Consider Wikipedia.
Who would have imagined 25 years ago that the natural place to go for an account of the life of Napoleon, or to try once more to understand how light can be both a wave and a particle, would be Wikipedia.
A free, online encyclopedia curated by an internet-scale community of writers and editors. With nothing in it for them other than the sense of shared belonging to an unalloyed public good of global importance.
The awesome speed and scale at which communities can coalesce over the internet and birth some of the greatest contributions to human endeavour found its best expression in a 1997 essay by programmer Eric S. Raymond:
‘The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary’.
In the piece, which has achieved mythical status in technology circles, Raymond expresses astonishment at the rise of the open source software movement which gave us Linux - the operating system that still today powers every server, every Android phone, and every IoT device. Without question the most widely used and consequential piece of software in the world. Here is Raymond:
“I believed that the most important software (…) needed to be built like cathedrals, carefully crafted by individual wizards or small bands of mages working in splendid isolation” “[Linux’s] style of development (…) came as a surprise. No quiet, reverent cathedral-building here—rather, the Linux community seemed to resemble a great babbling bazaar of differing agendas and approaches out of which a coherent and stable system could seemingly emerge only by a succession of miracles.”
“The fact that this bazaar style seemed to work, and work well, came as a distinct shock. I worked hard (…) at trying to understand why the Linux world not only didn’t fly apart in confusion but seemed to go from strength to strength at a speed barely imaginable to cathedral-builders.”
Jimmy Wales, the founder of Wikipedia, often cites this modern-day scripture as an inspiration. A manifesto of how an ostensibly leaderless online community, bound by the loosest of shared vision, can over time settle into grooves of self-organization, mass collaboration and rapid iteration with awesome impact.
Crypto represents the next one of these great online bazaars.
Where away from defined project roadmaps and weekly tracking meetings, nothing short of a new financial system is being birthed, with internet-native means of value storage, payment, exchange and lending.
In the fits and start, occasionally rudderless way in which great collaboration networks like the web have come before it. Where decades worth of adoption and progress can occur in one furious quarter of headline-making. And can be followed by entire years of despondence and listlessness, where the peanut gallery will harumph that ’the technology doesn’t even work’, and quip about ‘solutions in search of a problem’.
If we parse through the first 15 years of the crypto story, as a grizzled financial analyst, what do we see? What fundamentally new capabilities have we come up with?
Firstly consider Bitcoin. The giant on whose shoulders everything else is standing. Since 2008 a lesson in how cryptography and mechanism design, the careful calibration of incentives so that miners who don’t know each other keep securing the network through bitcoin prices high and low, have created a $500bn internet-native store of value.
No one is in charge. Oh, you want to speak to the CEO of Bitcoin? Good luck with that. China or the SEC can and sometimes do try and ban it. Doesn’t matter. The protean organism just evolves, miners move from Hubei Province to Iceland, and on and on we go.
Next Ethereum. The decentralized, transparent world computer. Whose permission do I need to use it? Precisely no ones. Surely there is a form to fill in before I launch a new application? Nope. An object lesson in composable, permissionless financial innovation. Exchanges, lending platforms, derivatives venues, fungible and non-fungible tokens all interoperating through smart contracts that run block after block with no human driver at the wheel.
Next the slightly amorphous ‘Web3’. Consider Instagram, Twitter, Spotify et al. All the ubiquitous online platforms of the day are technically so easy to copy. How hard would it be to make a website where anyone can upload pictures, tweets or songs? Yet these monopolies are so difficult to dislodge.
The iron grip of Metcalf’s law (the value of a network goes up with the square of the number of participants) means we let them get away with anything. Antisocial behavior: promoting hate for the sake of page views. Spoliation: what is left for the song writer? Opacity: are you sure those ads I paid for reached the number of people you say they did? And complete arbitrariness: oh, you spent years building an audience on Instagram? Too bad, we didn’t like that last picture of yours.
Web3 holds the promise of giving shared ownership of the next set of online communities through internet-scale cap tables, mediated through tokens. Incentivising early creators and users to overcome the cold start problem and own a real share of what they are creating. Letting all this content live out in the open on a blockchain where Facebook can’t just keep it under lock.
How much more explosive could the growth of Uber or AirBnB, already astonishing viral successes, have been if drivers or hosts could have benefitted from early part ownership of the network?
And finally: what has become known has Decentralised Physical Infrastructure Networks or DePIN. Efforts are underway, inter alia, to have tokens orchestrate the erection from the ground-up of a global Wifi network with no TelCo in charge (Helium), the crowd-sourcing of street imaging with no Google in charge (Hivemapper), and the supply of limitless file storage and computation power with no AWS in charge (Filecoin and Cudos, amongst others).
With the early supply-side every time being compensated with fractional ownership of a network whose value is meant to go up over time as the network gains usage.
Beyond Bitcoin, none of these use-cases above solve real-world problems yet. No one is arguing with that.
But take a step back and consider this plethoric bazaar of technologies and capabilities we rapidly toured through: cryptography, mechanism design, permissionless innovation, credible neutrality, composability, internet-scale cap tables, bootstrapping new networks and overcoming the cold start problem through tokens.
Consider all the bright minds at work in the bazaar. Consider the breadth and scale of the problems being tackled. Consider the clear continuum that exists between the hacker and open source ethos of its forefathers, and the profoundly subversive, radical strand of the crypto community today. Look at all those pseudonymous online avatars who can’t wait to fell extractive companies and institutions at the knees. To poke the besuited executives of Big Tech, Big Finance and Big Government in the eye.
Bitcoin and Ethereum, digital gold and the world computer, together should form the basis of any crypto portfolio. Beyond that, a reasoned crypto allocation will make careful, disciplined attempts at identifying breakout attempts at winning the categories described above.
It’s no coincidence that Vitalik Buterin called crypto the Linux of finance: an open-source layer of value transfer just humming away in the background.
Into which central banks, financial institutions, regulators, payment processors, all those tired, centenarian cathedrals, together with their self-serving clergy, will have to plug in. Or be left behind.
Like if they decided that email was not for them, and that adapting to innovation was someone else’s job.
No one is saying all of this is going to work.
But more importantly, are you ready to bet that none of it will work?