On Crypto and Democracy
On Crypto and Democracy
Should we approach crypto governance the way the traditional world approaches corporate governance?
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.