Crypto Ideologies, Part 1: We’re On Our Way To Building The Same System

History doesn’t repeat… it rhymes.

Preface

This series originates from my talk at Devcon V in Osaka on October 10, 2019. While this written format dives much deeper and has additional resources and links to further reading, you can watch the video of said talk here.

Originally this was going to be one long article, but there are a handful of different concepts that are covered and it made more sense to split this up into three parts.

I want to make something clear: I very much love crypto and this space. However, I think we should be having this conversation publicly, especially if we want to achieve the goals we set out to achieve. The most substantial growth will stem from difficult and honest discourse.

I am by no means an expert on any of these subjects. Find me on Twitter and challenge my thinking. 💖

This is Part 1.

Background

The internet enabled the instant, borderless, permission-less transfer of data and information. Blockchains enable the same for value.

Value is not just money. It’s any form of digital asset: money, assets, property, obligations, contracts, and more. Jeremy Allaire of Circle has talked about “The Tokenization of Everything” extensively if you want to learn more about this concept.

Blockchains are the next logical step in our technological revolution. The way we currently transfer anything of value today will seem just as archaic as communicating only via written letter or only having access to the books in the local library.

The evolution is greater than that though. On a recent episode of the a16z podcast, Marc Andreessen talked about how the internet suffered from one ‘original sin’: browsers lacked a buy button. He hypothesizes that if there had been one, we may not have gone down the road we did with everything relying on advertising. This need for financial sustainability was ultimately responsible for the invasive collection of data, misalignment of incentives, invasions of privacy, and asymmetry of information that dominates the modern landscape.

If crypto was around in 1992/1993, it could have allowed a superior economic model to thrive.

Throw some humans in the mix though…

Blockchains are still built by people, though. New innovations in technology don’t overcome the human or social problems — these innovations are merely a tool that we can use, for better and for worse.

Ultimately, we can change the tools we use and the technology that is available, but we cannot change human nature.

And this is important to understand as humans are quite unique. We have desires that can never be truly satisfied. The moment we achieve one thing, we move the goalpost and reach out for the next.

We also have this deep desire to possess things. We may eat until we are full, live in a safe environment and have a safe home, yet still wish to have more.

And, unfortunately, we are generally selfish. We will gladly impoverish others in order to improve our situation or acquire more. This trait manifests in greed and vanity and, in the crypto space, ICOs, Ponzi schemes, scammers, phishers, and shouters on #CryptoTwitter.

While there are many similarities between the early web and the early blockchain ecosystems, history won’t repeat itself exactly. But, it will rhyme.

We should look back at the evolution of the internet for insights about what the future holds for crypto. In doing so, we can learn from the mistakes of our predecessors and refrain from going down a similar, dark path.

It’s quite telling that some of the similarities we share have disappeared over the years. For example, small, marginal players used to thrive. Andreessen graduated with his bachelor’s degree in computer science in December 1993, Mosiac/Netscape IPO’d in 1995, and he was on the cover of Time Magazine in 1996. Today, the tech industry is dominated by large corporations, and “thriving” means getting your startup acquired by one of them.

It’s also telling how quickly things can change. Like the blockchain, setting up the internet required 50 steps, a helpful friend, and a trip to the bookstore. Those born today don’t even realize that the internet has wires.

It’s frightening to see how quickly the culture shifted once the web started to gain traction. Originally, it was loosely organized with no one in charge. Those early adopters and builders believed that the technology could enhance personal freedom and remove power from centralized entities. Just as the web was partially a response to the encroachment of the US government and the abuse of power executed by other nation-states, Bitcoin was partially a response to the government, the banking system, and new guard which rules our lives (Google, Apple, Facebook, Amazon.)

As we push forward, it’s necessary to be mindful of what we are building and that we are still shaping the future that we want.

As we know now, the internet didn’t just connect people, give people access to knowledge, and enlighten us all. For all the good it has done, it has also done as much harm.

The web has enabled more government abuse and surveillance by nation-states. It then enabled corporations like Google and Facebook to exploit us for profit.

It has created an entirely new business model that is less about advertisements and more about the extraction, collection, and capitalization of our information and behavior.

It has created more information asymmetry, which only further degrades our personal freedoms and consolidates power to those who control the most amount of information about us.

And, unfortunately, the creators of this new system optimistically patted each other on the back for “connecting the world” and “indexing the world,” and didn’t seem to mind that they were well down a path that would do the things they originally set out to fight against.

Hard Questions

Question: Why won’t crypto turn out the same way?Answer: It will.

The blockchain, at its core, is a public ledger.

We are optimistic about the potential use cases of its public nature, like the public transparency and accountability.

However, anyone — not just one company building a moat around its castle — can access and analyze everyone’s entire financial history. All of our actions are pseudonymous, not anonymous, and our identity is further compromised each time we make a transaction and use products and services that rely on the existing systems, whether those are KYC systems, banking systems, or internet systems (AWS, DNS, etc.).

With chain analysis, it is trivial to connect accounts to account holders, building a comprehensive financial overview of you that includes every transaction, every service you interact with, every vendor you pay, every product you use, and every news site you subscribe to. This level of insight doesn’t exist in the current system.

The credit rating companies can get your credit card balances, but not your transactions. Your bank has some of your transactions, your credit card company has other transactions, and your student loans are held by a completely separate party.

Some companies are taking measures to hide information from other companies. For example, Amazon no longer sends you emails that contain the item you purchased in order to prevent your email provider (i.e., Google) from knowing what you buy.

A single interaction on the blockchain has the ability to connect one of your addresses to your online identity or real-world identity. Because the blockchain is immutable, there is no way to “unlink” this information.

The level of education that is needed to prevent the exploitation of this data is terrifying. While the OGs in this ecosystem may consider their past transactions before making a new transaction, even they may not consider that any future transactions could also dissolve their pseudonymity.

For example…

I choose to use a mixer in order to prevent an untrustworthy vendor from seeing my transaction history. I take some of my coins, send it through a mixer to a fresh address, and then pay the vendor. All good, right? The vendor doesn’t know anything about me. Well, what happens in a month when I sweep the leftover mixed funds to another address? No matter how much time has passed or how careful I was when I initially made the purchase, the vendor, and anyone else who is looking, can glean information about me via these “future” transactions.

If I don’t live in a constant state of paranoia or use products that protect me automatically, this will happen time and time again. The original context of protecting my identity is no longer at the top of my mind as time goes on.