Pursuing a Tradition of Political Cryptoeconomy
A redeeming aspect cryptoeconomics is its synthesis of a myriad disparate fields into one compelling narrative
Some of the most fascinating experiments in the history of economics, psychology, physics, politics, mathematics, and software engineering are unfolding before our eyes in the world of cryptocurrency.
Past the nightmares of hacks or scams, tribalism or Arthur Hayes driving a lambo, this tradition of confluence could be what redeems cryptocurrency’s emerging dream. By studying the world at large from as many lenses as possible to build a symbiotic place within it.
Technological progress is too often periled with ulterior negative externalities. And economic booms draw investment fame and fortune- until the inevitable bust.
So the most compelling path for long-term mitigation of such dangers requires a determined attempt at empathy and understanding of our place in the larger world.
For example, a compelling champion of this thesis can be found behind a recent Ivy League abstract titled “Liberal Radicalism.” Named after a theory promoted by Glen Weyl, the paper co-authored by Vitalik Buterin, Glen Weyl, & Zoë Hitzig, proposes a new method for crowdfunding and organizing communities. In order to help solve “one of the most fundamental problems in political economy.”
That’s quite a bold claim.
Can the “Liberal Radical” method truly help solve one of the most fundamental problems in political economy? Especially because their definition of the term political economy is so ambitious. Glen defines it as the “tradition of not focusing on just the narrow purview of one contemporary field, but trying to take seriously the broad problems of society in all their dimensions.” (Epicenter)
Other than a small group of determined individuals (cryptoeconomists) carrying the torch of synthesis, the cryptocurrency community seems to have otherwise lost touch with this kind of ideal. By many metrics today, cryptocurrency is more oligarchic and unjust than the system it attempts to provide a solution for. It’s still very much a zero-sum game, with negligible current benefits for the rest of society, and overridden by speculators.
So what is the exact solution that Vitalik, Weyl, and Hitzig propose? Via implementation in the ecosystem of cryptocurrency, could it potentially help solve some of the broad problems in society?
Called Liberal Radical (LR) crowdfunding, it’s an equation to disburse contributions across an ecosystem in a programmatic way, proposed as follows: “Individuals make contributions to projects of value to them. The amount received by the project is proportional to the square of the sum of the square roots of contributions received.”
Put simply, it’s a form of “democratic” donation matching across an ecosystem. Individuals’ smaller contributions to organizations would receive proportionally more of the matching contribution.
Let’s say you have a charity crowdfunding platform with a variety of hundreds of organizations. If a big whale wants to sponsor “LR” donation matching for the platform, they could sponsor a Matching pool of 100 ETH. Unlike traditional donation matching however, the LR donation fund is not matched 1:1 in a direct monetary fashion. Instead, the proportion of funds received by each organization is dependent on the number of individual donors’ total donation amount as weighed by the LR equation.
As an example, in a crowdfunding app governed by LR Matching, if Code for America receives donations in the amount of 100 ETH from only one individual donor, but Rainforest Trust raises 10 ETH in small contributions from three hundred donors, then Rainforest Trust will receive a much higher proportion of the total LR Matching Funds.
The result is hopefully that small contributions and community outreach is encouraged. Applied to philanthropy, this could be useful. Applied to the world at large this could be, I dare say, revolutionary.
Unfortunately, in order to fulfill the perfect theory of LR, we need a great identity solution. Which is possible via centralized services like Netki or Jumio, but is not yet viable in a “decentralized” way. Robust identity is the only way to strongly deter collusion or “fake” participants trying to game the system. For the purposes of philanthropy, I hope to experiment with lite versions of LR. Sure, people may try to game the system, but for the purposes of philanthropy this may be suitable for the time being (albeit not perfect).
If the project achieves modest success, there are possibilities for expanding to a myriad of other possible applications (which will require higher tiers of identity verification), such as “Campaign finance”, “news media”, or “open source software.”
As the world at large is facing immense problems of inequality, distrust in institutions, greed, and the erosion of democracy, LR is an important potential solution we should all pay attention to. In the hearts and minds of countless people, the ideal of 1person1vote seems to be crumbling. By promoting a new, innovative mechanism for fundraising, could humanity more skillfully tend to the global garden of democracy? It’s worth a shot.
Cryptocurrency is still very much an experiment, and that’s what gives me extraordinary hope in its ultimate success, despite all its glaring *current* flaws. We have many more freedoms than the traditional corporate software model or bureaucratic academia. We can learn from trial by fire in this highly adversarial environment- to test crazy, and radical new ideas in real-time. This is an immense advantage.
So in the end, I hope we can continue to empower a tradition of our own: of Political Cryptoeconomy. To take seriously the broad problems of society in all their dimensions- and to experiment with real solutions.