remember in this situation is ‘Improvise. Adapt. Overcome.’ (Unofficially used by the US Marine Corps). When applied in the school environment, implementing regular virtual school-wide assemblies, encouraging a continuous atmosphere of teamwork and promoting collaboration, could all be examples of methods that help narrow the disparity between online and physical school.

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When presenting a slideshow on a research topic online and being met with the silence of icons with variations of two-letter initials, in place of what used to be my peers’ encouraging smiles, I, like many other students, felt a sudden sense of insecurity. The loss of personal interaction has affected the ability of many students to feel confident enough to participate in discussions, volunteer to answer and ask questions about their doubts. As face-to-face learning returns, I believe that the online experiences have created a long-term impact on confidence levels, as I have found that people are less willing to share thoughts and opinions in the fear of being wrong and given the connection between teachers and students that was compromised during the lockdown.

(An example of a virtual call with all the cameras turned off: Microsoft Teams)

To improve our learning experience, schemes to encourage praise and appreciation for students should be undertaken by schools worldwide, since they have proven to be effective in fostering students’ confidence levels and encouraging them to be more involved in discussions, debates and discourse. This could also have a rippling effect on peers around them, motivating them to involve themselves in lessons, and would therefore lead to an increase in overall participation rates.

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THE CULT OF FAST FASHION

Namya Manghnani Shopping used to be an event, but with the growth of malls and shopping as a form of entertainment in the 1990s, discretionary spending on clothing increased. This created the space for fast fashion to flourish. Fast fashion is the term used to describe clothing designs that move quickly from the runway to stores to take advantage of trends. It offers affordable prices and instant gratification for consumers due to the business model that usually ensures deliveries within a few days/weeks, more profits for companies, and the democratization of clothing, which is the idea of middle quality clothing for the majority consumers.

It is cheap, trendy clothing produced at a low cost. It seems like a mutually beneficial relationship between producers and consumers. This seismic growth is made possible by innovations in supply chain management among fashion retailers. It grew in popularity because of cheaper, faster manufacturing and shipping methods, an increase in consumers' appetite current trends (greatly aided by the growth of social media), and the increase in consumer purchasing power—especially among young people.

Its goal is to quickly produce cost-efficient articles of clothing in response to, or anticipation of, fastshifting consumer demands. While the garments are often poorly made, they're not intended to be worn for years, or even multiple times. It challenges the established clothing labels' tradition of introducing new collections and lines on a seasonal basis. Fast fashion brands often introduce new products multiple times in one week to stay on trend. It is a perpetually accelerating trend cycle that doesn’t seem to be stopping any time soon.

One of the most famous, newly emerged fast fashion brands is Shein, which has taken fast fashion to a completely new level of speed and choice for consumers. Shein is a Chinese multinational that has brought the Chinese concept of social commerce to the West, it combines social media and online shopping. This concept combined with their revolutionary speed of manufacturing has created moved ultra-fast fashion to a larger scale than ever before. To give you an idea: their gross merchandise value (GMV) in 2021 was $20 billion dollars. By 2022 analysts expect Shein’s GMV to overtake Zara’s revenues.

In May 2021, Shein became the most downloaded shopping app in America, beating Amazon.

Despite all this success, there are a lot of problems with the fast fashion model from an ethical and environmental standpoint that are overlooked.

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This is not restricted to Shein, many other fast fashion brands take part in these practices and contribute to the negative spillover effects. Shein is just an example of the scale at which it can occur.

These goods are often overconsumed because they are so cheap easily available, and social media outlets such as TikTok and Instagram promote them so heavily. This overconsumption is often a result of an information gap in the form of a lack of understanding about what the production methods are and what harm they can do to the environment. There are lots of negative externalities with the production and consumption, and this is all to say that it can be argued that fast fashion products are demerit goods.

The externalities on production mainly affect the environment, with the use of toxic chemicals and synthetic fabrics, water pollution is a major disadvantage of fast fashion production. Along with this are the carbon dioxide emissions; the fast fashion industry accounts for 2-4% of greenhouse gas emissions, exceeding the levels from the aviation industry. On the consumption side, the externalities also greatly implicate the environment.

Because the cost of production and the price of the goods need to be kept so low, the fabrics used are often low-quality synthetic microfibers or polyester – which is basically plastic. Because they aren’t made to last, the clothes can be thrown out regularly and 57% of all discarded clothing ends up in landfill; the landfills start to pile up, then the trash is moved to an area to be incinerated. This process poses multiple public health and environmental dangers to the people who live in nearby communities as toxic substances or large amounts of poisonous gases being released as a result of burning landfill.

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Furthermore, because they sacrifice quality for quantity, producers need to sell as much as possible as quickly as possible, which often means they are using exploited labour. Many fastfashion brands are facing questions over whether they source cotton from the Xinjiang region in far-west China, where the government is accused of using forced labour.

Also, the companies outsource their production to supplier firms in developing countries known as Tier 1 companies. These Tier 1 companies then subcontract production to manufacturing companies, or suppliers, that are not officially authorized by or affiliated with the fast fashion brands. Without authorization or affiliation, fast fashion brands carry no legal obligation to ensure decent working conditions in the bottom tiers of their production network. And because unauthorized subcontractors are unregistered, they operate without government regulation and oversight, resulting in deteriorating work facilities where worker abuse runs rampant and disproportionately against women- who make up 85% of garment workers in fashion supplier factories in Cambodia, Indonesia, Sri Lanka and Bangladesh.

Workers are often paid by the piece, between 2-6 cents for every item they make. This not only results in workers being paid far below the minimum wage, but perpetuates the dangerous working conditions, as they often feel they cannot have a break at all throughout the day.

Fast fashion is overconsumed, the problem can be immensely deescalated if fast fashion was only consumed by those who cannot afford alternatives and are likely to keep the clothes they buy for longer. The problem reaches this scale when people are buying $2000 worth of clothes on a monthly basis to keep up with the ever-changing trends. More brands are promising to switch to more sustainable fabrics such as Zara, who plan to make the complete switch by 2025. But, government regulation is needed to combat the ethical and environmental problems that come as a result of the growth of fast fashion.

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THE METAVERSE

Iman Amerzeeb

The metaverse.

A word that has recently been taking over the media, a supposed one trillion dollar opportunity.

But what actually is it?

When people say the metaverse the first picture that comes to mind is the matrix or a dystopian society. But the metaverse is not a distant future, it is something that is being developed as we speak and something that will be imminently transforming our society and our economy.

The metaverse is the future iteration of the internet, also known as web 3.0, made up of shared 3D virtual spaces linked into a virtual universe. It mimics our current reality, enhancing it and making it more immersive. But what’s truly key to the metaverse is the fact that is open to everyone.

The foundation of the metaverse economy is decentralised finance, a structure that is not controlled by one single entity. Using blockchain, the metaverse can take advantage of its ability to store data securely and verifiably in a timestamped, immutable ledger within a decentralized database without the need for a trusted central authority. This technology helps address privacy and data protection problems that a centralized metaverse would inevitably have to face. A very prominent example of a decentralised metaverse is decentraland, a world built on etheruem blockchain which has its own cryptocurrency called MANA. Decentralised ownership means that you own the digital content, not the central authority like a game development studio. Which means you have the complete autonomy to choose what you want to use your digital content for.

The question that everyone is asking, however, is what will the economy actually look like and what changes can we anticipate as the metaverse becomes an extension to our global economy.

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The first implication is through NFT’s - non fungible tokens. An NFT is a claim of ownership for a unique, non-interchangeable digital asset that is stored on a blockchain. In the metaverse NFT’s will be the foundation of value. Which means that NFT’s can be purchased by businesses and consumers and used to represent the equivalent of real world assets. An example of these assets is land. In June of last year, the digital investment fund Republic Realm bought a property in decentraland for more than 900,000 dollars.

Decentraland

The plot will now be turned into a virtual mall in a high traffic area, modelled after the Harjuku district in Tokyo. However, prices in the metaverse have reached new peaks, increasing by 400 to 500% due to sudden media attention following Facebooks rebranding as ‘Meta’.

Real estate is not the only example of virtual assets in the metaverse. In fact, fashion is one of the earliest sectors to grasp the economic potential of NFTs and the metaverse. Brands have been changing their business models to include NFT’s in order to gain access to the metaverse.

Whether it be through selling an NFT equivalent of the clothes bought in the real world, or offering customers who already have a relationship with the brand access to exclusive NFT’s.

For example, Burberry has created a NFT collection including accessories as part of the Blankos Block Party video game, Louis Vuitton launched its own NFT-video game, LOUIS THE GAME, where you can win an exclusive Louis Vuitton NFT that you can then use in the metaverse, and Adidas has recently launched their first NFT collection, monetising off of the emerging metaverse. These projects have been extremely successful, selling out instantly and increasing

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THE DOT-COM BUBBLE

Ahaan Punjabi

Venture capital is private equity investment made by venture capital firms or funds in early-stage start-ups with high growth potential. Venture capitalists and other investors poured money into software and internet start-ups, which was one of the key causes of the dot-com bubble.

Additionally, capital was readily available due to the availability of low-cost financing made possible by relatively low interest rates.

Decreased barriers to accessing capital for online start-ups caused the bubble to inflate even further. This investment was frequently made on the promise of further growth, and the money were spent primarily on unsustainable methods of increasing traffic, such as advertising and promotional offers. This led to the cost of acquiring a customer often eclipsing the value provided by the customer and perpetuated incurring net operating losses

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By the late nineties, the internet had become a sensation with the development of the World Wide Web and search engines, and practically everyone wanted to be a part of it. This resulted in a rush of dot com institutional and investor demand. To take advantage of this enthusiasm, many of these companies went public. Given how young and obscure the technology behind these start-ups was, retail investors did not have accurate ways to understand the value of these companies. The need to get in on new technologies drove valuations up, therefore the estimates quoted were frequently optimistic. Fundamental analyses such as revenue were frequently overlooked in favour of user traffic, resulting in a value that did not accurately reflect the start-ups' true financial viability.

The media fuelled speculation and heightened public interest in dot-com enterprises. The media frequently promoted overly bullish views on technology stocks, which were often quite risky. They promoted the concept of explosive growth and easy profits, as well as keeping technological trends, which brought in many individual investors, contributing significantly to the overvaluation of the companies, particularly when several went public. Large business magazines like Bloomberg and The Wall Street Journal did this, allowing much of the often-misguided advice to be legitimized further by the credibility of these publications. The media played the role of pushing the idea that technology as an industry would continue the unprecedented growth. The speculative bubble, created amongst the public which they influenced, would further add onto the effect that had previously been driven by mostly institutional investment.

The Federal Reserve raised interest rates thrice in 1999 and twice in 2000, signalling that the bubble was about to burst. This was the tightest fiscal policy in the 1990s leading up to the crash. The Federal Reserve began attempting to rein in soaring online stock values. The Federal Reserve Board chairman Alan Greenspan's remarks in 1996, in which he described the bubble as "irrational exuberance," signalled this. Financial experts began to change their behaviour, advising investors to sell online securities since they were no longer undervalued, and media outlets quickly followed suit. As the bubble decreased investment standards and boosted capital accessibility, the tail end witnessed a peak in low-quality start-ups entering the market, to the point that many start-ups founded by the end of the bubble had no chance of profitability. By April 2000, the Nasdaq had lost 34.2 percent of its value since its peak in March. Hundreds of companies saw their stock value plummet by 80 percent or more, with many declaring bankruptcy as a result.

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Between September 1999 and July 2000, insiders at dot-com companies sold $43 billion in stock, more than double the rate at which they sold in 1998. Individual investors were slow to react to insider selling and continued to pour $260 billion into US equities funds as the stock market began to fall apart in 2000. This increased from $176 billion in 1999. Ordinary people were the most aggressive investors during the dot-com bubble, while institutions and insiders were bullish. By 2002, 100 million individual investors had lost $5 trillion in the stock market. According to a Vanguard survey, 70 percent of 401(k)s had lost at least one-fifth of their value by the end of 2002.

According to CB Insights, start-ups raised $292.4 billion globally between January 2021 and July 2021, with 751 investments exceeding $100 million. Many significant tech start-ups have since had IPOs with massive valuations, with notable examples including Coinbase and Airbnb . The introduction of special purpose acquisition companies, or SPACS, as an alternative to IPOs for high-growth companies also represents growing interest in capitalising and investing into current momentum in technology .

This rising pattern of venture capital investment and skyrocketing valuations as digital companies go public harkens back to 2001, with the buzzword "dot.com" seemingly being replaced with "ai," "fintech," "decentralization," and other promising technologies of today. We have recently seen examples reflecting the past such as inflated start-ups like Rivian and WeWork slumping due to misleading promises or continuing operations with a net loss as well as the decline of large blue-chip tech stocks like Facebook and Netflix. While public information on how to value the technology and measures behind these technology companies have become more accessible, it appears that unsustainable, often retail investor fuelled, growth is still present today. It seems that only time will tell if we face another bubble burst in our near future.

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NFTs, HERE TO STAY OR JUST ANOTHER TREND?

Tatum Muller We’ve all seen the hype around NFTs. Whether it is on Instagram, YouTube or TikTok, they were one of the largest hits of 2021 and seem to be making anyone, even those as young as fourteen, millionaires. It is a highly profitable market said to be worth over $13bn with the most expensive NFT sold at $91.8 million (about the cost of a high-end private jet) dollars. So, what exactly are they, how do they work and how will they impact the future?

NFT stands for non-fungible token; an interchangeable digital asset stored on a unit of blockchain which can be traded across the internet. To put it simply, it is a digital file that stores information such as who created it, who bought it and its ownership history. The blockchain being a publicly visible ledger which keeps track of all transactions on the decentralized web. Due to these transactions being made publicly and hundreds of computers validating it at once, it makes it incredibly hard to hack or tamper with the information and therefore makes blockchain highly secure.

While it seems to be influencers and celebrities broadcasting the ‘Bored Apes’ they have bought, there is some tangibility behind the concept of NFTs. For example, one feature of NFTs that are becoming increasingly common is exclusive access to elite members only clubs. A famous YouTuber group with around 7 million followers called the ‘Nelk Boys’, who founded the brand Full Send, announced on January 17th, 2022, that they would be taking a step into the NFT game by launching their own Full Send Metacards. On the OpenSea page for the collection they advertised that the cards will be used for exclusive access to future gyms, lounges, festivals, and casinos, while they also plan to venture into projects in the MetaVerse. The collection sold out in minutes and with around 10,000 cards available and each priced at around 0.75 ETH ($2300 at the time), they made an estimated $23 million dollars in total value. Therefore, NFTs seem to have more value than just being a “trend,” they may define a new level of luxury.

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Another prediction for the future of art NFTs is the fact that it will diversify and democratize modern day art. Today, anyone who has access to an internet connection has the ability to obtain art online, they no longer need to be physically present in a certain place in order to view pieces. Furthermore, not only do more people have access to artwork but it is now easier to publish. NFTs are giving people the opportunity to create, distribute and sell their artwork online, bypassing traditional gatekeepers of artwork who have dictated who has access to it for centuries. With more artists being able to gain support for their work through online platforms, NFTs create a shift towards a more representative outlook on the world around us. Artists do not need “connections” or to find galleries who will publish their works, instead they are able to create and publish with their being no boundaries on who they may be in society and their economic situation. There are more than 40,000 buyers of NFTs every month and due to the limited boundaries on the entry to the market, it is only expected to increase as the world becomes more digital, creating a wider range of exposure for more artists.

So, to answer our main question, there is no doubt that the weaker projects will run their course and then fizz out, but those that are based on strong foundations are expected to continue their path into shaping the future of technology. One of the biggest factors that contributed to this conclusion was the fact that in 2021, large companies such as Nike, Facebook and Pepsi joined the NFT market and started to lay down strong fundamentals for future projects in the MetaVerse. The most important attribute of blockchain based assets such as NFTs is the fact that they provide authenticity and ownership. Ramkumar Subramaniam, Co-Founder & CEO of GuardianLink.io made a statement to the Economic Times India, stating that he believes that the biggest challenge of receiving university and college degrees in printed form have been verification and believes that in the future it is possible that degrees will be given in NFT form to prove authenticity. Now, the argument that NFTs are here to stay is looking overwhelmingly positive but only time will tell how far the world is prepared to evolve into decentralization.

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TEST YOUR KNOWLEDGE!

1) Which imports did the US ban from Russia following their invasion of Ukraine?

2) A cluster of new studies has found that a fraction of children in the youngest grades have missed reading benchmarks, up significantly from before the pandemic. What is this fraction?

3) The US Government now owns a mint Charizard Pokemon card as it was obtained fraudulently using coronavirus relief money. What is the value of this card?

4) Representatives from 175 countries agreed on March 2 to begin writing a treaty that would restrict the explosive growth of what form of pollution?

5) Which Japanese carmaker was forced to close all its plants in the country following a cyber attack on one of its suppliers?

6) Which region in Asia is losing airline business because of its zero-Covid policy?

7) Which video game publisher's stocks did Berkshire Hathaway purchase in the fourth quarter of 2021?

8) The chief executive of which fitness company agreed to step down after a campaign by activist shareholders?

9) Which Big Four accounting firm has introduced "flexible public holidays" for its UK staff?

10) Recently, the Central Bank of England increased interest rates to what percentage?

1) Oil, coal and gas

2) 1/3

3) $57,000

4) Plastic pollution

Answers: 5) Toyota 6) Hong Kong

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7) Activision Blizzard

8) Peloton

9) Deloitte

10) 0.75%