WHY is Blockchain; An Investor's Outlook on Blockchain’s Past, Present, and Future
The Prelude: Pioneers and their importance in defining generational progress
“The person who follows the crowd will usually go no further than the crowd. The person who walks alone is likely to find himself in places no one has ever seen before.” — Albert Einstein
Today’s “generational” progress doesn’t come from where it used to. Gone are the days of earth-shattering revelations coming from the desks of grey-haired businessmen — we are now seeing a redistribution of innovation stemming from those we expect it from least: cryptographers, futurists, and libertarians.
That being said, it’s hard to say honestly that we couldn’t see it coming. Pioneers have always been those who were never worried about conforming to the system set upon them, and the above groups can certainly say they fit that description.
As one with a penchant for abnormal innovation, I was naturally curious to seek out some of these untraditional pioneers bold enough to try and redefine some of today’s most complex industries — leading me to stumble upon the modern-day blockchain space.
Fast forward 15 months of experiences, activity, and immersion amongst a number of the industry’s “OG’s” (or new-school thought leaders) and I still consider myself no closer to achieving the generational change that pioneers like Satoshi Nakamoto and Vitalik Buterin have envisioned.
What I believe I have discovered, however, is a fundamental understanding of how a group of libertarians were able to craft a movement capable of terrifying the modern-day central bank, as well as an understanding of how the blockchain space must be interpreted to the uninformed individual in order to warrant buy-in, investment, development, and future adoption.
There are several articles online explaining how blockchain works along with articles glossing over a wide array of use cases (some good, some bad). This article doesn’t touch on any of this.
Instead, this post is focused on guiding investors, VC’s, and founders through an intuitive understanding of the conception of the blockchain industry, as well as a framing of the outlook that should be possessed when searching for pioneering blockchain projects.
Voice & Exit: The Thesis Behind the Creation of a Decentralized Society
“Any technological innovation, whether it was the wheel, the steam engine, the personal computer, or the iPhone is born from one of two innate human responses to any societal shortcoming: 1) The use of voice as a means to share one’s opinion, or 2) the use of an ‘exit,’ or withdrawal from the failing relationship entirely.” — Albert O. Hirschman
Before thinking about the blockchain space I challenge you to read the above statement, and think about it in both its broadness and specificity.
This statement is the underlying process that explains everything, from why we choose to revolt against governments that no longer act in our interest to why we tend to leave our jobs when we don’t get a raise. It explains the life cycles of political movements, technological advancements, and grocery store choices, acting as the intricate logic behind some of our both our most impactful and basic daily decisions.
The cycle, most importantly, explains why it is not in fact random that those who are spearheading the modern-day blockchain movement are those who felt like they were getting “pooched” by central banks.
The advent of the Cypherpunk movement and creation of the decentralized currency Bitcoin perfectly demonstrate the pervasiveness of voice and exit in our society; marking the starting-place for understanding of the core concepts that can be abstracted to create revolutionary blockchain use cases.
Libertarian Roots: The attempt at voice as a means to spark revolution
The mid to late 1900’s were a time of great turnover and experimentation in the world economy.
Following the second world war the decision on interest rates of many countries was placed in the hands of respective finance ministries, leaving central banks ultimately responsible for maintaining financial stability and exchange rates worldwide.
While the majority of society saw great comfort in having a central entity manage monetary policy, a group of libertarians and futurists saw the opportunity for unprecedented greed and power imbalance.
This group, formed at my alma mater UC Berkeley, came together to form a libertarian organization entitled “The Cypherpunks,” dedicated to pushing society towards the use of strong cryptography and privacy-enhancing technologies as a means to replace central entities and achieve social and political change.
This movement, decentralized by nature, began with activists around the world voicing their displeasure in the ability for central banks and governments to possess power and ownership over citizen’s private information.
The organization then proceeded to organize private mailing lists, panel discussions, publications, software & hardware projects, civil disobedience, and protesting rallies, but ultimately fell short of their desired goal of mass awareness and adoption.
The inability for a group of privacy-cherishing computer scientists and futurists to coordinate a vocal social movement does not surprise anyone. What is more interesting, however, is the role that exit played as an alternative to voice in the formation of the Cypherpunk movement.
When integration with existing systems fails to succeed, an effective alternative vehicle for change can be chosen — involving the complete detachment of the presumed system entirely.
Satoshi’s Innovation: The role of Bitcoin as the first true “exit” from centralized society
“The next Bill Gates will not start an operating system. The next Larry Page won’t start a search engine. The next Mark Zuckerberg won’t start a social network company. If you are copying these people, you are not learning from them.” — Peter Thiel
At the end of the day, the Cypherpunks were never going to get their greatest win by speaking out to the conventional governmental system that oppressed their ideals to date. The Cypherpunk’s greatest decision was instead to step beyond the realms of protest into the realms of “exit”: adopting, promoting, and utilizing an innovative new platform that provided stakeholders with the means to transact and transfer value privately and trustlessly.
This pioneering platform, in modern day, is known as Bitcoin.
With the publishing of the world’s first adopted decentralized ledger, Bitcoin’s creator Satoshi Nakamoto successfully transcended the bounds of the suppressive centralized systems that the Cypherpunks had been fighting since conception. This solution was a pure 180 from attempting to push for governmental privacy regulation, instead acting as a departure from the system the Cypherpunks were fighting entirely.
Fast forward 10 years and we are seeing Bitcoin have more success than anyone could have initially imagined; acting as the first and most powerful pioneer in a greater breed of innovative blockchain platforms.
By exiting the centralized frameworks that were designed to prevent certain systems from developing, blockchain technology has been able to craft a market and movement that has the potential to disrupt any and every industry — all the while maintaining the ideals of the computer scientist libertarians that were told “no” a million times before their breakthrough.
Reinventing the future: Understanding the role of the exit in imagining our future
“I want to put a ding in the universe.” — Steve Jobs
Bitcoin’s disruption of the online transaction, asset management, and value industries is just scratching the surface of the greater capabilities of blockchain technology. Due to the ability of blockchains to act as a tool for exit in a variety of verticals I believe we are on the way to a paradigm shift, in which interactions between stakeholders in all industries are no longer shaped by centralized borders but can rather be shaped by utility, practicality, and commonality of thought.
Due to the aforementioned shortcomings of governments and other central entities and the rise of platforms like Bitcoin and Ethereum it can be hypothesized that we are well on our way to exiting today’s society from “neighbour-based interactions” into more of a “borderless value economy,” whereby people and networks are no longer connected by proximity but are rather connected by passion, interest and like-mindedness. (i.e platforms to bring value and utility to Chihuahua lovers vs programs for citizens of China).
This is why I believe it to be critical to step beyond the realms of blockchains as tools for digitization & data integrity into the realms of blockchains as tools to allow for massive incentivized collaboration and globalization.
At the end of the day blockchain is as much about connecting those who don’t have the autonomy and liberty to make and own decisions of their own as it is about optimizing existing processes.
This is why the citizens of countries like Argentina, Ecuador, and Tunisia are so excited by the prospect of adopting blockchain use cases like digital currencies — it not only allows them to leverage the privacy and security associated with the management of their own digital identity, but also “exits” globally oppressed citizens who have spent years working for a living from being subject to the poor monetary management skills of their governments.
Most importantly - this concept of voice & exit can be extended beyond the realms of blockchain.
Take the Tesla movement for example. With this train of thinking it can be hypothesized that something like Elon Musk’s electric cars aren’t really about shifting the automotive industry from fossil fuels to electric — the real “exit” in the industry is the creation of a transportation industry not-susceptible to human interaction and destruction.
This is why Musk has experimented with reusable rockets, self-driving cars, and fully automated supply chains — to position Tesla as the first step to a fully connected and self-adjusting network of sustainable flying, floating, and rolling vehicles.
As we progress on with this mindset of searching for investment opportunities through the lens of finding the next successful exits I cannot express enough the importance of thinking of blockchains as tools that allow for collaboration and globalization on a massive level.
The next unicorn will not be found by looking for systems that can be made more efficient — instead look for the team, the vision, and the idea that turns a system on its end, exiting an existing industry to provide a global solution never previously possible.
Finding ideas that are “too big” and “too wild” can often be the only way to truly find the cutting edge.
Closing the argument: A reiteration of the importance of voice & exit in shaping global movements
“Life can only be understood backwards; but it must be lived forwards.” — Søren Kierkgaard
As we have seen in prior examples, many of the ideas behind the technological innovations of today were deeply rooted in the frameworks of the past. Since the dawn of time members of societies have been convinced that voice is the key means to spark societal change, which unknowingly has led to all-too-familiar cycles of complacency and contempt.
When thinking of the ways in which we can disrupt existing systems and place power back in the hands of individuals it is critical to remind ourselves of the cycle of voice and exit that can be undertaken as a means to refresh the industry standard.
Blockchains inherently provide a tremendous opportunity for a societal exit and thus value creation, which is why the industry is seeing so much attention and attraction from investors, inventors, and individuals at the moment.
As we progress forward in the pursuit of impactful blockchain projects we must make sure to the fundamental “exit-centric” ideals in mind, avoiding the all-familiar ability to sell the capabilities of the technology short and produce solutions devoid of impact and meaning.