The Full Circle Hypothesis

Can public blockchains disrupt the current institutional structure of the information economy? I don’t mean incrementally through enhanced efficiency, geographic reach, or automation, but qualitatively by enabling new and universal forms of empowerment, inclusion, and autonomy.

On the one hand, the whole premise of blockchain networks is that, by being decentralized, openly accessible, difficult to censor, and programmable, they differ fundamentally from the organizational models of the past. As such, these networks are promoted as preferable alternatives to what exists.

On the other hand, as I have pointed out before, the social and political dynamic within these networks is similar to any other system involving humans: the unequal distribution of network-specific resources inevitably leads to a power structure, while maintaining or challenging that structure becomes a defining feature of network governance.

Here’s one possible scenario: while blockchain networks continue disrupting organizations that administer information and facilitate transactions in reference to that information, on a societal level, the end result will look disturbingly familiar to what already exists. I call this the full circle hypothesis.

There are a number of reasons for taking this prospect seriously:

• Systemic tendencies towards institutionalization. Institutions — including successful networks — represent stable and enduring solutions to recurring problems. But they also contain points of control and resource accumulation. As such, institutions are always objects of political and economic conflict which leads to…
• Unequal distribution of wealth and influence. Even in systems designed to be maximally inclusive, there are always information and other asymmetries that trigger private interests and attempts to control — via institutions — the most valuable resources.
• Past experience and cultural inertia. Most problems of blockchain governance are actually not that different from challenges faced by traditional institutions. It shouldn’t therefore be surprising to see blockchain governance gradually evolve towards more tried and tested designs. This is foreshadowed, for example, by concerns over voter apathy and calls for checks and balances.
• Path dependency and network effects. Lock-ins exist not only on a technical but also organizational and cultural levels. It is expensive and tiresome to constantly learn, switch, and adapt. While technology can certainly increase the freedom of choice and action, in everyday practice, it is always weighed against the forces of convenience, stability, and market power.
• Social embeddedness. Ultimately, everything humans create is embedded in and determined by the existing social system with its array of cultural norms, biases, and inertia. At the core of every positive social transformation, there also gestate forces that will drive society towards new and more sophisticated forms of coercion and control.

Pushed to its extreme, this line of thinking leads to a type of fatalism that is not only discouraging but also empirically incorrect. The effects of innovation are always a mixed bag, but most people probably view them as net positive. My hope is that this is also the case with the social and technological experimentation triggered by the invention of public blockchains.

Building networks that help democratize the information economy and enable new forms of digital autonomy is a difficult task as it is. But to do it in a way that also avoids known institutional failures such financial short-termism, political capture/exclusion, principal-agent issues, and corruption from entering through the back door makes it even more challenging.

The list above does not describe a predetermined or even a likely path forward. For now, the full circle hypothesis is just that — a hypothesis. A great way to leave one’s mark on the Information Age is to help disprove it.

Related Writings

Ten Theses on Decentralized Network Governance (September 2020)

FOSS Governance and Blockchain Networks (July 2020)

Institutional Participation in Token-Weighted Network Governance (June 2020)

Blockchain Networks Are Bureaucracies Par Excellence (May 2019)

Resource Distribution and Power Dynamics in Decentralized Networks (August 2018)