I started blogging about crypto a year ago1. Since then, I’ve kept my process consistent: wake up, write about whatever is puzzling me, and publish regularly2. As this blog enters its sophomore year, I thought I’d spend some time analyzing the themes of my posts to see what I found most puzzling3.

I took all my public posts4 and gave each of them a primary theme, which was difficult in some cases because many posts have many themes. But a post on fiatcoins, for example, is not really a post about fiatcoins but a post about “who has power.”

The two themes I wrote about most were “who has power” and “value capture” by a wide margin. My top themes in order of frequency:

1. Who has power? (37%)
2. How do you capture value? (34%)
3. Scarcity in non-monetary assets (11%)
4. How do you get users? (6%)
5. How do you create value? (3%)
6. Other (9%)

For this post, let’s talk about “who has power?” The idealistic application of blockchains takes power from the powerful operators of legacy systems and gives them to the people.

I wrote in Stateful Protocols:

State aggregators enabled incredible outcomes: all the magical internet apps we use today. There’s no question that the products and services enabled by Internet 2.0 had a massive positive impact on society.

However, we’re starting to see some of the major drawbacks (e.g. privacy, monopolistic behavior) and consumers are starting to retaliate.

Centralization is the root cause of these problems. When a state aggregator grows to a certain size, the incentives of the state aggregator, the apps built on top of it, and the users misalign. This is covered well by Chris Dixon in Why Decentralization Matters.

And in Disaggregation Theory:

Users will have to make a choice between the superior UX of today’s internet companies and the superior privacy and data sovereignty of decentralized internet companies.

I cringe a bit at how buzzwordy my early posts were, but that’s where I was at in handling the topics: very punchy at the conceptual level (centralization bad, decentralization good; power go from them to us) and very wishy washy at the practical level.

I’m happier with my treatment of specific topics like “fees” vs “rents” and “incremental” vs “anarchy” and “voting” vs “governance” and “decentralization” and what does that even really mean?. In each case, there was a subject matter of e.g. fees, but the primary theme was power.

• Rents are charged by people who have too much power and abuse it; when they’re not rents, fees are charged by people who created value and are deservedly capturing it
• Crypto-anarchy is about making it impossible for people to have the power to marginalize groups
• Voting may seem like governance, but does not mean that power is distributed
• Decentralization is poorly defined and implies fair distribution of power; those with power can invoke it to manipulate perceptions of power

The launch of fiatcoins like GUSD, PAX, USDC and others offered useful real-world examples of “who has power?” The issuers clearly have power. And recently we saw Gemini use that power to close accounts that attempted to redeem GUSD for USD. As I predicted: use regulated stablecoins, get censorship.

Is it bad that Gemini can shut them down? Probably not. They probably have good reason to shut those accounts down. We rely on powerful people and platforms to take care of us. There are lots of benefits! We don’t know if we can replace those benefits if we take that power away. But if you don’t think anybody should have the power to censor, then perhaps you don’t care about losing those benefits.

Who has power can be observed, but who should have power is harder to answer5. It’s a question of trade-offs:

• If I give operators of a smart contract protocol more power but in exchange I get better performance and a better shot at getting users and developers, should I take it? What’s the optimal point on that spectrum6?
• Are there cases where I rely on benefits offered by powerful operators of platforms? Is there always a powerful operator-less working alternative that delivers replacements to those benefits?
• Is it overall better or worse for society if who has power changes? And does it change in the “more fair” way we have in mind? Or does it naturally pool again7.

I’m not sure what I think about most of these things yet, but I am eager to continue exploring topics like these as I enter my second year. Thanks for all your support, ideas and feedback.

1. My first post was on March 7th, 2018. Fun factoid: it came from a chart I made to respond to a Crypto Bobby thread on fundamental analysis.

3. Josh Wolfe has this awesome line in his recent interview with Shane Parish that’s along the lines of you know when nobody knows the answer to a topic when there’s a lot of books on that topic. The presence of those books is an existence proof that nobody knows what they’re talking about. If we buy this logic, the existence of many posts about a given theme could indicate I don’t know what I’m talking about for that theme. Makes you think…

4. Didn’t get around to labeling my member posts but I’ll probably do that soon.

5. I’m not sure this question has a right answer, but I know it has many wrong ones.

6. I wrote of USDC in a member update: a programmable and stable money is a boon to crypto adoption as long as we remember that it’s censorable. Coinbase has the opportunity to increase the probability that any one of their users goes from crypto speculator to crypto user–the most important step in the funnel–so I guess I’m cautiously cheering them on.

7. As I wrote here: “Niall Ferguson, a historian I admire, spoke at an event I attended a couple weeks ago. Feeling uncertain about the overall impact of crypto on society, I asked him how “democratizing” revolutions tend to work out. He said they almost never work because a new, even more hierarchical power structure emerges on the new “decentralized” foundation.”