Centralization Took Us Here, Cryptocurrencies Will Take Us There

Cryptocurrencies represent far more than speculation and decentralization, they represent the potential discourse of democracy.

Blockchain could antiquate the need to picket, maybe. (Photo by Unseen Histories on Unsplash)

Nestled in the picturesque snow-capped mountains just outside of Bern, Martin Keller reviews the next series of referendum’s that he will have to vote on in the coming weeks, with topics ranging from a national electronic ID to a so-called “burqa ban” that would prohibit face coverings.

Like many Swiss, Keller is well read, stays apprised of the myriad issues that concern the small, prosperous country of Switzerland and gives considered thought to how he will vote in the upcoming series of referendums.

With the most pervasive system of referendums anywhere in the world, Switzerland is as close as it gets to “direct democracy” where citizens vote directly on policy issues rather than electing delegates to decide.

In most every other part of the world that practices some form or other of democracy (it’s a sliding scale), democracy comes in the form of “representative democracy.”

The argument for a representative democracy is simple — it’s just more efficient to have a group of representatives (hence the term “House of Representatives”) who will hopefully vote on issues, develop policies and create laws that will govern society based on the views that best reflect their constituents.

However, the application of representative democracy has had a patchy track record at best, and is often susceptible to private capture — where the rich and well-connected are able to exercise an outsized influence on lawmakers for their own agendas.

Directing in Democracy

The Swiss system of direct democracy dates back to to the origins of the modern state in 1848, when the country’s relatively autonomous cantons decided to come together to form a federal republic.

Because Switzerland consists of multiple rival factions, with differences in language and religion, direct democracy was officially incorporated into the federal constitution in 1874 — with referendums becoming a way to get a fissiparous population to create a functional and modern central government.

But Switzerland is the exception rather than the norm.

https://medium.com/media/58512d45929cd9295af0c2d56a62d770/href

Given its small territory, “direct democracy” was logistically less challenging than say in a country as vast as the United States of America and critics say that having the populace vote on everything from the sublime to the ridiculous would lead to legislative gridlock.

Yet looking at the parliaments and assemblies of major democracies today and it could be said that gridlock has increasingly become a feature, rather than an unexpected outcome.

Part of the reason of course is that as countries grow and people become more (or less) informed by the free flow of information, disparate interests, agendas and lobbies start to gum up existing democratic institutions.

It is not without some degree of irony that U.S. President Joe Biden’s economic agenda recently hinged on the views of just one senator from his own party.

But such are the idiosyncrasies of democracy, warts and all, which is why United Kingdom Prime Minister Winston Churchill once famously remarked,

“Democracy is the worst form of government — except for all the others that have been tried.”

Churchill uttered these words after he had led the U.K. out of the Second World War and had then been unceremoniously voted out of the premiership immediately thereafter.

But Churchill’s words reflect his respect for democracy and demonstrate his magnanimity in seeing how the institution is greater than the man.

Unfortunately, representative democracy from the time of Churchill has actually brought into sharp focus the weakness and lack of representation, rather than any meaningful increase the democratic share of voice.

It is in this respect that technology may provide a solution.

Technological Democracy

While the so-called Constitution DAO (Decentralized Autonomous Organization) ultimately failed in its attempt to purchase an original copy of the United States Constitution, it demonstrated the power of an autonomous, internet collective, inspiring admirers and copycats alike.

Near the edge of Yellowstone Park in Wyoming, another DAO, CityDAO has successfully mobilized in under four months to buy a 40-acre plot of land in Park County, Wyoming, on the fringe of the Montana state border.

CityDAO has no official leader and its members organize themselves using the chat app Discord and every major decision must go up for a vote.

https://medium.com/media/93f2ce7d77cad74d074b38b600453581/href

With 5,000 members, CityDAO seeks to lower the costs of property ownership and is developing new systems for public finance, all using the same technology that powers cryptocurrencies.

CityDAO is just one of the more visible examples of hundreds of other decentralized autonomous organizations, where interested constituents can band together to pursue single or multiple purposes, from governing open-source software programs or buying real-world assets.

Key to some of the efficiencies when it comes to managing a DAO is that no messy votes need to be counted by hand, there aren’t any hanging chads and allegations of voter fraud are irrelevant because every vote is stored and logged on an immutable blockchain.

https://medium.com/media/603aac353c150e6df2235870a7df7f7c/href

Whereas direct democracy is often criticized for its inefficiencies, DAOs like the CityDAO show just how quickly things can get done and reflect a future where software code plays a larger role in governing large organizations, like a country or multinational conglomerate.

Given that a single shareholder or citizen can hardly be said to steer the course of democracy, DAOs provide for the prospect of greater democracy through increased participation and ironically, more representation than a representative democracy.

The Democratic Republic of DAO

It has been said that the irony of the United States is that Americans demand democracy in the public discourse, but accept dictatorship in private corporations.

With dual-class shares, where founders are often able to wield outsized influence over the direction of their companies despite holding a minority stake in their firms, the idea of a minority shareholder having their interests represented and protected is somewhat naïve.

Which is where DAOs may provide a path forward.

https://medium.com/media/047bddbb7ee8acaef711ae29b70da39e/href

While DAOs take on many forms, they are typically governed by smart contracts that automatically execute transactions when specific conditions are met — e.g. purchasing a plot of land when sufficient votes have been received.

DAOs are very much in their infancy at the moment, with just US$12.1 billion worth of cryptocurrencies in deposits and around 1.6 million members in groups tracked by data service provider DeepDAO.

But their potential for expansion to many aspects of human society remain significant.

The state of Wyoming, which was the first to develop the limited liability corporate structure and arguably created the legal vehicle for entrepreneurship to flourish in America, recently passed legislation that allows for the formation of “DAO LLCs” which are managed entirely by smart contracts.

And since the passing of that legislation, over 110 entities have since registered as DAO LLCs in Wyoming, with CityDAO being one of them.

Built atop the Ethereum blockchain, members of CityDAO must purchase one of 10,000 non-fungible tokens (distinct, unique tokens on the Ethereum blockchain) to take part in discussions regarding the acquired land, and are able to sell their NFT at any time should they want out.

While CityDAO NFTs do not give their holders a direct stake in the physical land or the rights to any income, it lays the groundwork for other types of DAO-led democratic institutions, key among which is software.

Whereas tying the blockchain to physical assets like land requires the acquiesce and sanction of lawmakers and governments, software, in particular decentralized software, does not.

Decentralize This

Because search engines and social media platforms don’t ask users for their opinion on just how the mountains of data and content that they create and contribute should be organized, disseminated or exploited, decentralized equivalents could potentially fill that role.

https://medium.com/media/e65f19bb4f533f9ef8273e25a48d0ad1/href

Token holders of decentralized search engines, social media and every other form of digital service that has become so integral to modern life could pave the way for users to receive a more representative experience with otherwise centralized platforms.

Considering that the average CEO in the U.S. in 2020 earned 351 times the average worker’s compensation, there is plenty of scope for a far more redistributive, participative and representative form of corporate governance, all of which could be facilitated by cryptocurrencies.

The cantons of Switzerland became a country only in the late 13th century, borne out of necessity as a defense against the rising Habsburg dynasty and forged a representative democracy to prevent disparate interests from tearing apart the nation.

Just as Switzerland has created a “national identity” out of its disparate parts through direct democracy, cryptocurrencies and blockchain could of necessity become the indispensable tools that help to refocus representative democracy to reflect the aspirations of the very people it seeks to represent.

To add to Churchill’s wise words, because democracy may be the “least worst” form of government, it can only be improved upon by facilitating more of it.


Centralization Took Us Here, Cryptocurrencies Will Take Us There was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.