If decentralization is to realize it’s potential, various problems need to be addressed. Scalability issues get the most attention and have the most people working to solve it. So my assumption is that scalability is getting solved.
The bigger issues with decentralization are Token Economics and Governance & Consensus. While people are working on those problems, it’s a fraction of the people working on scalability. But it is growing. Last November, we started the NYC Token Economics Meetup and the Crypto Governance & Consensus Meetup to help build the communities needed to solve those issues.
Prysm Group Is Helping Drive The Dialogue On Blockchain Economics and Governance
Given our focus on these areas, we’re encouraged by the work being done by the “blockchain economics and governance design firm” Prysm Group. The team includes multiple PhDs (e.g. Cathy Barrrera, Stephanie Hurder, Hak Hakobyan) driving thought leadership on the industry’s biggest problems. Recently, they hosted an event featuring Nobel Prize winner Prof. Oliver Hart to discuss decentralized systems for blockchain governance.
Prysm also publishes research papers that they also condense into blog posts. Prysm recently published “Blockchain Upgrade as a Coordination Game”, which was condensed into the post “Blockchain and Coordination Games: Failures and Focal Points”. It’s awesome for the community that this type of rigorous academic work is being done on these important topics. It also enables us to have a deeper dialogue on the issues.
A central theme of the paper is that forks are bad “… because network effects inflict large costs on the community when a subset of the community cannot be forced to stay.” The post then suggests governance mechanisms that could lessen the incentives to fork. While I appreciate the value of network effects, my belief in the importance of community to the success of decentralized organizations leads me to believe that forks are actually a good thing. For a quick overview of forks, this Cointelegraph post is a good primer.
What Is Community?
A community is a collection of people who feel fellowship with others as a result of sharing common attitudes, interests, and goals.
It took me a while to appreciate the importance of community in Crypto. But in March, in a post titled “5 More Thoughts On Crypto After Another Five Months Down The Rabbit Hole”, my #1 thought was Community Is A Major Differentiating Factor In Crypto. I wrote that:
Every Crypto project is also a community that works together to make the project a success. It’s developers on Github. It’s HODL’ers. It’s Telegram members. It’s Reddit and Twitter followers. It’s Meetup attendees. Community members have multiple reasons to want the project to be a success. Much has been written about Bitcoin’s ability to provide powerful incentives to the community.
In that same post I also wrote that:
Community is even an offsetting force to forking, which some see as destabilizing. When a community gets forked, those that remain generally get even more engaged in the Community.
Three Hard Forks Later, Bitcoin Is Still Going Strong
The first hard fork of Bitcoin was Bitcoin Cash in August , 2017. It was a contentious fork. Today, Bitcoin Cash is the 4th most valuable cryptocurrency, with a market cap over $12 billion. Since the Bitcoin Cash fork, Bitcoin has more than doubled in value.
Bitcoin Gold forked in October last year. It’s trading at a market cap of $450 million today. Bitcoin is up 20% since the Bitcoin Gold hard fork.
The first hard fork of Bitcoin was Bitcoin Cash in August , 2017. It was a contentious fork. Today, Bitcoin Cash is the 4th most valuable cryptocurrency, with a market cap over $12 billion. Since the Bitcoin Cash fork, Bitcoin has more than doubled in value.
Bitcoin Gold forked in October last year. It’s trading at a market cap of $450 million today. Bitcoin is up 20% since the Bitcoin Gold hard fork.
The last hard fork of Bitcoin was Bitcoin Private in March of this year. IT’s trading at a $220 million market cap. Since the Bitcoin Private hard fork, Bitcoin is down more than 40%, as the entire sector has experienced a severe downturn. But since the hard fork, Bitcoin dominance (Bitcoin’s market cap as a percentage of the total crypto market cap) has actually increased slightly (to 42.5% from 41.5%).
So the bottom line is that the hard forks have not decimated Bitcoin.
The American Revolution Was A Hard Fork From The U.K.
As a hard fork is simply a succession, it’s fair to say, that in large part, the United States was a hard fork from Britain. A new stand-alone community was formed. And we flourished.
Britain used lots of resources to stop the hard fork and keep the communities together, which King George believed was in everyone’s best interest.
But, if the core of a community is “sharing common attitudes, interests, and goals”, then the U.S. and Britain we’re no longer a functional community when the hard fork was declared on July 4th, 1776. Even if Britain had won the war, what would they have been left with?
Instead, post the American revolution, Britain prospered:
Indeed, some historians argue that support for the crown grew. Political life quickly settled into much the same patterns as before the war, albeit with a greater emphasis placed on public opinion, a stronger sense of political parties and more concern with economic reform and corruption. Demobilisation caused temporary difficulties, but low tariffs helped to stimulate trade and the economy recovered rapidly: by the 1790s, Americans were purchasing twice as much from Britain as they had as colonists in the 1760s. – Stephen Conway, The British Isles and the War of American Independence (Oxford Press, 2000)
Hard Forks Should Be Appreciated For What They Are— A New Crypto Community Leaving A Stronger Crypto Community Behind
Whether individual hard forks turn out to be successful or not, I believe they are a core part of decentralization, and in aggregate, a massive positive for the Crypto community.
First, people are more likely to join a Crypto community if they know they can hard fork it down the road.
Second, I believe that the tyranny of the majority is an inherent part of any decentralized governance mechanism. This results in the oppression of minority groups and opinions, comparable to what happens in centralized governance mechanisms. Forking is a brilliant mechanism to enable the minority to choose not to be oppressed. Forking enables the minority to pursue their vision. Undoubtedly, the vision of the minorities will sometimes prove to be more prescient than the majority.
Finally, the community that is left behind, is the better for it. While the network effect is diminished, as fewer people are remaining, the ones that are remaining are, by definition, more aligned with the vision. The remaining community is better at rowing in the same direction. They are more motivated to have the project succeed and prove the forkers wrong. The remaining community has a more coherent message, able to better attract new community members. I’ve always loved the quote:
I refuse to join any club that would have me as a member – Groucho Marx
In a riff of that quote, I refuse to join any club that doesn’t let me fork. The decentralized world is going to be a better place, in part, because of forks.
