Resource Distribution and Power Dynamics in Decentralized Networks
The idealized vision of decentralized networking and socio-economic coordination triggered by the invention of Bitcoin continues to inspire entrepreneurs and drive innovation. Meanwhile, it is increasingly acknowledged within the broader crypto community that though the idealists are onto something, these emerging social systems are far from immune to problems and inequalities that have plagued human institutions historically.
How to begin conceptualizing these networks and “decentralized autonomous organizations” (DAOs) in terms of resource distribution and power dynamics, and by extension, governance? One option is to think of these systems as fields. In this post, I will give an overview of how fields are generally defined in sociology and how this concept could be operationalized when analyzing cryptonetworks.
Whether you’re an entrepreneur or engineer working on protocol design, an investor assessing opportunities, a policymaker considering regulation, or a researcher studying the space, you may find this approach useful. Most importantly, a realistic analytical framework for thinking about power and resource distribution early on will hopefully assist in avoiding the threat of these emerging systems reproducing or even amplifying the various imbalances that characterize the economy as we know it today.
What is a field?
In sociology, the term field denotes a structured social and symbolic setting in which individuals and groups acquire positions and act, and in which systems of meaning, institutions and hierarchies are formed, maintained and challenged.
As arenas of production, circulation and accumulation of goods, services, knowledge and status, the structure of a particular field is determined by the distribution of field-specific resources and, by extension, relations amongst its constituents.
As individuals and groups cooperate, compete and strategize, they either reinforce or challenge that structure. Under normal circumstances, the participants of a field accept the fundamental rules of the game. Indeed, this acceptance generally serves as a precondition for being able to legitimately enter the field in the first place. But occasionally, both the rules and the power to define them become actively contested stakes within the field.
Fields are not neutral, open and free marketplaces — at any given time, there are norms, limitations, inertia, and various structural forces that make certain development trajectories, for both individuals and the field as a whole, more likely than others. As a result, the reality of a field is not fully reducible to the individual properties of the participants, but should be analyzed in terms of the relations that constitute the field as a whole.
The boundaries of a field are not always clear or fixed and the concept can be applied at various levels of analysis. Consequently, many different and overlapping fields can be identified, from very large social universes such as science, business or art, to much more specialized arenas such as climate research, US retail business, or contemporary Italian painting, to even more narrowly defined microcosms such as a particular network of research institutions, a local consumer electronics retail market, or a community of art professionals in a particular city.
Decentralized networks can also be thought of as fields that are challengers in broader, incumbent-dominated fields within various areas of economic activity. Approaching cryptonetworks from such a perspective has analytical benefits because all fields are characterized by similar properties and tendencies. For example:
- Fields initially form when a large enough group is able to establish a local social order (a game worthy of playing, so to speak), potentially to compete with or within an existing field.
- Competition and cooperation over field-specific resources, including the power to legitimately define and impose the fundamental rules of the game.
- Unequal distribution of these resources and, as a result, structuring into dominant and subordinate positions. However, this does not preclude a field from having a relatively egalitarian power structure.
- Tendency of the dominant positions to struggle for consolidation and conservation, and subordinate positions for disruption and change. Large structural shifts become possible as existing rules and arrangements break down, often in the context of some sort of crisis, allowing the structure and culture of the field to be redefined through individual and collective agency.
- Tendency of the dominant groups to justify the reality and effects of unequal resource and power distribution, often relying on a set of fundamental beliefs and assumptions about humans and society.
- Relative position in the field has an impact on individual predispositions, although the full meaning and effect of this is not necessarily acknowledged or understood by the participants themselves.
- Tendency to have economically and culturally dominant poles as discrete resources accumulate in the hands of different constituents. This often leads certain groups to fight for goals and values that go beyond strictly individual or financial self-interest (“public purpose”).
Different iterations of field theory include additional nuances (there’s a list of further reading material for anyone interested below), but for the purposes of this post, these are sufficient to raise the following question: what would basic ‘field analysis’ consist of when applied to decentralized networks?
Field analysis for decentralized networks
In the first approximation, such an exercise would consist of the following steps, together with some inferences based on the standard formulation of the theory (from here on, the words “network” and “field” are used interchangeably):
(1) Understanding the rules as defined by the protocol and its governance system.
- Defining the rules of communication and governance has important implications for resource/power distribution and the future development of the network.
- For example, initial and ongoing funding mechanisms for developers and transaction validators have a direct effect on the evolving structure of the field, the key question being: how are resources initially allocated and how can they be used or accumulated over time?
(2) Identifying network participants and stakeholders.
- In-depth analysis would include studying the history of key individuals, groups and institutions, their production of shared meaning and dominant ideas in the field, and how these influence decision-making and action.
- For example, constituents could include founder(s), core developer(s), managing company, foundation, various supply- and demand-side actors, investors, speculators, exchanges, companies using or building on the network, partners, regulators, etc.
- Understanding the harmony (or lack thereof) between the experienced reality of the field and subjective values of the individuals and groups involved. This can help in projecting future growth and challenges, especially as openness to cooperation and new people/ideas becomes an important driver of mass adoption. Note that the average participant may remain oblivious to the underlying power struggles within the field, participating happily in any network that delivers the service desired in the best possible way (i.e. decentralization is partly realized but not for the original idealist reasons).
- Government and policymakers, by introducing regulatory clarity and safeguards for different participants (which often amount to barriers of entry), play a key role in creating fields that are relatively stable.
(3) Identifying the resources at stake.
- This could include decision-making power (off-chain, on-chain); political capital of founders, core developers, and other community members; technical talents; formal and non-formal reputation; mining/staking power; control over funds; general economic and social capital; anything related to the ability to fork the network.
- The most highly valued resource does not have to be financial, although it often becomes a defining aspect of the field’s power structure.
(4) Understanding the historical and current distribution of these resources, including the distribution at network launch and stock/flow dynamics as enabled by the protocol.
- Organized and increasingly institutionalized competition over network-specific resources is likely to become a defining feature of large decentralized networks.
- Consolidation tends to benefit the dominant groups.
- Extreme inequality in resource and power distribution leads to resistance and can potentially result in network disintegration, especially if near-substitutes for the services provided are readily available. Theoretically, this does not apply when users prioritize quality of service over egalitarian values — the “paradox” of preferring good governance to democratic governance, or accepting high levels of inequality in exchange for some good/service perceived as “worth it”.
- For example, networks where the majority of participants are passive (but satisfied) consumers may be more accommodating to extreme power imbalances and, by extension, more traditional forms of (centralized) governance.
- Differentiating between networks driven by ideology vs. pragmatism. The former are more likely to collapse under the weight of their own ideas, while the latter are more likely to reproduce the familiar problems of power/resource inequality, although potentially in a form that many are willing to tolerate, either out of convenience, necessity, apathy, or all three combined as is often the case with existing economic and political systems.
- Assuming that at least some networks will become globally important, time will tell how easy it will be to steer their development, or fork/start competing networks.
(5) Identifying competitive and cooperative drivers, ongoing conflicts and alliances.
- Group interests combined with growing complexity lead to increasing levels of organization and institutionalization, allowing for more powerful forms of both maintaining and challenging the structure of the field.
- As a network grows in importance and value, it naturally becomes increasingly attractive for hackers or other groups to attack or misuse it.
(6) Detailed understanding of governance mechanisms.
- Differentiating between on- and off-chain governance, defined as “how public blockchain communities and key stakeholders arrive at collective action, specifically with respect to protocol change… [and] the creation and maintenance of institutions, both formal and informal, to regulate behavior.” This includes the introduction of checks and balances, various trade-offs between speed/efficiency and broad participation, dispute resolution mechanisms, as well as links to existing systems of law and governance.
- For example, traditional (corporate) governance; “benevolent dictatorship” (charismatic founder or core developer); technocracy (rule of technologists); plutocracy (governance rights connected to coin/token holdings); in the future, also more experimental systems such as variations of holacracy (off-chain), liquid democracy (on-chain), futarchy (use of prediction markets in determining policies that deliver on collectively agreed upon performance metrics); quadratic voting (each additional vote becomes increasingly expensive to the voter), etc.
- Networks with higher stakeholder engagement and a more broadly distributed sense of ownership may require much more distributed, participatory and democratically legitimized governance systems to avoid conflict. This can be mediated through various decentralized governance platforms and interfaces, several of which are already under development.
Again, more sophisticated iterations of field theory allow for additional angles, especially in relation to decision-making and action, but the steps above represent the minimum that’s required to describe a particular network or DAO as a field. An important benefit of a field-theoretic perspective is that it lends itself easily to both historical and comparative studies on how different social systems evolve and are governed. As the crypto landscape grows and matures, such research may become increasingly relevant and insightful.
While the idealized vision for decentralized networks is certainly compelling and has already given birth to a number of exciting projects, as long as we’re dealing with humans, the age-old struggle over power and other resources is inevitably part of the picture. And if we accept that concentration of these resources may have negative consequences or pose serious challenges for future future network development, it should be considered critically.
Field theory, as a general theory of local social orders, represents one approach to these issues. It can and should be combined with other existing theories, and in the future, entirely new ones that will account for some of the more unique features that decentralized networks have in contrast to more traditional forms of social organization.
The concept of field has been developed with varying points of emphasis in different social scientific disciplines. Below is a list of references for anyone interested to learn more (some of which were used as source material for this post), as well as additional resources that are relevant in this context.
- General overview: Martin, J. L. (2003). ‘What is Field Theory?’ American Journal of Sociology, Vol. 109, No. 1, pp. 1–49.
- Early social-psychological perspective: Lewin, K. (1951). Field theory in social science. New York: Harper.
- Organizational theory perspective: DiMaggio, P. & Powell, W. (1983). ‘The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields’. American Sociological Review, Vol. 48, No. 2, pp. 147–160.
- Social skill and action perspective: Fligstein, N. (2001). ‘Social Skill and the Theory of Fields’. Sociological Theory, Vol. 19, No. 2, pp. 105–125.
- Stratification and power struggles perspective: Hilgers, M. & Mangez, E. (2015). Bourdieu’s Theory of Social Fields: Concepts and Applications. London and New York: Routledge.
- Carter, N. & Sclavounis, O. (2018). ‘An Overview of Governance in Blockchains’. Introductory presentation to an upcoming working paper, available at: https://www.docdroid.net/ddz6VzP/overview-governance-blockchains-nc-zcon.pdf
- Daian, P., Kell, T., Miers, I. & Juels, A. (2018). ‘On-Chain Vote Buying and the Rise of Dark DAOs’. Available at: http://hackingdistributed.com/2018/07/02/on-chain-vote-buying/
- Maples, M. (2018). ‘Crypto Commons’. Available at: https://blog.usejournal.com/crypto-commons-da602fb98138
- Zamfir, V. (2017). ‘Against on-chain governance’. Available at: https://medium.com/@Vlad_Zamfir/against-on-chain-governance-a4ceacd040ca