Warren Buffet sharing his opinion on crypto earlier this year. © CBSlocal / Getty Images
“It’s rat poison squared”“It’s a ponzi scheme”“It’s internet money”
We’ve all heard a wide range of very creative views on what a cryptoasset network, like Bitcoin, is. Unfortunately, these views have blinded the uninitiated from seeing the historic revolution that is taking place in front of our eyes. If you happen to be part of that group, today is a monumental day.
What Are We Missing?
“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail. “ — Abraham Maslow
Upon discovering this unfamiliar technology, many people attempt to learn more by watching a video like this. Although these videos are trying to help, they often miss the important implications of crypto completely.
Notice how I didn’t use the term ‘cryptocurrency’. The term ‘currency’ is holding us back from understanding the true revolutionary nature of this innovation. So, from here on out, I will refer to them as cryptoasset networks.
When we encounter something foreign and complex, it’s human nature to use familiar concepts to make sense of it. Humans can take a small amount of data — a “thin-slice” — and draw conclusions from it using a combination of experience and intuition. In fact, this serves us extremely well in day to day life. It allows us to make simple decisions like stopping at a red light, efficiently and effectively; saving our energy for more critical decisions like what to post on social media!
However, this holds us back in understanding fundamentally novel concepts. Using the term cryptocurrency is having a thin-slicing effect on the uninitiated’s understanding of cryptoasset networks.
Today, concluding that cryptoasset networks can only be used for currencies, is similar to, in the early nineties, concluding the internet could only be used for email. It would be a shame to have the internet at your disposal, but conclude that all you can do is send emails. Failing to acknowledge all of the potential applications of cryptoasset networks leaves you with a very limited understanding of their implications for the future.
From a Whitepaper to $140 Billion
Although, it’s common to fixate on the functionality of Bitcoin, what’s truly impressive is the network its built. The Bitcoin network is a team consisting of:
- Miners: Who secure the network
- Developers: Who maintain the code
- Users: Who advocate for the use of Bitcoin
- Enthusiasts: Who run nodes that relay transactions across the network
However, 10 years ago, none of these Bitcoin teammates were involved with Bitcoin. In fact, on October 31, 2008, Bitcoin was just a whitepaper.
One developer, no code, no miners, no users, no enthusiasts.
How did Bitcoin go from one developer to an abundance of talented developers working on it?
How did Bitcoin go from no miners to having entrepreneurs starting enterprises dedicated to mining?
How did Bitcoin go from $0 market capitalization to over $140 billion?
The answer is simple: Incentives.
Incentive Models
Incentives are rewards (or penalties) that encourage (or discourage) certain types of behaviour. A set of incentives can be called an incentive model.
Incentive models are not new. We’ve been participating in them our entire lives. The classic incentive model is a traditional company.
When you start working for a company, you agree to a set of incentives.
There are positive incentives, like a regular paycheque, for desirable behaviour such as showing up to work and completing the required tasks. There are also positive incentives for consistently doing a great job, such as a bonus or a promotion.
There are also negative incentives, like pay cuts, for undesirable behaviour such as showing up late for work. The most severe negative incentive is getting fired for consistently doing a poor job.
Job levels, pay scales, bonus structures, promotions, annual reviews, vacation entitlements, are all incentives that comprise a company’s incentive model. This model enables a company to effectively organize the behaviour of large numbers of people to collectively reach its goals.
Cryptoasset Networks as Incentive Models
Bitcoin’s incentive model, implemented in code in 2008, has compelled miners to mine, developers to develop, enthusiasts to run nodes, and users to advocate for Bitcoin.
The hash rate, i.e. total computing power, on the Bitcoin network (logarithmic scale) since inception. Source: blockchain.com
Bitcoin is now an extremely secure network that allows anyone to store and transfer value globally. It is the collaborative effort of a staggering number of talented and diligent participants working together efficiently in the interests of strengthening the Bitcoin network.
Just think about that for…a…second…
A whitepaper and some code, implementing an incentive model, has independently created the Bitcoin we know today.
So What?
“Sapiens can cooperate in extremely flexible ways with countless numbers of strangers. That’s why Sapiens rule the world, whereas ants eat our leftovers and chimps are locked up in zoos and research laboratories.” — Yuval Noah Harari
In his eye-opening book, Sapiens, Yuval Noah Harari details our rise from an inconsequential species fighting for our survival 150 000 years ago, to the dominant species on this planet today. He attributes our success to our ability to organize in mass cooperation networks. Today, thanks to major technological progress in communication, education, and transportation we are able to specialize and cooperate on a previously unimaginable scale. No other species can even compete.
Enabled by cryptoasset networks, decentralized and permissionless incentive models have started a revolution in mass cooperation networks.
What does the future hold?
Bitcoin is the first of its kind. It’s the first incentive model, created with a cryptoasset network, which is organizing human behaviour to develop, maintain, and secure a global, decentralized, permissionless system.
However, Bitcoin is just one possibility, like email was just one possibility. We have yet to discover the smartphones, social networks, and video calls of this revolution.
The most exciting implication is that every one of us, without discrimination, will have the ability to easily contribute, financially or otherwise, to cryptoasset networks of our choice. We will be empowered to strengthen networks that are organizing human activity to achieve goals that reflect our deepest values.
Some possibilities include:
- Cryptoasset networks that allow anyone to add value and get compensated, based on their skills and interests, without having to be accepted by a traditional company. Let’s say you have an interest in powerful computers and are skillful at maintaining them. You can be compensated to build and maintain a set of powerful computers, strengthening the Golem network, that anyone can use to do intensive computations. Is this the rise of the 21st century ‘employee’ and ‘organization’?
- Cryptoasset networks that enable us to organize our behaviour to make decisions more collaboratively. Since these networks are decentralized (i.e. they are secured collaboratively and as a result are tamperproof), we can experiment with modern and equitable ways of making decisions as a community. One such example is a liquid democracy, such as Democracy.earth. What would the world be like if we all had a more equal say?
Democracy.earth is implementing liquid democracy using cryptoasset networks.
- Cryptoasset networks that help us organize our behaviour to preserve our planet. In the future, a cryptoasset network could accurately track the environmental impact of a product. You could elect to only purchase from companies that are doing their part in preserving our planet. An extremely passionate individual could also elect to contribute financially to this cause. We could call this a voluntary tax; a tax where you know exactly where your money is going; a tax which helps you build a society that reflects your true values. What initiatives would you support?
We are currently bound to archaic networks of organization designed by distant ancestors for a world we left behind centuries ago. Even with significant dissatisfaction these networks have been extremely resistant to change. However, we are amidst a revolution. We, as individuals in society, will finally be empowered to create the world we wish to live in. It may be hard to comprehend this without detailed examples, so I will be releasing a series of posts, called Future Glimpses, where we will take deep journeys into the lives of people in our revolutionized society.
In summary, we are witnessing the greatest evolution in mass cooperation networks for our species. 150 000 years ago, as a neutral observer, I would have bet on lions, tigers, or gorillas. Today, as one of the initiated, I bet on cryptoasset networks taking our species to unchartered and unfathomable territory. Godspeed.
Love and gratitude to you for your attention! Liked it? Click the hands below and follow me on Medium and Twitter for future content.