Cryptoeconomics: Awakening the Game of Life
First published on Medium on Feb 11, 2022
Last updated
First published on Medium on Feb 11, 2022
Last updated
“You get pseudo-order when you seek order; you only get a measure of order and control when you embrace randomness.” — Antifragile
Civilization has led us to a peculiar bias: the belief that humans can predict and control everything. Consider the skyscrapers dotting urban landscapes and the intellectuals within, conducting meticulous analyses to interpret market trends. Meanwhile, fortified European towns host world leaders whose solemn decisions reshape the global economy. Most people instinctively view centralized institutions as pillars of civilizational advancement, maintained by the intelligent few to ensure order, stability, and efficiency. Yet, this perspective suffers from a selection bias—it overlooks the potential and benefits of decentralization.
Historically, anarchists and anti-establishment voices, often marginalized, have protested during transitions but rarely impacted change. Their failure largely stemmed from their inability to construct viable alternatives to what they dismantled.
However, the advent of blockchain technology equips these once-fringe groups with unprecedented tools, potentially initiating a transformative "game of life" within human civilization. Let’s delve into what constitutes this game of life.
The game of life is essentially about interactions among life forms. While humans and microorganisms are life forms, corporations and governments are not. Life forms possess unique qualities like adaptability and constant evolution, which drive the dynamic interactions in this game, spawning limitless creativity and possibilities.
Many centralized structures are human attempts to mimic these organic processes, though they largely fail to capture the essence of life. Their fundamental error lies in trying to eliminate randomness and uncertainty to make behaviors predictable. This approach introduces vulnerabilities because it goes against a fundamental natural principle: randomness and uncertainty are omnipresent and crucial for the robustness of any system.
Antifragility, a term coined by Nassim Nicholas Taleb, refers to systems that gain from disorder. Unlike mere resilience or robustness, antifragile systems thrive under volatility and stress. This characteristic is inherent in all enduring natural systems. Efforts by centralized entities to suppress volatility and randomness don’t actually fortify systems; instead, they compromise their inherent strength.
Consider the 2008 financial crisis: the visible trigger was subprime mortgages, but the deeper issue was the flawed suppression of instability by centralized financial instruments, which led to a catastrophic release of pent-up failures. The crisis underscored a broader systemic flaw—overreliance on central authority, which reduced vigilance and ultimately led to disaster.
To grasp the evolutionary leap from Web2 to Web3, it's useful to compare the two. In the Web2 ecosystem, centralized institutions initially do everything in their power to attract users, developers, and business partners. Their goal is to build network effects—a critical mass that makes their platform indispensable. However, once these network effects are established, the dynamic shifts: these institutions transition from attracting to extracting value. They monetize their user base by charging business partners for access and targeting users with data-driven advertising.
If we liken Web2's centralized entities to biological concepts, they resemble cancer cells. Just as cancer cells grow unchecked and oppose the body's own systems, Web2 companies start by positioning themselves against their own users and partners. Over time, they expand and aggressively extract the maximum possible value, exploiting the very ecosystems they helped build.
In contrast, Web3 ushers in a model of spontaneous life formation. Here, the relationship between users and projects is collaborative rather than adversarial. The tokenization inherent in Web3 transforms users into stakeholders and owners, aligning their interests with the success of the platform. There are no middlemen siphoning off value; instead, creators, users, and network maintainers all share directly in the platform's successes.
Web3's architecture allows any project to serve as a building block for another, with a plethora of highly adaptable smart contracts facilitating seamless connections. This interoperability can lead to a combinatorial explosion in workflows and innovations, vastly extending the ecosystem's capabilities.
Web3 not only mimics but enhances several life-like qualities:
Redundancy Mechanisms: Decentralization and open-source practices promote replication and variation, much like biological diversity. Just as redundancy in natural systems (like having two kidneys) manages risk, Web3 offers multiple alternatives for any function, providing resilience against failures.
Antifragility: In Web3, systems benefit from stressors. Errors and randomness naturally occur, and the open-source nature of smart contracts means that these are quickly iterated upon or discarded following challenges such as hacker attacks. This may lead to high volatility but ultimately strengthens the system by weeding out weaknesses.
Genetic Material: Projects in Web3 don't need to reinvent the wheel; they can build on existing smart contracts, akin to biological entities sharing genetic material. This capability for cross-pollination of ideas and functionalities enriches the ecosystem, creating new niches and opportunities for innovation.
Universal Paradigms: Unlike the fragmented, siloed nature of Web2, where each service requires different credentials and interfaces, Web3 promotes a unified and interoperable environment. This holistic integration mirrors a cohesive ecosystem, forming the backbone of the Metaverse.
Self-Organization: The fundamental drive in Web3 comes from individual choice—"I want to do this"—allowing anyone unwilling to participate to easily exit. This self-motivation and the lack of a central commanding authority foster a robust, self-organizing network of projects, users, and developers, akin to the biological organization from cells to organisms.
The cryptoeconomy, leveraging the principles of Web3, is poised to replace centralized traditional economies by naturally aligning with the dynamics of life itself. In this new paradigm, every individual’s actions are impactful, and personal investment translates directly into communal benefit. This shift represents a profound transformation in how civilization organizes itself, promising a future marked by unprecedented complexity and richness.
This vision fuels my optimism for a future where cryptoeconomics not only coexists with but significantly surpasses traditional economic systems. Just as the wind fuels a wildfire, the challenges and fluctuations inherent to life and economies will only strengthen the resilient, antifragile nature of cryptoeconomics.
