Everyone has a different opinion about the advantages and disadvantages of using cryptocurrency, even the co-founder of Ethereum himself – Vitalik Buterin. Buterin recently teamed up with the co-author of Radical Markets – Glen Weyl, to create an inquisitive and thoughtful paper on how liberating the mere idea of decentralization can be at extreme levels.
During the piece, the team discusses how the different authorities in this industry are also targets of mistrust in the general audience they target. The opposition they encounter also is due to the power the elite hold in this industry. However, the way to correct this issue isn’t to step back from the advancements that have been made with blockchain, because that would sacrifice all of the progress made in the industry.
Bitcoin and other major cryptocurrencies were originally created in response to the way the financial system was working at that time. In fact, the New York Times even wrote an article about how they were considered a second bailout during the 2009 financial crisis. In the article, one of the other big issues discussed is the way that data privacy is lacking with legacy centralized systems.
The desire for privacy is part of the reason that so many consumers want to follow a “self-sovereign” system like the blockchain. The features of this type of ledger helps to provided better data security thanks to decentralization.
The article, highlights the Radical Markets theory that Glen Weyl describes, which centers around potential rules that stop the economy’s need for centralization and shared authority. With a radical free market, there would be less domination of sources with private assets, and more competition and egalitarianism with auctions of common property. Weyl states:
“Traditional private property tends to create and perpetuate inequality of power, monopolizing resources in a few hands, rather than deploying them to their best uses.”
The article also brings to light a new voting system proposal, which is referred to as Quadratic Voting (QV). QV would let votes purchase votes on certain issues, based on the square of votes purchased. Much of the problem with voting systems that allot a single vote for each person is that minorities aren’t given as strong of a voice, which means that democratic systems aren’t as democratic as they seem. On the subject of QV, the two parties say:
“A more creative democratic forms that give power to minorities to protect their own most deeply valued interest can restore the legitimacy of government.”
Cryptocurrency and blockchain technology are considered radical, which is why they have to be gradually integrated into the current financial ecosystem. Without this slow pace, the industry may reject the idea all together, or cause excruciating social disruption. By using Ethereum, Buterin wants to make the slow transition from a trust-based to a rule-based infrastructure. He said:
“The failings of standard property and voting rules quickly manifest themselves when stripped of the protective coating of human-driven judicial discretion.”
The big issue with decentralization is finding a way to maintain a shared set of rules that can help the industry gain trust. However, this integration is difficult to achieve without the loss of decentralization that makes the cryptocurrency industry so appealing. Vitalik Buterin has sad before that the discovery of certain protocols to decentralize the power over the financial industry and create formal rules is crucial. There are many places in the article that both parties mention their specific areas of knowledge are necessary, like with the introduction of QV and increasing security over the blockchain data.
The other big part of the problem with establishing this new ecosystem they propose is the fact that there are so many false traders that create fraudulent accounts. With the right security in place, the formality of the rules and the decentralized platforms could make it easier to avoid infiltration. However, these regulations don’t solve the voting fraud that can be created with non-community members of this culture.
The piece finishes with a final sentiment of how to stop the existing financial system from being put back in place – establishing systems that offer a way to check power. It is only then that decentralization of authority will work.