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The decentralization flaw

To paraphrase Ben Gibbard, lead singer of Death Cab for Cutie, decentralization is the flaw in the heart’s design of blockchain systems. It’s in the title and first sentence of Satoshi’s Bitcoin white paper, in its other form: “peer to peer.” Ethereum inventor Vitalik Buterin had it on his mind as he was one of the first to grapple with decentralized autonomous organizations in his white paper.

The necessity of peer-to-peer transactions is foundational; it’s not an option. In code it’s actually not hard to create – the Bitcoin and Ethereum blockchains are sufficiently decentralized to prevent a majority-takeover event. But when people get involved, it gets trickier, because nothing ever begins in decentralized perfection. People come together to turn ideas into reality. They form teams, delegate responsibility and the motivated few are willing to slave unrelentingly to birth what they don’t yet see in the world. Folks like Steve Jobs, Henry Ford and Oprah Winfrey didn’t let anyone tell them what they couldn’t do and worked their asses off to achieve their goals.

So it has always been this thorn in blockchain tech that centralization is maybe more necessary than its opposite. That doesn’t mean the goal isn’t to always move toward decentralization, to always be trying to make interactions only between the two interested parties. No bloodsucking intermediary taking 30 percent, thank you very much.

That’s the theory, at least, the unmussed potential. And then crypto met Washington, D.C.

That’s where the United States Supreme Court resides. A majority of the nine Supreme Court justices created law in their Citizens United case in 2010 that allowed individuals and corporations to give as much money as they wanted to political action committees in furtherance of their agenda. Let’s skip the debate on how this allowed the tobacco, oil and pharmaceutical industries – among a million more – to buy their way in to doing whatever they wanted. For the purposes of this editorial, Citizens United allowed crypto bigwigs to donate, in the technical parlance, a shitton of money to pro-crypto lobbyists and politicians this election cycle.

Think about it this way. Is there anything more centralized than the backroom deal? It’s the nexus of power, where one very influential person greases the wheels for another very influential person to do their bidding. The famous backroom, filled with cigar smoke, where two men who gave $44 million between them to lobby for crypto are in the company of an always cash-strapped and desperate politician.

Pure coincidence, that’s the amount of money that the founders of venture capital firm a16z gave to the pro-crypto PAC Fairshake, as we wrote about this week. That eyepopping amount from Marc Andreessen and Ben Horowitz was a large part of the $247 million collected by Fairshake as of Sept. 18, according to Open Secrets data. “Cameron and Tyler  Winklevoss, founders of the exchange Gemini and early Bitcoin adopters, gave $5 million while Coinbase Chief Executive Officer Brian Armstrong gave $1 million,” Decential reporter Amanda Smith wrote. Fairshake is the fourth-most funded PAC this cycle, ahead of committees to retain majorities in the Senate and House of Representatives.

That’s pretty cool. But I digress.

How should an industry that has decentralization as part of its DNA deal with this type of filthy lucre centralized political porn? [Jon Stewart voice]: “mmm, very carefully?”

Think about how much money Marc Andreessen and Ben Horowitz expect they can make from crypto if this is what they’re willing to give to DC lobbyists in the past few months. Don’t forget Coinbase’s Armstrong and the Gemini twins (weird that exchange owners have their panties is such a twist until you realize exchanges take a cut from every trade and it’s a fantastic biz to be in if you can pull it off.)

Think about how much money there is in crypto – even as you’re saying “but the bear market!” Were you around when ETH was $8? I was. There are literally thousands of ETH millionaires out there willing to pledge a bunch of that insane crazy funny money to make sure web3 isn’t destroyed by moronic senators. Same goes for Bitcoin millionaires.

To return briefly to the Citizens United case and the U.S. Supreme Court, money is speech. While I think that’s absurd, it is how the rules have been laid out, and crypto executives have every right to play by those rules.

I think Cody Carbone, chief policy officer at the Digital Chamber in Washington, hit the nail on the head when he told us, “I’m okay with Coinbase putting up the money to represent this industry, but I’m not okay with Coinbase being the sole decision maker on that leave everyone better off. how DeFi or the entire industry is regulated.” 

That’s the trick here for the industry. To play nicely when centralized forces like political lobbying are necessary, then go right back to the fight to create decentralized systems — Matthew Leising, editor in chief, Decential Media

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.