Exit Before Voice

Why Blockchain is the Biggest Political Innovation Since Democracy

“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.

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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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