Why crypto is politics

“All crypto is economics” [E. Hughes, 1993]

Crypto products are always political.

Reason: social systems, public organizations and trust mechanisms are bound by the level of their enforceability. Social contracts evolved to what they are today due to technology that was available at hand.

The single purpose of crypto technology is to enable new social contracts based on unbreakable encryption, unforgeable signatures, untraceable electronic messages, and unlinkable pseudonomous identities. [T. May, 1994]

Therefore, the success of any cropto-enabled product is a function of how effectively can it re-design existing social contracts. It might be small optimization or a radical innovation — but it’s the same direction, no matter if it’s $10 VC coupon issued by the local pizzeria, $100 NFT of the Brutal Gladiator Warglaive, $10B TVL in Compound or $1T Bitcoin market cap.

You can easily dismiss anything that sounds like anarchy or communism because both of those things pretty much never worked. However, the outcome of last 30 years of crypto innovation is in disproving exactly this: it’s not crypto-anarchy anymore — it’s mainstream capitalism. Decentralized crypto systems generate more economic surplus compared to centrally designed organizations, therefore Darwinian forces, not an anarchist’s manifest, will propel the adoption.

Software ate the world and crypto will eat the software.

Appendix A: quick examples

SSI

Today: Digitization of trusted data exchange

Tomorrow: Removal of trusted identity providers

DeFi

Today: 20+% APR in USD

Tomorrow: Programmable and stackable (one open source contract built on top of another) financial system

Bitcoin

Today: Investments and savings

Tomorrow: Alternative to fiat monetary system

DAO

Today: Decentralized corporation with no beneficiaries

Tomorrow: Alternative public goods allocations and financing, instead of govs and taxation

NFT

Today: digital art

Tomorrow: de-facto property rights