September 27, 2021

Why Blockchains Matter

A few weeks ago I wrote about what blockchains are, describing four technological analogies for the blockchain: the blockchain can be thought of as a database, a network, a computer, and a bank. And yet, it's not any one of those things; it's all of them. Now we need to depart from the land of analogies and talk a little bit about what the combination of those four technologies produces.

Why do blockchains matter?

Here's my formula:

fun + money + coordination -> relentless experimentation

Fun

First and foremost, blockchains are fun. I start with this reason because unless you've been hanging out in Discords, collecting NFTs, or following along with the evolution of Ethereum through the many ERCs, you may be surprised at the visceral experience of pleasure that many experience while playing with these new technologies. I use the term "playing with" intentionally; for whatever reason, messing with blockchains feels more like play than work.

I remember with great fondness my early days on the internet. Before the release of graphical web browsers, I would dial in with my 2400 baud modem, explore BBSs, connect to servers with gopher just to browse random files, and read through reams of Usenet posts. I felt like I'd entered another world, a world that was rapidly evolving where I could contribute. Blockchain brings back that feeling. And I'm not alone. I've talked to a dozen people who, unprompted, mention a similar feeling of pleasurable nostalgia that blockchain rekindles.

Why does it matter that blockchains are fun? Beyond Chris Dixon's assertion that "the next big thing will start out looking like a toy",† pleasure matters. When learning is intrinsically fun, we learn effortlessly. When an activity is pleasurable, we daydream about it and re-organize our lives around that activity. Blockchains being fun is, while perhaps unintentional, a significant strategic advantage.

Money

In 2005, I was in a virtual reality research group in CS grad school. One of the biggest challenges we had was getting our hands on high-quality hardware, in particular, headsets. If you've kept up with the development of VR headsets, you'll know that they are enormously complex little systems. You need high-quality screens that are lightweight and high-resolution, with a large field-of-view. You need fast, accurate 3DOF head tracking in order to properly orient the view. And everything has to be insanely low latency. Humans are enormously sensitive to VR and will start to get motion sickness at anything above 30 or 40ms of delay from moving their head to seeing the view move. Headsets are hard. And yet as hard as they are, there are few other options for VR besides wearing a headset (see immersive caves).

At the time, the best headset the research group could buy was made by a one-man company who basically worked out of a garage. And this one-man band had few competitors. Why? There was tremendous value in VR headsets and they were essential to the development of the medium. Why were so few companies making them? Simple: economic incentives. There wasn't a proven mass market, hardware startups were not sexy, headset companies couldn't secure the necessary startup capital, and basically venture capitalists had tired of funding virtual reality. The headset that we used in 2005 was technologically superior in almost every way to the first Oculus from 2016. But because of a lack of money in the ecosystem, innovation in VR headsets was delayed by a decade.

Blockchains, as we discussed previously, can be used as a store of value. Because each token is provably cryptographically unique with a single owner, we can treat them like digital currency. And people have, to the tune of $2 trillion. This has led to rampant speculation, exploitation, and frankly can be quite distracting for people working in the space. But it has one massive upside: there is money in the ecosystem to be made working on these risky, challenging projects with no proven mass market. You don't have to convince venture capitalists to invest. You don't have to beg for public support via Kickstarter. You can launch with barely a roadmap and secure hundreds of millions of dollars. To pick one example out of hundreds, the Oculus Rift raised $2.5M over several months in one of the most successful Kickstarter campaigns. The Loot Project created over $200M in value in about 24 hours. Blockchain sees hundreds of new projects launching every month, securing insane amounts of investment.

I'm not making an argument for whether this is an appropriate amount of investment or whether it's being used wisely and this is certainly not investing advice. My point is that money in an ecosystem is a catalyst for innovation. And in Blockchain, there is plenty of it.

But we've seen some well-capitalized commercial entities crumple without any real impact; it takes more than just money.

Coordination

Blockchains natively provides means for groups to coordinate. The smart contracts themselves are functionally open source, since they are stored and execute on a public blockchain. DAOs are an (early) experiment with replacing corporate structures with lightweight decision-making groups based on token ownership. And oh, the Discords. Every project, large or small, has a Discord server, and they move fast. The aforementioned "money" is also owned directly by participants in the ecosystem without the indirection of a corporate entity.

What does this look like in practice? I'll use the Loot Project as just one example, which I've become very familiar with. Loot launched a simple NFT based on a smart contract that was intended to be composable with other smart contracts. A bunch of people, including some developers and builders, minted bags of this NFT for free (except for gas). The floor price (lowest price you can acquire one) rose to about $50k. The project had "raised" ~$400 million (it has since gone down by ~50%), which was already distributed to different members of this newly-formed community. A Discord sprang up. Dozens of related smart contracts and projects sprouted. A DAO was formed and voting on proposals began. A website was thrown together, and developers hopped in to make improvements. Effectively, a project started, money poured in, and developers started building in a matter of days. It was one of the fastest-moving initiatives that I've ever witnessed.

I'm not making an argument that Loot Project is the future of gaming, or that specific project is some sort of ideal. Rather, Blockchain's in-built coordination plus some basic technologies like chats, forums, and open source repositories unlocked a community to spring up and start building far faster than any startup I've ever joined or started. It was astonishing.

As a side-note, the global nature of Blockchain also means that this project was advancing "around the clock." I would often check-in in the morning only to find new projects launched, new proposals written up, etc.

Who benefits from the success of the Loot Project? Every holder of a Loot NFT. How do they benefit? By the NFT becoming more valuable and by that NFT "generating" additional wealth through airdrops of tokens and other NFTs. There is built-in incentives for coordination.

And all of that happen without incorporating a corporate entity, without anyone changing jobs, without even centralized leadership.

Relentless Experimentation

By now, it should be obvious where fun + money + coordination leads: relentless experimentation. Blockchains enable positive feedback loops that drive early exploration of a highly-speculative set of technologies.

What does that look like for an individual developer? I get interested in one of these early-stage projects, so I jump in and grab some tokens. Blockchain money machine go BRRRR and tokens are now worth more money, which motivates me to increase their value further. I build some stuff, which I can do without permission, and that stuff gets adoption, which is further motivating. I can quickly and easily connect with the rest of the community building things. Decisions can be made quickly by token-weighted votes, and I have a vote in those decisions, because tokens. I sit back and reflect on how different this is from working at my day job as a software developer. And Silicon Valley attrition hits all-time highs.

Let me be clear that Blockchain is also a total, chaotic mess. There's shady stuff happening, more speculation than is probably healthy, and a pace of innovation that has left me exhausted after just a few weeks. I'm not making an argument that Blockchains are going to save the world, or ruin it. What I am saying is pay attention. Something is happening over here.

And that's exactly what I'm doing.

Glimpses from the future

Tools for Thought Rocks September meeting is happening on Tuesday, September 28th @ 5pm PT. I'm really looking forward to the two talks:

• Weiwei Hsu is talking about pace layering for thinking. How might tools help us collaborate at different speeds?
• Alan Chan is going to talk about his inspiration for creating a visual playground for notes, called Project Meta.

I got to talk with Weiwei and Alan in the last month and see the projects that they are working on. We are in for a treat! Not too late to sign up here, and if you can't make it, it will be recorded.

Gordon Brander wrote a nuanced and thoughtful reflection on web3, contemplating how it relates to the "future of the web." I appreciate Gordon's thoughtful essays on the computing medium, and especially the ecological and systems thinking viewpoints he weaves into his essays. Definitely worth reading.

Project Meta is creating your own infinite canvas for thought. I got onboarded to Project Meta last Friday, and my big takeaway was that it changes the purpose of visual thinking. I often use visual media as an interim artifact that helps me crystallize my thinking on the way to the final product. My final products are almost always essays or code, and the visual artifact sometimes gets captured, but often discarded. The way Alan uses Project Meta is different: his infinite canvas of notes is the final product. It's a rich visual representation of his thinking that he gardens over time. In a way, Project Meta is a means of creating your own infinite room for thought.