Explaining blockchain to the uninitiated is good sport, but it’s also an exercise in inefficiency. Whenever I’m ‘explaining the chain’, somewhere in the “distributed spreadsheet” analogy I feel silly. I realize that this person either didn’t really want a blockchain explanation or the analogy doesn’t capture the significance of blockchain as an innovation. Usually it’s the latter. Even if the explanation lands, it still needs to be piecemeal assembled with other analogies to get the whole concept across.

But there’s a thrill in striving towards a haiku representation of a hyper-object. So maybe we’ll try again:

blockchain offers a new computing paradigm:
“survival-oriented computing”

Blockchain is a paradigm of computing where each node is programmed and operated towards a single goal: survive. Surviving for the node means justifying its existence to the node operator by creating some profit. To do this it has to make the operator’s account balance go up and then ensure that balance is worth enough in fiat.

What else? Nothing. That’s it. If the node persists, it persists. In the same way that we could define life as that which spites entropy, blockchains are those which spite the state of digital nature. Nobody is obligated to do (or not do) anything on the internet. Ultimately, the programs that exist in the sphere of global computing are those that make sense to exist, i.e. those that win out in the arena of digital reality.

Every other aspect of blockchain design emanates from this survival incentive. Nodes are programmed to work together because centralized systems are not as valuable as decentralized ones (centralized systems are vulnerable to attack). Nodes are programmed to stay in sync because forked systems are not as valuable as unified systems, especially if a given node sides with the smaller fork path. Nodes are programmed to try to use a few resources as possible because costs eats into survival. Nodes are programmed try to achieve consensus as fast as possible to avoid confusion or repeated work. Nodes are programmed to process as many transactions per second as possible without affecting decentralization, because this increases the value of the network.

By ascribing agency to nodes, we start to realize that node operators and nodes are symbiotic. Even if the nodes do not demonstrate any general intelligence, they are still as symbiotic with us as trees and plants providing us oxygen and energy.

Please understand, I’m not inventing this digital state of nature as a means of justifying morally reprehensible actions within it. The opposite. By acknowledging that blockchains rage against nature, we are provided with the perspective to understand the necessity for social infrastructure to conquer our lesser selves. More than just building technology, we must build community, justice and rule of law.

There is something that differentiates human motivations in this framework from those in crony capitalism. Corporations wield more power than governments in the incumbent system. They seek to grow indefinitely. They operate in a state of pure competition. The world of blockchains enjoys competition too, but it also sees new force: cooperation. In blockchain, decentralization is a strength, not a weakness. If any given player gets too big, they have a strong incentive to self-limit or watch their chain lose appeal for it’s centralization. This is an incredible thing. The new system values cooperation as well as competition. They hold in a balance together. The crypto movement will take over the world because it understands this.

I’m excited for the future. If you are too, buy some crypto and stake it with Stakefish, where they pay my salary as a protocol specialist.

Decentralization = Demonopolizing Power + Corruption Resistance + Nation-state Resistance

Demonopolizing Power

I like this word demonopolizing because it has the word ‘demon’ in it.

The most accessible and least concrete meaning behind decentralization is the obvious ideological thesis: that power is very centralized in this world, that this centralization is the root-cause of many social ills, and this power should be decentralized (read: destroyed and replaced with democratic alternatives).

Everywhere we look we see institutions crumbling as their monopolies hold themselves and the world back with rent-seeking behavior:

• The United States enjoys a monopoly on the global reserve currency, an exorbitant privilege that affords us a massive military and the ability to print our way out of economic and monetary policy missteps unlike any other country.

• Healthcare in the US is ruthlessly expensive and inefficient because the players are too big (centralized) for congress to mess with.

• Universities and Academics around the world offer disappointingly few satisfying answers to big questions as we try to navigate these times of turbulence. The progress of most scientific disciplines has slowed or transformed into LARPing simulation.
  
  Tuition prices are rising much faster than inflation and putting generations of Americans in debt. College administrations sent home millions of college kids during the pandemic despite hard evidence that covid is less dangerous to young people than driving a car.
  
  What’s going on here? Centralization. Academics and administrators alike have become ideologically centralized. There are many exceptions but by and large our trusty academics are not keeping up with reality and our trusty schools are revealing their incompetence, or worse, bad faith.-

• Finance is a cabal of knighted banks that operate as extensions of the US federal reserve. When they make money, they take it home. When they lose money, we foot the bill. When the Fed says “jump”, they say “how high”. Consumers are stuck with credit cards with 27% interest rates and savings accounts with 0% interest rates.

• Tech is basically five companies directly (or indirectly) buying our attention for nothing and selling it for billions. Meanwhile they stifle innovation by acquiring or squashing competition and keeping their data ecosystems closed.

• Hollywood and the media seem to think they know the answer to society’s ills, but the quality of their content has steadily declined. The entertainment value has eroded because most of the content offers no satisfying answer to the philosophical/ideological question of what is wrong with the world and how we should go about fixing it.

What do these dysfunctional sectors have in common? They have too much power. So let’s decentralize.

Corruption Resistance

If it’s going to be decentralized, it’s got to be permissionless, and if it’s got to permissionless it also has to be distributed. Otherwise it’s going to be centralized. Got it?

A centralized system is vulnerable to corruption. Just like liberal democratic governments tend away from corruption more than authoritarian ones, liberal democratic computer systems tend away from corruption more than authoritarian ones.

Ask yourself: Why did Bitcoin work? Did it work because it was somehow resistant to nation states? Did it work because it ran across many computers all over the globe? No, it worked because everyone knew that there was no one individual with the ability to arbitrarily create, steal, or prevent the exchange of money. With that property it turns out people are really willing to plough their money in assets not protected by a physical military. The ability for anyone to start or stop a node in the system at any time without permission is what makes a system permissionless. Period.

Google runs software across the globe, but are they decentralized? No, because they’re not permissionless. I can’t spin up a Google search engine node as a non-google employee. The fiat banking system is the same – it’s the product of tens of thousands of computer systems working redundantly in tandem to deliver a (very subpar) experience, and yet its not decentralized because it’s not permissionless.

So remember this: when people talk technically about decentralization, they’re usually referring to the permissionless nature leading to corruption-resistance. Nobody wants to invest in a thing without getting some controlling equity in return.

Nation-State Resistance

This is the edgy one. Remember, cryptocurrencies are capable of handling massive value without corruption because they’re democratically controlled. In order for them to be democratically controlled, they have to be permissionless, i.e. they have to run in a distributed fashion such that anyone can join the system with a node of their own. So we get corruption-resistance, but we also get this neat property of redundancy. There are 10,000 bitcoin full nodes out there. They’d all have to go down for bitcoin to die. That’s some resiliency.

The funny thing is that this naive nation-state resistance mostly a convenient byproduct of the corruption-resistance we were after above. “No”, you’ll say. “Bitcoin was designed to be redundant so it couldn’t be shut down by nation-states.” Hell no. Hostile governments don’t need to shut down Bitcoin, they need to shut down Bitcoin in their country.

How do they do this? They shut down and prosecute every bitcoin node operator in their country, then they set up a national-firewall and blacklist external bitcoin IPs. While they’re at it, they blacklist VPN and proxy providers. Fortunately for them, it’s pretty easy to get a dynamic list of all the Bitcoin IPs. This is what China has done successfully. So no, Bitcoin doesn’t come designed with much nation-state resistance. And this is a huge problem.

Bitcoin is a threat to the dominance of the most powerful organization in the world. Few realize this. You might think this organization (the US) will go down without a fight in some nice bloodless revolution. This seems wrong to me. Americans have everything to lose if dollar system ends, because without it they will suddenly be in a position where the axis of China is an even match economically (and then militarily). So they’ll fight tooth and nail to ban the thing when they figure this out. Many other countries around the world will follow suit when they realize that this same threat affects them, albeit less dramatically. In anticipation of this, it is up to us as an industry to design systems to evade these controls. This task, of nation-state-resistance, is the third and final meaning of decentralization I’ve observed. It’s the least discussed and most important meaning of decentralization because without this property blockchains will certainly succumb to nation-states.

The narrative in Crypto is that we are in a democratic movement. This is true to some extent. Before crypto, all that existed in the realm of digital public goods were undemocratic systems designed and managed by private companies with no formal responsibility to users. Now we’ve got digital common goods that really are democratic. Proof of work networks are democracies of hashpower voting. Proof of stake networks are democracies of token voting. If enough people with power want the system to change, it will.

But how far will the pendulum of democracy swing, and what will be the result? Will the future be one of utopian direct democracies or dystopian mob rule? Will we continue to have our Vitalik Buterins, Do Kwons, and Anatoly Yakovenkos, issuing supreme authority in systems that only seems like a democracies? Or will these cult-of-personality leaders go out of fashion?

I want to make the (seemingly) contradictory assertion that the future of crypto will be utopian bright, but will continue to involve sovereign figures like these. In Exit Before Voice I go into why the fundamental nature of blockchains is governance, from the micro scale (programatic consensus for block creation) to the macro scale (human consensus for proposal ratification). I also go into why the world of blockchains will be unlimited, in the sense that there will be no effective resource constraints on the creation of new (energy-efficient) blockchains. Last, I go into why, when things go bad, the option of exiting blockchains will be a lot more enticing than the option of taking democratic action in a system, because the cost of switching chains will be negligible. Does these observations remind you of anything?

When consumers are given choice, they’ll usually choose the best product. Unless a customer is exceedingly loyal, it is rare that they will build up an ownership position in the company behind their favorite product in order to influence its development. More likely they will switch products, on to the next best one.

When I close my eyes and think of the future of blockchain, I see a world where blockchains have Presidents, appointed by elections of validators, backed by quorums of token holders. Some of these presidents might hold a lot of power, and find it difficult to be voted out, like the names I mentioned above. Others might not. But one thing for certain is that people only gravitate towards democracy when there’s no better alternative. And if there exists a universe of chains managed by various governors, it seems likely that at least one will be a better alternative.

In this godforsaken industry we love to talk about decentralization. We’re constantly using this word. It’s a fantastic word with descriptive and prescriptive qualities, with the perfect balance of specificity and vagueness. It describes the systems of today and simultaneously describes the systems of the future. It is a rallying cry and a north star.

But I’m here to claim that we have outgrown decentralization. It is not serving us anymore as a concept. It’s loaded now! What began as a word representing the trend towards incorruptible computer systems gradually began informing how we decide what to build. We’ll encounter a policy question, like “what is the best distribution of token equity?” and then turn to this idea of decentralization in spite of its utter uselessness in deciding questions around target gini coefficients.

To make things concrete: decentralization in its original sense was about corruption resistance. Not censorship resistance, corruption resistance. A system that has corruption resistance has these properties:

1. it is not administrated or controlled by a single entity

2. anyone can become an administrator, there is no gatekeeper

If we’ve learned anything from the success of crypto thus far we’ve learned that corruption resistance is the bare minimum needed to get people to sign on to collective efforts like a new currency. If I started a crypto currency using a centralized network today, I would have a hard time convincing anyone that I wouldn’t abuse my power later. But when the network is controlled democratically, no individual has that power and everyone can invest more safely.

Why is decentralization not about censorship resistance? Because censorship resistance is a real can of worms. To get censorship resistance we need these computer networks to operate in secret, without an open list of node IPs. When node IPs are public the way they are now, state actors can kick in the door of domestic node operators and blacklist the IPs of foreign node operators.

There are a whole slate of other things that decentralization is not really about.

A geographically distributed computer network? Not decentralized (Google has servers in over 69 countries). A closed network with many actors? Not decentralized (the banking system is thousands of institutions with state gatekeepers). Nope, it’s just about corruption resistance.

I’m not saying that censorship resistance isn’t important. Quite the opposite. I'm doing my best to ring the alarm on the impending collision course between decentralized blockchains and nation-states. But decentralization is not the right concept to lead this charge.

The Decentralization Dogma

At some point the tail began to wag the dog on this word. It got coopted into marketing materials as jargon that signaled ideological purity. It got referenced as a principle to inform complicated design decisions. It got memed into a tribal rallying cry during manic price rallies and into monk-like meditations during depressive bear markets. Crypto was a movement, and the unifying idea seemed to be decentralization.

And the above sentiment seems destined to play out. How can any monopolistic consumer service compete with a decentralized version? Decentralization gives people sovereignty over their data and the system itself. People like that better, naturally. Digital feudalism will end and digital capitalism will replace it. There’s immense value to the simple idea that the world of server technology is changing, and that centralized systems with long terms-of-service operating “on behalf” of users are probably doomed.

But even the mighty decentralization concept has its limits, and we’re starting to see that the concept operates better as a descriptor than a guiding principle, because it offers us little in the exploration of simple questions.

For example: How decentralized should we be? What is the ideal distribution of network power? Across the political spectrum, capitalists and communists might agree that it’s bad when power becomes too concentrated. But if this is all that the concept of decentralization has to offer then it’s probably irrelevant here.

Or another, more sophisticated question: Which is more decentralized, proof of work or proof of stake? Trick question! Neither. When we talk about “proof of XYZ” we’re talking about the coordination mechanism that network participants use to democratically decide what valid blocks look like and who gets to produce them. The XYZ is the resource that’s used for voting in the democratic process, since one-person-one-vote is subject to fraud. In proof of work miners hold direct power and mining pools hold indirect power. In proof of stake tokenholders hold direct power and validators hold indirect power. But neither system is inherently more decentralized by nature.

Where does this leave us? It is my sincere hope that we collectively get really good at distinguishing between decentralized systems and censorship resistant systems, because we have a lot of work to do in the latter. And if this revolution will succeed, it will succeed on the basis of its immunity to nation states.

“If you cannot explain something in simple terms, you don't understand it.” ~ Richard Feynman

The difference between blockchain and other technologies is this: Blockchain is Political.

Sure, we’ve seen the pen turn into the printing press and later into mass media, but these are tools of communication which, on a march towards total connectedness, have only accelerated the diffusion of ideas. They haven’t changed the nature of how we organize those ideas into action.

Blockchain gives people a way to organize into unassailable groups. It lets them start currencies, fund agendas, and launch revolutions. All of this was possible before, of course, but governments also had the option of striking back. With their power of violence they could shut down (social) media sources they didn’t like. They could bust up protests. They could seize assets. But with blockchains it’s possible to do these things anonymously, at scale, in a way that’s truly immune to these physical controls.

These claims of indestructability might be hard to believe. Most will only appreciate the power of blockchains after watching their government officials make a concerted effort to shut down these computer networks and then fail. The dilemma will become the choice of either shutting down the internet or accepting the existence of these well-financed groups. Mark my words, countries around the world will explore both sides of this decision.

Suddenly we live in a world where people are dramatically more capable of organizing against the will of others. This is wonderful and terrifying! In the long-run, the economies of violence are undermined, and this is good. But if everyone is free to exist, that includes the bad guys too. The elite class killed the old world and gave its people reason to defect but the criminal class currently controls the new world. These two classes want the same things: they want to steal from us and lie to us, to get rich at the expense of social trust and cohesion. Blockchains rage against a digital state of nature, but that does not mean that the world inside their membranes must be as chaotic as the world outside. If we don’t like bad guys on our blockchain, we can do something, and that’s a power that we should use. We can make our own governments and rule of law and have strong values and all the other lovely things that make great countries great, so that after a fair trial we can unceremoniously seize the bad guys’ assets and discourage bad behavior more broadly.

This is blockchain’s fundamental nature: to make it possible for people to organize into digital systems of government.

Those who understand this fact are in awe of its implications. Those who don’t are forced to cobble together explanations of blockchain using silly phrases like “decentralization”, “self-sovereignty”, and “digital gold”, making vague appeals to the inevitability of something coming after western-led capitalism. But these complicated explanations miss the point. I hear in conversation people referring to blockchain technology and cryptocurrency technology as the same thing, but this is as nonsensical as implying that the dollar and the United States are the same. The essence of blockchain technology is governance, and one of the many responsibilities of that governance is the administration of its currency.

Blockchain will save the world because more than anything the world needs good governance, and blockchain enables good governance to exist against the elements. Just as centuries ago the American continent served as fertile ground for experiments in democracy, the internet today is home to hundreds of experiments in digital governance, many of which will emerge as self-sustaining alternatives to the digital state of nature outside their walls. Blockchains will compete on user experience and security, sure, but above all they will compete on values and the political support of a choosy citizenry.

If you want to start a geostate you need land, a finite and precious resource, and guns (or a friend with guns). To start a cryptostate you need a few computers. There’s no resource constraining their numbers and attacking them is expensive, so we should expect them to proliferate like crazy. In this cambrian explosion we’ll witness an high-speed evolution of cryptostates towards values and design that maximize chances of survival. In the restaurant world, bad restaurants go out of business quickly because consumers have so many options and the margins are small. The same dynamic will apply to cryptostates – they will be competent by necessity because the people, in their abundance of choice, will refuse to settle for unfair systems or dishonest, incompetent leaders. We will see the governance quality of cryptostates quickly surpass the governance quality of geostates. We will see geostate tax revenues shrink and their economic moats erode. We will see people choose to work remotely from whichever country offers the best quality of life (whichever country is best governed and capitalized). And so this same dynamic will eventually apply to geostates. They will be held accountable for their governance and, on average, their governance will improve as a result.

We probably won’t even care whether these cryptostates are governed by democratic or authoritarian mechanisms, because we’ll be too busy caring about whether they are well-governed. The switching costs of cryptostates will be super low. To continue with the restaurant analogy, you wouldn’t expect your favorite restaurant to be run in a democratic fashion, why would expect this from your favorite cryptostate? Intuitively this is because if your favorite restaurant stopped making good food it would be easier to switch restaurants than involve yourself in its quaint politics, and the same reasoning will apply in the area of cryptostates. Maybe the best cryptostates will emerge with democratic governance with a well-educated, values-aligned citizenry, or maybe they’ll be run by benevolent authoritarians. I don’t know. But none of that matters if people have the ability to take their assets and run without moving an inch geographically. This is what I like to paraphrase to “exit before voice”.

As a member of any organization, to advance your interests you have two categories of action: voice, to attempt to exert influence through the political process, or exit, to leave for greener pastures. I see a lot of principled emphasis on voice, especially from liberals in the west who believe that their democratic values are what make them great. But I disagree. In crypto, it’s the multitude of options and low switching costs that will power the emergence of quality governance in an otherwise dystopian landscape, and maybe democracy will emerge as a consequence. Or maybe not, and it may not matter. Exit before voice.

If this is making sense to you, the best way to act is to stake your assets and have your voice heard! I’m partial to stake.fish, one of the largest independent values-based non-custodial validator.

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