Cryptocurrency & Decentralization: The Road to Societal Transformation, Part 4
The road leading to the creation of cryptocurrency was constructed over millennia. Since the first stones were laid in the time of hunter-gatherers, it has taken twists and turns, from the use of shells, beads and gold coins to the printing of money and the creation of the Federal Reserve. Today we are on the cusp of a major societal transformation that is due in part to this evolution.
In this four-part series, Totle will discuss four crucial ways that cryptocurrency and decentralization are poised to rock the foundations of nation states and alter the world we live in.
Part 4: Transformation Requires New Forms of Governance
With so many contributions to society — from a new form of currency and new asset class to novel answers to privacy and security concerns — cryptocurrency and decentralization could have a massive impact on societies worldwide in the 21st century. But just as the printing press, the Internet, and other advances in communication technology have been accompanied by a need for changes in governance, so too will these latest advances.
Great Potential, Great Responsibility
Bitcoin holds tremendous potential as it shifts power away from centralized entities, such as banks, and enables a decentralized group of peers to directly own and transact their digital assets. However, crypto networks realized early on that the weight of governing their digital economies fell on the shoulders of network stakeholders.
This awareness has spurred a massive experiment in decentralized governance as teams have raced to find a model that ensures their network not only runs efficiently but also accrues value to their native token. New economies built on the ability to communicate programmatic value will require significantly restructured governance models.
New Models
The need for new governance models first became apparent in mid-2016, when a group of bad actors exploited a flaw in an Ethereum smart contract belonging to the DAO project, stealing $50 million worth of tokens. The hack spawned a raucous debate over what the appropriate response should be, with the majority of the community in favor of editing the ledger to return the funds to their original owners. Many objectors felt strongly that the blockchain should be immutable, leading to a network split between competing Ethereum and Ethereum Classic. This event exposed the need for a well-defined governance system that could prevent such fractures in the future. The DAO hack illustrated how software bugs sometimes cause smart contracts to execute adversely, and that blockchain communities require a formal process to establish the intent of these contracts. Responses to this state of affairs have included the off-chain governance model being developed at EOS, and the Decred Model, a cryptocurrency used to store and exchange value.
Conclusion
Years from now, students of political communications will pour over the tweets of Donald Trump in an attempt to quantify the way in which he used social media to mobilize his supporters and change the political discourse. By enabling politicians to engage their base in real-time and circumvent traditional media outlets, the Internet and social media have rocked the political foundations of the 21st Century’s sole superpower. As with previous innovations in communication technology, the upshot will likely be a reorganization of society and governance.
Whether or not cryptocurrency will prove to be as transformative as other recent technological innovations is an open question. Until Satoshi came along the double-spend problem prevented machines from sparking a revolution that would have transformative effects similar to those produced by the advent of writing systems, the printing press, and, more recently, the Internet and social media.
But like these innovations, blockchain and cryptocurrency have certainly shown that new technologies require new forms of governance. Cryptocurrencies have introduced the concept of digital scarcity, ushering in the era of decentralized token economies. How to propose and implement software changes, alter constitutions and upgrade economic policies in a way that empowers these decentralized economies is the question capturing the most mindshare among blockchain builders. EOS and Decred are leading pioneering efforts in the emerging field of decentralized governance. These experiments seek to discover an optimal confluence of the legal, economic, political and technological universes that would free the blockchain network to actualize their value.
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