Finding crypto's soul, and bridging the chasm between "welfare" and "neutrality"

In crypto, the concepts of “welfare” and “neutrality” are often muddled together, but in reality, in most crypto contexts, they are contradictory ideals.

First, let’s define them, in crypto contexts. “Welfare” is the idea that the needs of all people are satisfied, irrespective of their means. “Neutrality” is anyone can satisfy their own needs, but they may require the means to do so.

Related, most of what’s called “public goods” in crypto are actually “common goods”. They are non-excludable, so anyone can use them; however, in most cases, crypto is rivalrous - i.e. there’s a limited supply and often there’s an auction for who can use said services. (For an example for what’s also non-rivalrous and a real public good: signing messages with our ENS.)

So, while you can say “anyone can use crypto”, in reality, there’s a bias towards the wealthy in many cases. For example, blockspace across all blockchain networks with representative demand is sold to the highest bidder. Or, in DAOs, theoretically, “anyone can own a DAO”, but in reality, tokens are extremely centralized, with a handful of whales effectively controlling the DAOs, with >90% participants having no real rights.

Of course, there are significant efforts to improve the situation. Scaling efforts lower the barrier, so more people can bid for blockspace; proof-of-stake or proof-of-work networks make it so anyone can run a node and form consensus irrespective of tokenholding. Finally, we are starting to see experiments with DAOs introducing democratic methods to complement established plutocratic tokenholder voting. More on these soon.

The biggest issue, though, is that welfare is subjective. Code & crypto cannot be subjective - only we can.

Let’s rewind back to what crypto is uniquely great at - neutrality. I believe the real USP of crypto are immutable protocols that settle to an ossified blockchain. No tokens, no governance, just objective code that runs perpetually and benefits those who can afford to use them.

However, most protocols have active governance. When we say users can run nodes and fork away, or DAOs are experimenting with democratic voting, these are not crypto innovations, but mechanisms borrowed from the real world. These often veer into the subjective, and the objective neutrality features of crypto are no longer leverage. Unfortunately, many of the lessons from centuries of history are ignored, which often makes crypto governance significantly worse than their real-world peers. Yes, crypto tools may aid some processes in traditional mechanisms, but these equally apply to said traditional organisations.

So, what’s the soul of crypto? I still believe it is immutable protocols settling on ossified blockchains. A perfect rendition of this concept may not be possible, but the goal should be to get as close as possible.

The reality, though, is crypto is not just about neutrality - it’s much more a social movement that borrows heavily from movements throughout our history before. It’s much more about people than code. To varying degrees, different protocols in crypto will resemble traditional communities, religions, social clubs, governments, cooperatives etc; while some will lean more towards the neutral/immutable side. There’s always a spectrum. The balance between welfare and neutrality must be found.

For those that are more community-focused would do well to borrow heavily from centuries of history, rather than attempting to reinvent the wheel. Some cryptobros may rage, but well-functioning democratic governance is fairer, more inclusive, and yes, more decentralized, than plutocratic cabals that most DAOs are today oriented towards.

No, I’m not going to talk about an enlightened AGI that can make subjective decisions - it does not yet exist.

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