Managing Partner at Nair Ventures
Take a minute, type in “pros of cryptocurrencies” and run a quick Google Search. Click on any one of the few hundred listicles and blog posts it lines up for you. As you scroll through the lines extolling the virtues of virtual assets, it is highly likely that you will read about Bitcoin being empowered by not having to depend on humans of flesh and blood. There is no central authority, no need to rely on the fragility of human memory and cognition, no obligation to let the pesky and precarious human ego come in the way of a tech-enabled currency system.
Over the years, nearly every piece I have read on the promise inherent in cryptocurrencies, has been quick to discard the role of actual men and women in the smoothly dexterous run of the “code”. For these hardcore fintech evangelists, having human beings play a major role in the system would be akin to opening the floodgates of corruption, errors and thoughtless omissions.
Yet, shutting out the human hand has not ensured a watertight defence against bugs, scams and hacks. The headlines today document our losing battle against sophisticated human minds who continue to come up with a new way to break in every day. Malwares, crypto wallet security breaches, exchange scams have practically become the order of the day.
With such a worrying situation at hand, can we really afford to be so dismissive of the social layer’s role in securing crypto’s frontiers?
Nothing can possibly survive in a social vacuum, especially not something so deeply intertwined with the broadening horizon of human innovation. Just like man himself cannot seek out social isolation without paying a high price for it, the cryptocurrencies, man made as they are, cannot afford to be so blasé about the strength of the social layer in ensuring its success.
There are two key areas where the relevance of the social layer kicks in. One is definitely the issue of security. After all, the security of any cryptocurrency system is determined by codes and cryptographic algorithms put together by human beings. Even breaches in these algorithms are a result of another person or persons taking advantage of the original developer’s failing.
If you think you can painstakingly put together a protocol and simply sit back, hoping nobody will ever break it apart, you are possibly delusional. If hackers are basically human masterminds looking to capitalise on that tiny flaw you may have left unattended, you can only retaliate with masterminds of your own. To guarantee a safer system, it is imperative to let people in, allow others to ideate and improve, instead of letting the “code” dictate it all.
While the Ethereum Classic community may still be adamant that “code is law”, truth is that code CAN be breached, and WILL be breached, in time. Only a robust community of developers and strongly woven social layer can help make it harder for hackers to catch up.
As time runs out, and the competition in the crypto market gets stifling, it is essential to acknowledge that humans are far from being the weakest and most vulnerable element of blockchain. They are the ones who can bolster it against others of their kind and identify the way forward even after a security breach does happen. If an attack does make the blockchain collapse, the social layer will pick up the pieces and decide on a fork to reverse the breach, if need be.
The other aspect where the social layer gains relevance is adoption. Even though the largest cryptocurrency in the market has been doing well enough without a known founder, most other cryptocurrencies do derive a great deal of exposure and subsequently, adoption, from the public images of people associated with them. Their credibility and acceptability frequently drive the adoption of cryptocurrencies they represent and their personal decisions often influence how those cryptocurrencies are used.
If you have followed the amount of discussion that followed Charlie Lee’s dumping of Litecoin.Com due to a “conflict of interest”, you probably know how much crypto influencers can, sometimes inadvertently, affect the adoption and performance of the cryptocurrencies. Therefore, it is clear that a smart handling of this social layer can devise a great roadmap for crypto’s overall success.
Even the purely technical part of cryptocurrencies cannot avoid a social element that manages to creep in. The consensus mechanisms that are responsible for making sure transactions are correctly validated and a single version of the truth is recorded, are vaguely reminiscent of social order and cohesion.
Nodes agree to play by the rules of this social set-up and the blockchain runs only as long as they continue to operate that way. Even in the absence of tangible trust, blockchain is held together by consensus, just as functionalists in sociology say the human society is. Given its similarity to the human social structure and what it stands to gain from the same, it is absolutely urgent to acknowledge and accept the role of the social layer in addition to the “code”.
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