This report is an examination of how populism may affect cryptonetworks.

Populism is a phenomenon that noticeably comes along about once in a lifetime, and, as such, is not very well understood or recognized. The last time populism flared up as a major global force was during the mid-1930’s, which spelled disaster for the global economy. Keeping this in mind, populism has been gaining steadily over the past few years and is on track to emerge as a major force yet again.

To help illustrate this point, we present an index of the share of votes received by populist/anti-establishment parties or candidates in national elections, for all the major developed countries, spanning from the early 1900s to now.

As one can observe from our chart, populism levels today are rather synonymous with populism levels during the mid-1930s. Given this observation, we believe that populism will play a greater role in shaping state economic policies in the near term. This, in effect, may spell problems for the nascent cryptonetwork ecosystem as well.

Before we delve into how populism may affect cryptonetworks, we provide the reader with a clear framework of the dynamics that constitute populism. By utilizing this framework, we can theoretically evaluate the qualities of populism that could expose cryptonetworks to complications.

Populist Framework

Populism is a political and social phenomenon that arises from the common man being fed up with 1) the “establishment elites” holding the power, 2) wealth and opportunity disparity gaps, 3) real or perceived cultural threats from those with different values and from external actors, and 4) a lack of governmental effectiveness to provide for its people. See Figure 1 for more details.

Figure 1

In the event that these dynamics come into fruition, the net outcome typically results in “strong” leaders gaining power — examples would include Adolf Hitler, Benito Mussolini, and even Donald Trump. Moreover, a key quality that defines these leaders is their proclivity for confrontation rather than collaboration. This, as one can envisage, leads to conflicts that typically occur between opposing factions and/or parties, which, as a result, become increasing more forceful in self-reinforcing ways over time.

Furthermore, as populistic leaders gradually gain power, they create inner-country conflicts that lead to more disorder; which, as a byproduct, instigates an increased pressure to regain order by suppressing the other side. Tactics to regain order may include censoring the media, finding excuses to lock-up opposing political figures, banning access to certain cryptonetworks, etc. From a historical perspective, such behavioral actions have led to civil war and a number of democracies transforming into dictatorships with the goal of maintaining order. From an economic perspective, one can imagine that conflicts as such typically spell disaster for economies — and they may for cryptonetworks in the future as well.

Populism and Cryptonetworks

Keeping this brief overview in mind, we now proceed to conjecture how populism could negatively affect the development of cryptonetworks.

The most obvious characteristics of cryptonetworks run antithetical to that of populism. Encapsulated in Figure 2 are the core beliefs and policy goals of populists that are the most misaligned with cryptonetworks:

Figure 2

To the first point, cryptonetworks utilize various cryptographic mechanisms to enable trust between previously unaffiliated parties. This is achieved by lowering the activation energy needed to trust one another through mathematical proofs and game-theoretical mechanisms. Keeping this in mind, it is important to point out that populist leaders are naturally averse to trusting the establishment and its elites. As such, they seek to increase the activation energy needed to enable trust between unaffiliated parties.

Let’s expand on a hypothetical scenario that would help to exemplify this behavior:

If a populist leader had the proper resources, it’s likely that they would proceed to implement their own cryptonetwork. Now, because the populist leader seeks to maximize the activation energy needed for trust between unaffiliated parties, it’s theoretically feasible that they would implement an admission system for their cryptonetwork through their own permissioned-blockchain. In other words, admission to their cryptonetwork could only be achieved if an applicant were to meet a strict set of criteria spelled out in smart contracts. This would effectively eradicate the existing establishment (cryptonetwork) and its elites (token holders), which, in effect, would ensure that only anti-establishment and anti-elites would be included in their cryptonetwork.

Furthermore, populistic leaders are extremely nationalistic and hold national unity as a key aim. In this case, a populist leader may authorize the use of a curated list of cryptonetworks that align with their nationalistic intentions only. In other words, cryptonetworks that don’t align with the goals of the populist leader would be blocked from operating within their jurisdictional boundaries. This would ensure that only the cryptonetworks that are “beneficial” to maintaining national unity are utilized. Lastly, as a byproduct of populist leaders being distrustful of others and strongly nationalistic, they are characteristically anti-international and anti-global trade. As such, they would most likely perceive foreign cryptonetworks (crypto-networks that are developed outside of their country’s boundaries) as a threat. In effect, they would refuse to participate in cryptonetworks that are utilized for global trade.

Considering the above points, it would not be outlandish to suggest that the rising populism in countries could negatively affect the adoption and growth of cryptonetworks in certain geographic locations. Through our historical analysis, populism has proven itself — over and over again — as an influential force in negatively shaping human history. With this in mind, the cryptonetwork ecosystem is still in an embryonic stage of development and needs to be protected. For this reason, it would be in the interest of all cryptonetworks users to keep an eye on populism and its anti-cryptonetwork tendencies.

Please contact us with your questions at: [email protected]

[1] Dalio, Ray, et al. “Populism: The Phenomenon .” Bridgewater Associates, 22 Mar. 2017, www.bridgewater.com.