Conserving Crypto Culture

Why culture is upstream of law, and how to to maintain it

Crypto has emergent structures so deeply ingrained that we hardly notice them, like a fish unaware of the water it swims in.

I deposited tokens into a blue-chip lending protocol. They’re gone now, lent out to an unknown wallet I couldn’t track down even if I tried. Yet I have deep confidence that I can retrieve them whenever I want.

I executed a six-figure NFT trade with an anon whose name I don’t know, based on reputation alone. I sent him his asset and he sent me mine, without any smart contract escrow. I also had deep confidence that this transaction would work correctly - and it did.

The former interaction was law, the latter was culture.

Law and Culture, Intertwined

Law and culture are inseparably intertwined. Law shapes the acceptable bounds for culture, yet culture is a leading indicator for law. 

Traditional law refers to the system of legislation, judiciaries, and a monopoly on violence. Blockchain law refers to the system of transaction construction, block proposals, and validation. Neither can fully replace the other, but the comparison is informative. Enforcement of traditional law is executed manually & sporadically, while enforcement of blockchain law is executed autonomously. 

Culture as I use it here refers to the emergent values that groups of people promote in everyday words and actions, present both in traditional politics and blockchain battles.

How does law shape culture? Penalizing certain activities pushes them outside of the mainstream, and either dampens a certain cultural influence or forces it to become unstoppable. Europe’s red tape has dampened their entrepreneurial culture, while America’s soft criminalization of crypto has led to hardened decentralized primitives.

How does culture shape law? As new cultural preferences gain mindshare, politicians advocating them rise to power and eventually enshrine them into the legal code. See the economic shift towards stimulus & UBI, or the social shift towards decriminalization of certain drugs. Bitcoin’s culture determined the legal outcome of the blocksize wars of 2018, and Ethereum’s culture determined the legal outcome of the DAO fork.

Law can also attract or repel people with specific culture. Global citizens immigrate to places that reflect their cultural values, and leave places that don’t. I’ll avoid specific international geopolitical examples, but there are poignant case studies. Consider how certain countries attracted individuals with specific cultural values because they supported that culture within law. Also consider how certain countries pushed out individuals with specific cultural values, because they penalized those values within law.

There’s a flywheel effect here. Culture creates law, law protects culture, and law attracts culture. Now let’s apply these principles to crypto.

What is Crypto Culture?

Crypto implicitly elevates certain principles above others, as does every societal system. Leading blockchains such as Bitcoin and Ethereum guarantee certain attributes: censorship resistance, liveliness, transaction finalization, and self-custody. These characteristics are spectrums rather than absolutes, but they’re axiomatically enshrined into core economic mechanisms.

Compare these attributes with a highly contentious topic: fairness. People have wildly different conceptions of this idea. Solana’s definition is that everyone pays a flat transaction fee, thus being fair by not pricing people out - the tradeoff being that the chain crashes if too many people transact. Ethereum’s definition is that everyone pays a market transaction fee, thus being fair by selling blockspace to the highest bidder - the tradeoff being that poor people can’t afford it. There’s not an objectively correct answer here, just different values.

You can build a permissioned app on top of a permissionless system, but you cannot build a permissionless app on top of a permissioned system. We have KYC mints built on Ethereum, but we do not have crypto built on SWIFT.

OpenSea can delist items from their site but cannot remove your NFT from the blockchain. Uniswap can delist tokens from their frontend but cannot disable pool creation. Tornado can blacklist geographic IPs but cannot prevent backend deposits. Infura can crash but the RPC network will not.

Just because you can, doesn’t mean you should. This is the crux of the difference between law and culture. Crypto law enables people to build insecure permissioned systems, but crypto culture should reject them at the social layer.

Why Culture Instead of Law

A popular modern ideology is to “mandate all the good things, and ban all the bad things”. This is a dangerous approach that stifles experimentation and innovation, and is heavily vulnerable to the failure case of a malicious or incompetent societal oracle. One day your oracle is Trump, the next day your oracle is Biden, and before long it’s Sifu.

Law should lay down the bare minimum needed to thrive. Many guiding principles should come from culture instead. Warm celebration of positive-sum actions, and harsh condemnation of negative-sum ones. This feels uncomfortable to many, because it’s a delicate equilibrium. There’s a loss of control. What if people do the wrong thing?

They certainly will. But law is downstream of culture, so if you lose the culture you’ll lose the law eventually anyways. Open, free systems are the best shot for a minority counterculture to build better ways, and to demonstrate course corrections. So even if it feels dangerous, it’s the only way forward. People must defend the culture, or else the law will fall as well.

When Law Goes Awry

The trick is that law must be flexible enough to enable innovation, yet rigid enough to prevent co-option by malicious actors. For example, last month the stablecoin protocol Beanstalk Farms suffered a $76 million governance exploit, where the attack vector was simply to acquire a majority of governance power, transfer protocol ownership to themselves, change the protocol rules, and drain assets within the protocol.

While it seems novel because the entire exploit took place within an atomic flashloan transaction, the mechanism is the oldest trick in the book. Gain governance power within an organization that stewards significant power, whether that be soft power, hard power, or monetary power, and use your control to your own gains.

This is just one on-chain example of why it’s critical to limit law generally, and focus your efforts on a healthy culture.

Culture of Blockchains

We’ve discussed crypto culture in general, but that’s quite the generalization. Does a Bitcoin maxi share the same values as people minting sight-unseen KYC metaverse land?

Bitcoin has a culture of toxic prophylactic responses to baselayer innovation. Ethereum has a culture of slow-and-steady baselayer innovation. Solana has a culture of rapid upgrades to the baselayer. Avalanche has a culture of yelling that Ethereum should become a subnet. ApeChain culture might be open to frequent centralized transaction reversals.

I expect that each chain will end up attracting users that share those cultural values, for better or worse.

So What?

This article is more passive description than active prescription. Offering a set of colored glasses you can use to view the world with, and see if they clarify any issues. The main idea is that culture is upstream of everything, including law.

So if you have strong preferences for maintaining a permissionless system, for example, then the best thing you can do is actively fight on the social scene for supporting truly decentralized projects, and oppose the opposite. This doesn’t mean censoring the actions themselves. It does mean using the social, cultural layer to actively advocate for embracing decentralized tech, and rejecting permissioned attacks on the system.

As Voltaire said, “I disagree with what you say, but I will defend to the death your right to say it”. If money is speech, then the same applies to crypto activity.