The ETHics of Crypto and NFTs, Part 2: The Social Smart Contract
The ETHics of Crypto and NFTs, Part 2: The Social Smart Contract
A Light Philosophical Take on the Social Impact of Crypto and NFTs
Powered By the Will of the Many
It can be difficult to take the world-changing potential of crypto seriously amidst all the rampant market speculation and irrational behavior we see in the space sometimes. Such is often the case with exciting new technologies (think early internet during the Dot-com bubble), but in this article, I hope that we can look past the hype and reflect on what the true value propositions of crypto and NFTs are for us as individuals, and as a society. It’s important to let our values shape the roles that technology take in our lives, rather than the other way around.
Decentralization. Self-Sovereignty. Financial Empowerment.
These are a just few of the core tenants in crypto/NFTs that resonate with my own personal values. In my ongoing career in entertainment and technology, I have seen and felt what it’s like when creators and artists are exploited for their work. It’s probably why I’m such a proponent for creative rights, freedom of expression, and horizontal organizations.
Starting in earnest after Satoshi released their whitepaper amidst the backdrop of The Great Recession and government bailouts, people have started waking up to the inequalities and corruption entrenched in many trusted, centralized systems that held power in their lives. Governments are meant to serve their populations, but without getting too political, many seem blind or even hostile to the equitable potential of crypto/NFTs for their people. In several cases, many have even attempted repeatedly, and without success, to ban the technology itself.
"First they ignore you, then they laugh at you, then they fight you, then you win.”
-Mahatma Gandhi (likely misattributed)
Banning anything is rarely the right answer, let alone a long-term viable solution. Stakeholders will circumvent restrictive legislation by moving operations to different jurisdictions, or by going underground. Most blockchains, like Ethereum, are simply open-source, decentralized code running on a global, permission-less network, that by their very design, are logistically impossible to shut down. Nothing in this world is completely black or white, but if one’s values include freedom of speech, fair distribution of wealth, and equal access to information and opportunity, then they would probably be opposed to such restrictions too.
Anti-Fragile & Anti-Fraud
Public blockchains like Ethereum retain a full and open history of all transactions, freely accessible to anyone who wishes to interpret the data. This is massive for the prevention of systemic issues such as fraud and corruption, and a breath of fresh air from traditional, opaque institutions and cartels where fines for getting caught doing illegal activities are just a cost of doing business. Contrary to popular misconceptions around crypto, it is actually more difficult to launder money when every transaction a pseudonymous user ever makes is timestamped on a public ledger for all eternity.
I believe there’s also dignity in bottom-up decentralization, as opposed to a top-down central authority akin to a monarchy or oligarchy. In an ideal state, everyone would be held to an agreed upon set of rules with equal access to opportunities, rights of consent, and inclusivity regardless of their motives, nationality, or background. Basic self-sovereignty and property rights, such as control of one’s own identity, would likely be foundational to such a system.
Layer 0: The Social Protocol
We are social creatures, and regardless of your views on whether compassion or destruction are inherent traits of human nature (speaking as just a plebe who shouldn’t be looked to for further insights on political philosophy 👀), I believe that crypto/NFTs will be foundational in creating truly equitable covenants between a population (users) and governing structures (an amalgamation of smart contract code and real-world institutions). When we come together to form communities, there is a general consensus that we give up a few of our individual freedoms to create prosperity for the whole.
Crypto/NFTs would also provide a foundation of peaceful coordination and frictionless agreements, such as indisputable ownership rights, confidential metadata, and one’s own personal identity and reputation (hello, NFTs!), that would otherwise need to be enforced through strength. 💪 Compare that to current “solutions”: centralized databases on permissioned servers owned by big tech companies, and governments that consider nine-digit SIN numbers and physical signatures secure in the face of rampant identity theft (Really? 🤦♂️) - all juicy attack targets for hackers.
Web3 will enable communities to scale more quickly and easily, and in a way such that independent freedoms need not be given up to current extents for the perceived stability of a centralized state power (an after-the-fact way we justify our submission to entrenched institutions, in this writer’s humble opinion). When decisions are made by the many (even in the presence of leadership figures), I agree with “J.J.” Rousseau that there is an underlying “general will” of compassion and fairness. What better way to ensure that a government acts in good faith to its citizenry than through the transparency of a public blockchain?
DAOs: Decentralized Autonomous Organizations
Imagine a company with no clear hierarchy or chain on command. If you’re picturing a kindergarten class with no teacher 🏹, I don’t blame you. But what if the direction a company or project took could be proposed and voted on by anyone and everyone in the organization? It’s a noble egalitarian goal, and though there have been many attempts, we always seem to struggle with a failure of coordination in the end.
The current legacy system is highly inefficient and opaque - essentially a mess of disconnected stakeholder proxies (i.e. custodians, registrars), each with their own internal record-keeping and communication systems. A few times a year, entire teams work at great costs to “create” snapshots of a company’s true financial situation (often prone to error, manipulation, and notoriously slow and difficult to audit) for shareholders and regulators. As we’ll cover next, DAOs would not only have the most current historic data publicly available, but all data would all be managed automatically in real-time!
DAOs are mission-led cooperatives that coordinate through a mutual set of rules enforced on a (public) blockchain. Members of DAOs often hold a digital token(s) that allow them to vote on decisions that steer the direction a project takes. All this is done in a democratic (direct and/or representative), location-agnostic, and transparent structure on the blockchain. It becomes in the best interest for existing members of a DAO to create a community of value to attract new members, who in turn grow the value of the community - a virtuous cycle that can be difficult to capture in businesses where incentive structures vary from top to bottom. Who better than the users themselves to decide what a community does to create long-term success? In Web 2.0, shareholders got rich and users were the product; in Web 3.0, users are the shareholders and will participate in the upside.
The now infamous Ethereum ”DAO Hack” in 2016 was an early failure that gave the entire DAO concept a black eye for years, and even caused a hard-fork of both the code and the community. It’s important to note how early we still are on this front, particularly with how DAOs are subject to government regulation and reporting (of note: the state of Wyoming recently passed a law that would recognize DAOs as LLCs). Many also use DAO tokens as vehicles of speculation 🤑, rather than for their intended use of governance. However, it’s amazing how much progress has been made and how much brainpower is going into powerful ideas that could very much shape how we work and organize ourselves in the future. Thinking years down the line, imagine a scenario where multiple DAOs from different communities could interact with each other, and what could be accomplished at such a scale: it would be a “United States” in the most technical of terms. 🗽
Examples of DAOs
Effective but difficult to execute models of governance, such as flat/horizontal organizations and quadratic voting are just a couple of the prized features being implemented by DAOs today (i.e. Gitcoin, a blockchain-centric public goods DAO).
In the NFT space, platforms such as Rarible and Mintable are both governed (to an extent) by their communities - the former, like most DAOs, uses a fungible token ($RARI), while the latter is one of the only DAOs I know of that votes through NFTs. There are also many DAOs built on collective ownership of NFT collectibles, such as FlamingoDAO, which holds a diversified NFT portfolio, and CryptoPunkDAO and MeebitsDAO, which focus on CryptoPunks and Meebits, respectively (a little out there for most, but very supported by passionate and genuine communities).
Finally, check out DeepDAO: it’s a great dApp to view data on most DAOs out there.
Further Reading: "A beginner's guide to DAOs," by Linda Xie is a great introductory article to DAOs, and "Sketch for a NFT-based media company," by Kyle Chayka is full of good ideas on how projects can use NFTs to build value systems within their communities.
Can a Brighter Future Outshine the Shadows of Our Past?
We stand at crossroads. How will society integrate the power of crypto and NFTs? Will it be through permission-less public blockchains in a libertarian, free-market utopia, free of regulation, nation-states, and taxation? Dream on, delusional anarchist. 🙄 Are we then condemned to a dystopian future of permissioned, private blockchains in which all citizens are subject to state-wide censorship and surveillance (like some nations already seem to be pursuing 🕵️♂️)? Sounds like an Orwellian nightmare, but again, I don’t see that materializing with any staying power.
Instead, I see a mutual balance of concessions between the interests of individuals and those of governments, through code: a Smart Social Contract, if you will, where communities work together with regulators to create value for society as a whole. For better or for worse, each nation will likely want to implement blockchain in a way that uniquely suits their population and political agenda. It’ll be interesting to see how non-fungible each system is, but ultimately, I believe that the ones that aim to empower rather than control will see the greatest success.
“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
-John F. Kennedy
This topic is ripe for discussion, and I’m always grateful to readers who share their questions, experiences, and arguments. Be part of the conversation with me and share your thoughtful ideas in the comments section below, or DM me on Twitter - I will always do my best to respond in a timely manner. ✅
As always, thank you so much for taking time to share this journey together with me into the world of NFTs. I hope you found the content helpful, and maybe even fun to read! 😁
If you would like to help support the NFT Droplets newsletter, please do Share this article with someone who would find it helpful.
If you’re not yet subscribed to NFT Droplets, enter your email below and be among the first to find out when fresh NFT articles get dropped (I promise that you will never get spammed, nor will your email ever be shared with anyone). ✅👇
If you have any questions, comments, or suggestions for future articles, please share your thoughts in the comments section below. 💬
⚠ Disclaimer ⚠
Cryptocurrencies and NFTs are a speculative asset class. Be aware of the risks involved and know that you could lose money. Everything I share references an opinion and is for information and entertainment purposes only. It is not intended to be investment advice. Please consult a licensed professional before making any investment decision.