The Two Views Of Crypto: Sound Money Vs. Global Computer
/Each of us has a unique personality and history that influences the way we perceive the world-- our own set of lenses through which we view reality. It turns out, those lenses can result in dramatically different conceptions of the same phenomenon.
It will Shock some of you To Learn all three versions look 100% Gold & White to Me ¯\_(ツ)_/¯
In the crypto world, amongst those who believe this technology to be lasting and important, there seem to be two dominant viewpoints. In this post, we'll elucidate these two lenses, explore what each perspective gets right and wrong, and seek to unify the two if possible.
A World Computer
Many people view blockchain networks as giant, decentralized, global computers. Henceforth, we'll call people who tend toward this perspective "Computerians". (It's a dumb name, but I really don't want to type "people who have this perspective" over and over, so let's go with it).
A blockchain computer is everywhere and nowhere. Code IS run and State is Replicated across Thousands of Nodes
Computerians tend to be developers and software people. They recognize blockchains as a new place to run their code and store their data. Compared to traditional computers, blockchain computers are wildly inefficient, expensive, and hard to program safely.
Despite this, Computerians are excited to write software for these global computers, and believe this software will change the world. Thats because they recognize a host of new capabilities these computers bestow on software, namely:
- Digital scarcity
- Data storage that is immutable, auditable, and censorship resistant
- Code that is unchangeable once deployed (i.e. the ability to provide guarantees to users about how a system will behave)
To put it succinctly, Computerians believe software is eating the world-- blockchain computers enable them to write new kinds of software and thus devour parts of the world previously thought indigestible.
Sound Money
In contrast to the Computerians, there are a group of people who view blockchain as primarily a monetary innovation. For these folks, "blockchain" is an implementation detail. We'll call them the "Fiscalites."
Is Bitcoin a Better Gold Than Gold?
Fiscalites are more likely to have a background in economics, finance, or political science. They understand that, historically, things that become money-- like shells or precious metals-- have had certain properties, such as:
- Durability and secure-ability
- Measurability and divisibility
- Forgery resistance
Looking at cryptocurrencies, Fiscalites recognize them as a revolutionary new form of sound money. Fiscalites tend to be skeptical of fiat money, that is, money issued and controlled by a government. They view centrally controlled, inflationary monetary policy as dubious.
Concisely, Fiscalites see cryptocurrencies as an ascendant new form of global money and the antidote to the questionable modern experiment of fiat currency.
Each Side's View Of The Issues
Unsurprisingly, viewing the world through these different lenses leads to different conclusions regarding various matters. Let's examine how each side perceives:
- The concept of cryptocurrencies
- Altcoins and other tokens
- Scaling and network upgrades
Cryptocurrencies
It should be self evident that to a Fiscalite, cryptocurrency is the whole ball game. The underlying blockchain technology is an afterthought. It's the sound money it enables that matters.
A Computerian views cryptocurrencies as a fundamental component of blockchain computers, but not as their singular end. A network's currency underpins the incentive structure that allows it to function in a decentralized manner, and it enables powerful use cases in the form of programmable money. While Computerians recognize the importance of these functions, the currency doesn't conclusively define the utility of the network.
Altcoins and Tokens
Fiscalites tend to be Bitcoiners. Since Fiscalites are focused on sound money, they see the network effects of Bitcoin as unstoppable. The more people who store their wealth in Bitcoin, the more its value increases, and the more likely others are to use it to store their wealth.
To a Fiscalite, unless a large number of people are willing to store their wealth in a given coin or token, it's useless. Most believe only one asset can accrue such broad social trust. An open minded Fiscalite might be interested in altcoins that improve on the money-ness of cryptocurrencies, such Zcash and Monero, but thats about as far as it goes.
Fiscalites Put Bitcoin On A Pedestal.
As engineering minded folks, Computerians are more open to new projects which experiment, add features, and explore the blockchain tradeoff-space. As such, many of them are excited about Ethereum, but not exclusively so. They're multicoiners.
Computerians can envision a world where multiple blockchain networks see mainstream adoption, and where technologies like decentralized exchanges and atomic swaps allow users and software to transact seamlessly between them. Many Computerians even envision a world where a multitude of tokens and assets are implemented in code on top of these networks, each providing some narrow utility or incentive structure.
Scaling and Network Upgrades
Fiscalites don't want to change the network. Period. If the network can be changed, then theoretically it could be censored, broken, or have its monetary policy altered. This would damage its social credibility as money. For Fiscalites, intractable governance deadlock is a feature, not a bug, and suggesting a change to the network for scaling purposes is like proposing we alter the atomic composition of gold to make it easier to carry around.
Fiscalites want to scale the network on the second layer-- i.e. by leaving the base protocol untouched, but building on top of it, even if that comes with some tradeoffs. A historical analog would be government issued gold notes. They made using "gold" easier, albeit with some tradeoff towards trust. This was acceptable as long as there was an easy way to opt out of that trust by exchanging notes for physical gold.
Gold Notes Could Be Redeemed For Gold On-Demand
Computerians see scaling as an engineering problem, and one that must be urgently solved. If blockchain networks are all about creating new kinds of software, then we need lots of people to be able to use that software. These networks need to scale. As such, Computerians don't take an either-or view of scaling when it comes to layer 1 vs. layer 2. Why not both?
Naturally, this means lots of changes to the network. "Fine, let's get to 'em," says the Computerian. Even changing the monetary policy is not off the table in service of making the global computer work better.
What Each View Offers The Other
As we've seen, Computerians and Fiscalites seem to disagree on quite a lot, despite both being bullish about the overall importance of crypto. The truth is, the two views are complimentary, and each is necessary to keep the other in check.
We are the proverbial blind men, each feeling a different part of the elephant while arguing over its nature. We ought to be triangulating our viewpoints.
The Blind Men and The Elephant, Via Wild Equus
My background lends me to a more Computerian disposition. I've come to realize there is much we should learn from our Fiscalite friends.
Computerians ought to take more seriously the history of money, and tread more carefully with regards to network changes as a result. The Ethereum DAO hardfork makes a good example of where this can go awry.
To an engineer, the hardfork felt like fixing a bug-- correcting a piece of software that had not behaved according to its design. In reality, the hardfork was a breach of social trust that damaged the credibility of the Ethereum's decentralized nature. For ETH to be money, this is unnaccetpable. Hopefully, history will view it as a one time event that is forgivable due to the network's nascency.
The Ethereum community also tends to have an unbridled optimism and confidence around fixing problems through engineering. This can be energizing, but it can also border on dangerous naiveté. The push towards Proof-of-Stake, for example, strikes me as more risky than the community admits.
Finally, while Computerians may always remain multicoiners at heart, they should probably recognize that at some point, consolidation to a small handful of networks is not only inevitable, it's desirable. We almost certainly don't need a token for every decentralized app under the sun.
For their part, I think Fiscalites could stand to learn a few things from Computerians as well.
For one, Fiscalites are painfully narrow-minded when it comes to anything other than sound money. In fact, this narrow-mindedness can turn to actual hostility towards those who suggest other use cases for decentralized networks. This is foolhardy, as these other use cases do not preclude cryptocurrency being used as sound money in any way.
Smart contracts are the most obvious example. Fiscalites downplay their importance or outright write them off, as Jimmy Song does in the piece linked below. But an army of tinkerers and builders are flocking to these platforms to see what they can create with the new capabilities they've been granted. Underestimate them at your own risk, but perhaps do a bit of research on the history of personal computers, open source, or the web before you do.
Finally, Fiscalites ought to at least consider the idea that multiple crypto-networks can coexist. Perhaps they'll be proven right in the long run and Bitcoin will dominate. Even if so, pretending to know right now, with certainty, that Bitcoin is the only coin that can possibly prosper is beyond presumptuous, it's preposterous. The world is simply too complex.
Can't We All Just Get Along?
If these two vantage points are to be reconciled, we must find common ground. The essential point of contact between the two ways of thinking is decentralization. Both sides deeply value the potential for crypto-networks to disintermediate entrenched central powers.
Fiscalites are focused on state-backed central banks who tinker with the economy through top down monetary policy. Computerians are concerned by the giant internet aggregators who increasingly control the web, wielding broad power to promote or censor what is seen. Both are rightly uneasy about deepening concentrations of power in the modern world. Both recognize the immense promise and importance of dispersing it.
This vision of a bottom-up, decentralized world, enabled by crypto-networks, is one worth fighting for. Hopefully, those who share it can be persuaded-- despite their distinct perspectives-- to work together to see it realized.
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