AL #039: Is Cypherpunk Dominant?
How dominant strategies influence movements.
Vitalik wrote a thought provoking piece on the nostalgia of the original crypto movement: called Make Ethereum Cypherpunk again.
The piece argues that high transaction costs have limited crypto activity to speculation and made the industry less fun to be a part of.
It calls for re-embracing Cypherpunk values through the way we gather and build.
I love the sentiment of the piece but I think it misses a critical aspect of why the crypto industry has came to emphasize boring financial use cases.
Transaction costs do explain the demand side of the equation very well but the supply side matters too. It’s hard to ignore the impact of regulation and taxes but we will not focus on that here.
People don't just build companies and products that users will find useful.
They build companies that can accumulate market power (moats). These are the companies that raise the most capital and have the potential for large sustainable profits. More importantly, these are the companies that set the culture for everybody else through hiring, marketing, the way they build products and the supply chain they spend their money on.
Vectors of centralization
This is why centralized exchanges were some of the first companies to get funded and started accumulating serious market power. Their business model was well understood.
More recently, they are also starting to positively impact the culture, as I wrote last year about Coinbase and Onchain Summer.
Another example is media companies. Their best source of funding other than creating their own products is sponsorships and the most valuable sponsors are naturally companies effectively presenting investment opportunities. Companies that get the most sponsors, can allocate more resources towards capturing attention resulting in a positive flywheel.
These are just some of many examples how dominant strategies determine crypto culture.
Example of culture and profit alignment
There are cases where culture and sustainable profits can coexist in harmony.
One example is Pete McKinnon, a photography YouTuber I've recently started enjoying. He decided to spin out a lifestyle brand called “Pete’s Pirate Life”. It’s a harmonious blend between his obsession with “Everyday Carry” (EDC) culture and his talent for photography. It also allows him to spend more time taking photos indoors.
He gets to create wonderful product photography on Instagram and create product drops on the back of that.
So is Cypherpunk dominant?
For Cypherpunk principles to reemerge, they need to be supported by dominant strategies.
And I think there is still hope here.
From Dominance Frontier:
Jesse believes that any misalignment between a company and its customers creates room for a competitor to enter the market with better alignment. And that the company with the best alignment — that’s most generous to their customers — is the company that wins.
Surely, the most aligned version of a product is a network that customers own a part of?
The Cypherpunk movement is inherently customer-centric, focused on defending their freedom, security and sovereignty.
But centralization itself is in direct conflict with the values of Cypherpunk.
Yes, lowering transaction costs will help by making many more use cases viable.
But managing this tension between centralizing strategies and the Cypherpunk ethos will ultimately determine whether crypto will just become a valueless infrastructure layer for a new generation of corporations or a rich marketplace of protocols.