Web3 and the failure of trust
I would like to bring our attention back to the ways in which Web3, this emerging ecosystem of Bitcoin/Ethereum/Blockchain/Crypto technology (I will use these terms interchangeably, despite their not having identical meanings), is triggering the emergence of a new anthropological space of collective knowledge, intelligence, self-governance, and self-coordination.
The possibilities it provides are exciting and promising –and yet, somehow, we are failing on the two counts on which it was poised to become an improvement with regard to traditional governance systems.
What has happened is that the exponential growth of Web3 technology, which held such shining potential as a driver for the change of paradigm our planet so desperately needs (from individualistic to community-affirming, from hierarchical to collective), has taken place under a heavy bias. The people constructing blockchain are showing a very clear slant towards an exclusionary, technology-oriented perspective, which has continued to be their main focus over time.
The consequence of this approach is that the blockchain space, which was supposed to be decentralized, inclusive, and built on trust, has, to put it bluntly, crashed on all counts.
Let us not forget that, on its first appearance, crypto was hailed as the new paradigm — much more accessible than the traditional system, and enabling healthier and more holistic dynamics for trading and exchange.
Perhaps as a consequence of that, too, crypto was envisaged by many as having a hitherto unseen potential for human connection, even for those not-so-sociable types who were struggling with isolation and finding it difficult to find meaning and a sense of belonging.
But, alas, what happened was exactly the opposite.
As regards inclusiveness and accessibility, the concentration of power and wealth in the crypto space is at least five times that of the traditional, i.e. bank-, finance- and government-related system. It has been estimated that the top 0.1% of Bitcoin Miners (about 50 miners) control 50% of mining capacity and a mere 2% of the accounts hold more than 90% of the value in any coin you can find. So much for decentralization, community-building, and opportunity.
Another area in which crypto has signally failed its hopefuls is that of trust. Commended as a system in which you didn’t need to place your trust on the usual institutions, it has become an unregulated environment that cannot be accessed unless it is through the unassisted creation of wallets and ledgers, trusting all the while that MetaMask will be as good as its word.
Naturally, this kind of adventure requires much more trust than walking into your local Citibank branch and doing the paperwork necessary for opening an account. In the latter alternative, the bank has probably been around for a while –maybe you even know your accounts executive– and you can be fairly certain that it isn’t going to vanish into thin air. This is not to say that banks have never defaulted on their customers or become insolvent, of course — but, if the idea underlying crypto was to replace this kind of vertical relationship with something more equitable and altogether better, it clearly hasn’t worked.
Why the original plan –driven by the excitement and hype of the tech community and spearheaded by the likes of Charles Hoskinson and Vitalik Buterin– went bust is not certain. My educated guess is that the creature rebelled against its creators, becoming bigger and more unmanageable as the frenzy grabbed hold of so many. Whatever the actual reasons, instead of being the mortar gluing a community together, crypto is now every man for himself. Everyone plays their own game, but this has not forestalled the vulnerability of users of the lack of accountability of the more powerful actors — rather the opposite.
At the same time, the crypto space keeps offering up tools that enable us to do stuff without having to be human, thus fostering the absence of common benefits and goals.
It is our human nature that makes us doubt, yearn to trust, and desire to meet, socialize and connect — in other words, to engage. The current crypto scene is ripping apart all these features and qualities — building solutions for you not to even have to prove that you’re a person.
Booker Prize winner Arundhati Roy is emphatic about the need to remain human through it all: “If we were to lose the ability to be emotional, if we were to lose the ability to be angry, to be outraged, we would be robots. And I refuse that.” The reason why millions are not flocking to the crypto space — why it remains still the fiefdom of blockchain developers — is, quite simply put, because everybody else doesn’t want to have their human fiber ripped off from them.
People in the real world, with real-world problems, aren’t going to make any money developing tools or mining coins because that’s not where their skills or fields of expertise lie. But, as Balajis affirms, they can give blockchain a chance to become an operating system where new types of organizations, companies, cities, and states can be designed. In order to achieve this, we need to include everybody — not just the techies.
Investor and philanthropist Stanley Druckenmiller recognized this when he said: “All in all, I don’t think robots and greater automation can bring about a utopian world as I imagined they would as a kid 50 years ago.” This is because the potential of the emerging paradigm still lies with us humans. As my partner Tomas rightly asserts: If we want the law to run on blockchain, we need to include everybody else. If we want voting to run on blockchain, we need to include everybody else. If we want a country’s finances to run on blockchain, we need to include everybody else.
Why? Well, because otherwise, no one is going to trust blockchain. And if no one trusts it, then it’s not going to work.
Trust, in this scenario, equals nothing more and nothing less than legitimacy. Systems that lack legitimacy are bound to stall because that’s basically what a system runs on.
Humans coordinate efforts based on legitimacy, or the idea of legitimacy. If I have firm reasons to believe that you are going to stop at the red light, I will do the same — stop at the red light, go at the green. But if I don’t know whether you’re going to stop or not, it doesn’t matter if the traffic lights are red or blue or purple — I’m just going to be on edge and not trust anybody. The assurance that makes a person behind the wheel cross the intersection at a green light, knowing that no rogue driver will crash into his vehicle, is what we need to foster if we want crypto to become the regenerative commons which, I have argued, alone can keep humanity afloat.
As it happens, trust as the backbone of human organizations has been around for a long time. In his book The Dawn of Human Culture, Richard G. Klein describes the “trust tokens” found by anthropologists on the western shore of Lake Naivasha in Kenya — six-millimeter discs carved on ostrich eggshells, supposed to have been employed by primitive communities in that and other areas of Africa to establish reciprocal ties of collaboration and assurance. These symbolic systems in turn led to other, more sophisticated ones, such as language, which served to channel the collective actions enabling humans to evolve as a species to greater advantage than that which might be gained by individual endeavor.
I believe that crypto has the (hitherto undeployed) potential to become such a token of trust. For that, we need to create DAOs.
In his article “The Next Big Thing in Crypto is DAOs”, Michael Lin argues that “while DAOs have existed for a while, the technology to make them come to life has only just arrived. Hence the renewed interest in them.” To create a DAO, he asserts, only two requirements need to be fulfilled: the existence of an online community of people and making sure that the rules in this group are decentralized. The comparison to traditional organizations is especially illustrative: “If a single entity controlled the treasury, then that person alone could steal all the money for themselves. If a single person controlled the votes, they can manipulate vote counts. A single person who controls all communication could censor people. DAOs eliminate these risks by decentralizing and automating all parts of the organization.”
For Lin, the biggest benefit DAOs bring is “incentive alignment with its members”. But, while he analyses these benefits mostly in terms of the distribution of monetary value among members, I think we need to go further, driving not only economic but social and, ultimately, human regeneration as well.
Vitalik Buterin, the founder of Ethereum, actually seems to be with me on this: in his article “The Most Important Scarce Resource is Legitimacy”, he offers his opinion that “the public goods ecology of most of these blockchains is, regrettably, still quite authority-driven and centralized” and that “we should […] focus on building better social technologies to fund public goods at the scales that we need, and as a systemic part of our economic ecology […]”. The aim seems to be rather bigger than a more equitable distribution of proceeds.
However, while Buterin acknowledges that cryptocurrency’s power lies in its ability to summon up large pools of capital by collective economic will, his notion that “these pools of capital are controlled directly by concepts of legitimacy” needs to be unpacked. His example of how one blockchain community, by coordinated action, stopped entrepreneur Justin Sun from using their currency in a way the community did not like is, I’m afraid, less common than the far more usual situations in which, as Michael Lin says with reference to online communities, “the users are excluded from ownership or any say in the platform that they make possible”.
If it is to be harnessed and deployed for the collective advantage and not the private gain of a few, legitimacy (“a pattern of higher-order acceptance”, in Buterin’s words) needs to systemically emerge and be validated by an organization that has holistic wealth as its core aim.
In a recent article, Jordan Hall predicts that there will come “The moment when Web3 becomes consciously self-governing in service of the whole”.
Much in the manner of a flock of starlings, where no individual has the time or ability to make individual decisions and all follow the tempo and inflection of the collective whole, we need to be able to put our trust in a legitimate system of rules that will lead us up and forward on our quest for the integrative and sustainable common good.
Web3, the consciously self-governing system Hall describes, is coding itself as we speak, hopefully with the code of life, all life, and following the patterns and principles that make living systems regenerative, and therefore sustainable.