A Critique: Will Crypto Prove to Be as Revolutionary as it Promises to Be?

Source: https://www.forbes.com/advisor/investing/defi-decentralized-finance/

The blog by Jon Stokes on the integration of blockchain technology into the fabric of the modern economy is a well-crafted vision that balances fearless optimism with pragmatism. He beautifully highlights use cases — from the simple monetary exchange of value without governing bodies to the more complex e-commerce without banks and retailers — being built by a new generation of entrepreneurs who envisage a libertarian, decentralized, and equitable future for all global citizens.

In my opinion, the fundamental premise of his argument is simple — the tasks currently being performed by marketplace facilitators (banks in finance, universities in education, retailers in e-commerce, etc.) are ripe for disruption by decentralized autonomous organizations (DAOs). These DAOs will use a combination of software, cryptography, and smart contracts to replace the functionality of the current behemoths Amazon, Twitter, and Harvard University that centrally exercise their power through data, censorship, and perceived prestige, respectively.

However, for the non-technical person to truly fathom how the progression of these changes will happen, the piece doesn’t address certain psychological and emotional hurdles to be overcome. For example, the widespread adoption of the web as we know it today occurred due to a combination of both technological innovation and the fulfillment of the human need for connection (Facebook, Instagram, Twitter), convenience (Amazon, Coursera), and credibility (Citi, TD Ameritrade).

Thus, I want to highlight the sociological factors that must accompany the technological innovation of DAOs if it is to surpass, or merely replicate, the adoption enjoyed by the web.

Connection Conundrum

The crypto-powered social media, with no intermediary, is currently in its nascent phase comprising Bitclout, Hive, and Steemit vying for a first-mover advantage. They guarantee pseudonymity, in-built monetization, non-censurability, and on-chain permanence to all those who sign-up. It ensures the transfer of power from the platform to the content creators on it. However, to gain widespread adoption, the technologies need to tap deeper into the reservoir of human desires.

The concern is with regards to the transactional nature of the social interactions that crypto-powered social media facilitates. Fundamentally, human beings crave meaningful social connections to form tribal affiliations based on their interests, ideology, mindset, and culture. While adding a layer of in-built tokens into social interactions empowers the creator, will it lead to people becoming more careful of everything they say in a perverse form of self-censorship? Will people be frightened by the prospect of having a permanent record of everything they’ve said online? Will pseudonymity lead to the rise of trolls and bad actors, as seen on Reddit and 4chan?

Source: https://interestingengineering.com/a-chronological-history-of-social-media

We will see the answers to some of these questions play out in the upcoming decade, in which the people will have a choice between algorithm-powered technology platforms and smart contract-powered decentralized ones. The algorithm-powered technology platforms can arbitrarily exercise power for both good (remove bots/ bad actors) and bad (de-platforming, privacy violation). On the other hand, the smart contract-powered DAOs could unlock a whole new dynamic for social interactions. In this world, Balaji S predicts everyone will become an investor with a portfolio of creators that they invest in from time to time. Watch out for how this dynamic plays out in the coming years!

Tradeoff for Convenience

People often struggle to balance convenience and cost and are constantly calculating how much of a cost they are willing to bear for the sake of convenience. For example, people will willingly give Amazon their home address to get their orders delivered in under two hours. We have gotten used to this level of convenience, and now people seldom think twice before making such purchases.

The competitive edge of Amazon lay in the logistics network, dispute settlement mechanism, and customer experience flywheel that it has built from scratch. Nevertheless, I believe that DAOs can execute identity verification, reputation evaluation, customer service, and product curation without the need for an Amazon. But the question remains, will an individual used to low time to sell and low time to purchase metrics go the extra mile to verify on-chain credentials for each transaction?

Source: https://www.leanedgemarketing.com/blog/amazon-product-sales-flywheel

I think people acclimatized to their current behaviors will err on the side of convenience, even if that means they give up some of their data to the central intermediaries. I believe a more rigorous scientific evaluation is required in this regard to understand people’s willingness to change their existing behaviors on the principle of keeping their data out of the hands of perceived monopolies.

Credibility Crisis

Sci-Hub’s open access publishing disrupted the credibility that Elsevier and Springer had built over decades by pay walling premium scientific content (not without backlash). Similarly, the concerned citizens of Cuba are questioning the credibility of its communist regime over gross incompetence in handling the Covid-19 and the economic situation in the country. Furthermore, the WHO took a hit to its credibility due to its confusing pandemic response on masks, therapeutics, and vaccines. There is a global institutional credibility crisis.

Source: https://www.wsj.com/articles/in-cuba-covid-19-stress-pushes-unrest-to-the-edge-11626268720

Jon Stokes’ blog masterfully highlights that the institutional credibility void will lead to a decentralized economy in which information becomes open-sourced, easily accessible, and verifiable by all. Additionally, he predicts that employment will shift to a system of competence over credibility. For example, the on-chain credentials of pseudonymous people will drive the distribution and execution of micro-tasks as opposed to hiring based on external credibility stamped on candidates by the Harvard Universities of the world. However, the piece does not draw attention to the loss of accountability, follow-up protocols, and growth trajectory of careers in a world without institutional credibility.

Closing Thoughts

There are many hurdles — both technological and sociological — to overcome for DAOs to revolutionize the world in the upcoming decade. But these hurdles present a great opportunity to the entrepreneurs of tomorrow to build the world they wish to see. From my point of view, the adoption of DAOs will play out like the Domino effect — if the technology cracks a single-use case, that will set off a chain reaction across a handful of other use cases.

There is a lot to learn from the conquerors of the web — customer-centricity from Amazon, ease of use from Instagram, and the power of network effects from Facebook. In my opinion, version 1.0 of the DAOs would have to incorporate elements from the web players and abstract away the complexity in the back end to deliver a simple, relatable, and empowering experience to the user.

Eventually, I hope to live in a decentralized world, where power does not reside with a select few but with the majority. It would fly in the face of the Hobbesian philosophy of “People need government.”

I like writing about Health, Technology, Decentralisation, & Cricket