by Dermot O’Riordan
This article originally appeared in the Bankless newsletter on 14 January 2020.
Cryptonetworks are getting increasingly better at attracting financial capital (both TVL and investment) as well as human capital (developer activity in particular). On the other hand, qualitative arguments for one cryptonetwork over another tend to focus on price (“have fun staying poor”) or technical trade-offs.
What about their social capital? Social capital, the shared values that allow individuals to work together in a group to achieve a common purpose effectively, is much more underdeveloped and is largely undefined for most cryptonetworks.
In Descartes’ Error: Emotion, Reason, and the Human Brain, neuroscientist Antonio Damasio describes a revolutionary discovery he made: people with damage to the part of their brain where emotions are made can’t make decisions. They could describe what they should do in logical terms but couldn’t decide. In other words, we use logic to reason ourselves towards a decision, but the emotional side of our brains, not reason alone, is required to make any determination. In this sense, engaging a speculator’s fear of missing out on a hot new project is a valid argumentative technique. It is likely more effective than arguing over technical trade-offs on Twitter. At the same time, price-focused arguments are laughably limited in scope (this is unlikely their sole motivating drive), short-termist, and uncalibrated. Nevermind, the second-order effects such a culture of greed and anti- intellectualism creates.
Can we do better?
Let’s start with some perspective.
The chart above shows that there are only 500,000 daily active addresses on Ethereum**** out of c.130m unique addresses.
Looking ahead to 2021 and beyond, values can act as the catalyst that sparks greater coordination and innovation in cryptonetworks; the light that guides usacross the chasm to mainstream adoption**** of ten million-plus daily active crypto users.
This article will look at the role of values in cryptonetworks and how founders can define, embed, and leverage values for their crypto startup’s success. Cryptonetworks and crypto startups are used interchangeably throughout, what matters is a shared endeavour to create incentivized public blockchain infrastructure.
Jim Collins’ research for his book “Good to Great” covered 1,435 companies across 30 years. One of the takeaways was that “markets, technology, competition, or products” weren’t the distinguishing factors that separated “an enduring company of iconic stature” from the others. What matters most is for companies to: “** *[d]iscover [their] core values and purpose beyond just making money (core ideology)***and [to] combine this with the dynamic of preserve the core / stimulate progress.”
There are two strands to the argument for the explicit development of culture and values within cryptonetworks.
First, the 2020 “Defi summer” demonstrated the power of incentives for bootstrapping new networks with both capital and users. Saying that, with only 500,000 daily active users across the entire Ethereum ecosystem, extrinsic values that appeal to our base desires to get rich (and avoid staying poor) will only get us so far.
Cryptonetworks need to compete more effectively with their web2 technology and financial competitors on a values-basis for capital and users.
Second, cryptonetworks’ owner-operator co-operative model makes them uniquely differentiated compared to their centralized competitors. Open source code is brought to life through a network of supply-siders, users, speculators, developers, and general enthusiasts. However, to survive and thrive, cryptonetworks’ stakeholders need to be aligned around how such networks adapt and evolve. Core guiding principles can create better alignment between stakeholders, in turn, enabling greater coordination and, ultimately, sustainability through better governance.
To summarize, values are necessary to attract capital and users away from competitors and align stakeholders. Attracting new users to opt-in to the new crypto paradigm, and opt-out of the status quo is the starting point. Aligning all stakeholders is the gamechanger that should enable cryptonetworks to coordinate and govern effectively at scale.
