“The Sheep, the Shepherd and the world of blockchain innovation”
One thing we’ve learned over the course of diving deep into crypto is that things are not so black and white, despite what so-called experts may want you to believe. Whilst things are definitely not as great as we saw overpromised in 2020/2021, the space is also not as bad as many are making it out to be after the wave of collapses in 2022. That’s mainly because the issues we saw with Celsius, Three Arrows Capital, FTX and others had to do more with people, processes and procedures rather than the blockchain tech itself. In fact, systems like DeFi which were set up to be automated and non-reliant on human fallibilities continued to work without fault and as intended. Just look up Uniswap, Sushiswap, Aave, etc.
It makes for an interesting time to be around as well because we’re at the precipice of seeing regulations come into the market for the first time (as government agencies were basically in observation mode for all these years as crypto grew in popularity). We certainly count ourselves lucky to be here at this point in time but we also know there’s a fork in the road as to where we could end up. The way we see it, there are 2 opposing views to how regulation might happen and one of them is likely to stifle innovation far more than the other.
Engineers Perspective
On the one side, we see something we’re calling the Engineers Perspective. In this view of the world, those responsible for regulation feel responsible for everything that goes right and wrong and it leads to them needing to be highly specific when it comes to rule-making. There is a need to control the outcome for the engineer as well as account for all circumstances and prevent mistakes. This perspective would have specific plans for how technology should develop as well as needing to understand the underlying mechanics of blockchain tech to be able to make it better.
However, in a game of ever-improving technology (for example, see how fast AI is moving right now), this is always a game of catch-up.
When things go wrong, a perspective like this can lead to questions of what could we have done better and, more often than not, how can we regulate more. This has led to stifled innovation in the past and yet, time after time, we repeat the same mistakes.
Shepherds Perspective
We also see another viewpoint, something we call the Shepherds Perspective. In this analogy, blockchain/crypto projects are the sheep in the herd. For shepherds, the job is to find the right pastures for sheep to graze and provide the right ingredients to nourish and encourage growth.
Furthermore, the sheep are born with a history of what’s happened in the past and with a unique set of traits from those that came before them. The shepherd sees the sheep as akin to children, more so than products, with a rich mosaic of characteristics.
In this regard, shepherds are powerful, they provide the right environment for growth and protect the sheep from wolves and outside threats.
Like sheep, the projects built with blockchain are not blank canvases on which to dictate our wills. We have no idea how amazing they will become right now or what they will discover.
What comes next?
All of the above leads to open-ended questions relating to what comes next and we don’t attest to presenting all the answers here. We merely encourage folks to think about things a bit more from these different points of view. We’re taking actions ourselves as well (see Layer-C below) and of course, we’re aware there are some generalisations in the above views. We certainly recognise elements of the Engineers Perspective are highly valuable and even necessary for any sort of technological advancement. Additionally, there are positive arguments for having regulators that understand the technology well. There are certainly elements of both sides that can be useful here as we near crypto/blockchain regulation. A best-of-both-worlds approach may even work well.
We highlight the engineer and the shepherd because we need to distinguish that being prescriptive in such early-stage tech can be detrimental to future development. It’s something we’re seeing recently with French authorities deciding to follow a more pragmatic approach, giving more time for development to happen (https://decrypt.co/119943/france-gives-crypto-firms-more-time-comply).
Taking it further, via the work we do at NotCentralised and being stewards of the awesome communities that are the Aus DeFi Association (and now the Web3 Innovation Centre with Stone & Chalk), we see ourselves as shepherds who also embrace blockchain development. One of these developments that we see bringing compliance from within the industry (and using blockchain tech to do so) is a protocol called Layer-C. In this protocol, we’re using blockchain rails to make web3 projects more compliant with local regulations and help avoid issues for project creators, end users and regulators as well.
Whatever area you’re in, we also encourage you to think of having more of a shepherd's perspective with blockchain tech. Whether you’re a regulator, a corporation, a project founder or a participant. Let’s think about how we can shepherd the way forward, nurture innovation in this space and bring about better outcomes for all.
