What does it look like when blockchain tech is used to help communities govern themselves, and not for a get-rich-quick scheme? In Part 2 of our interview with Nathan Schneider, he tells us about the flurry of experiments in democracy that get drowned out by NFT hype.
Nathan Schneider is a professor of Media Studies at the University of Colorado, Boulder. He helped organize with first Platform Cooperatives conference with past Reimagining guest Trebor Scholz, and has continued that work by helping launch start.coop and develop the Exit to Community framework. Nathan has lately been researching the use of blockchain tools for community governance, and is involved with the new DWeb initiative.
It is really interesting to think about how culture does come into play here. Right? So a lot of my work these days is with public media organizations, particularly in Europe. And these are organizations that are surprisingly powerful compared to public media, as we think of it in the United States, and they are a very particular sort of organization. They’re not governmental in the sense that we think of them. They actually have an enormous amount of independence, but they are values-led organizations. They have a specific charter of values, and they have to live up to that chartered purpose, which often has to do with things like ensuring the privacy and autonomy of their users, and working on the diversity of points of view. And then weirdly enough, those values come into very sharp conflict with the realities of the software world.
For instance, is it possible to be an organization that is supporting the privacy and the autonomy of your users, and then pushing them onto Facebook to have a conversation about your programming? But in Europe, at least, the notion of reasonably powerful and innovative entities that are not governed by traditional, we must make a venture capital return instead of a fixed amount of time, it feels like another tool in the toolbox in addition to co-ops, B Corps, so on and so forth.
But I want to push this in a very different direction because we’ve somehow managed to talk about different models for innovation, different structures for organizations for 40 minutes, without mentioning cryptocurrency or DAOs. Are distributed autonomous organizations part of the solution set within all of this? We’re having this conversation at a very strange moment in time where many people heard the word DAO for the first time, when a group of people raised 40 million in the hopes of buying the US Constitution. Is this part of the solution set, or is this just a terrible distraction from the very real problems that you’re trying to solve?
Well, when I was on my book tour for my book about Occupy Wall Street, in early 2014, I made a stop in San Francisco. At the time, I was trying to figure out what was the next phase of this, what I had experienced as a democracy movement around the world in 2011? Where young people everywhere, from Egypt to Lower Manhattan were experimenting with radical deepening approaches to democracy, trying to reimagine what democracy needs to be in a networked era. And two threads came before me. I was already following some of those Occupy movement folks into worker cooperatives and into this old cooperative tradition. But at the same time in San Francisco, this friend came to me and said, “Hey, there’s this thing you really need to know about. This white paper just came out,” and was the Ethereum white paper.
I’d heard about Bitcoin a lot in Occupy, and I’m not a gold bug. I don’t think the Federal Reserve is the biggest problem in the world. And I was just not very interested in this weird kind of money. But Ethereum was different. That was a tool where maybe those same experiments could continue through the kinds of organizations that people would be able to build out of smart contracts, really building organizational experiments from the ground up without having to have a new incorporation statute.
I started reporting on that back at a time when I couldn’t get any of my editors at magazines and papers to care. So I was hanging around this group and saw the ambivalence of that space, some really scary dystopian stuff about how we’re going to turn everything into a commodity and so forth, but also that kind of vision of this is a space where we can build the deeply accountable institutions that these movements were craving.
And now, we’re just getting to the point where those possibilities are starting to become very, very real, very quickly. And so in some of my recent work, I’ve been following the governance designs in DOAs, in these autonomous organizations. Some of it I think is this kind of dystopia of a financial sector without an economy, but in some of it, you see people inventing new voting mechanisms every week. You see a level of innovation about human self-governance that I see almost nowhere else. And so I think there is this kind of deep possibility in some of these communities forming around blockchain technology, but everything depends on the choices that are being made right now.
We had a good conversation on the podcast with Maciej Ceglowski, who is like me, old enough to have seen a lot of things and be cynical about almost everything. And he had cautionary words for me about Web 3.0, which was that he was paying attention to it because he saw creativity and energy around the movement in ways that he wasn’t seeing around the rest of the web, that Web 2.0, as it got swallowed by Facebook and sort of other massive platform companies had really squeezed the fun out of it. But the folks who were playing around with NFTs and DAOs actually seemed to be engaged in the sort of play that has been so important to the creation of the web over time. And so I’m trying to take that creativity around voting and such very seriously, but it does feel like a moment to actually sort of look at the space.
We did see this attempt to organize a group of people to buy a copy of the US Constitution and put it on display. They never actually used the governance parts of the DAO. So they never actually decided where the Constitution would go, how it would end up being used. They hit a fairly predictable problem, which is since they stated the amount of money they were willing to bid on the Constitution, someone outbid them, and then people wanted to do something the DAO promised that they could do, which was back out of it and pull their money out. And in the process, they discovered that the transaction fees on Ethereum were so much that for the average user, they were wiped out in the process of doing it.
Put all that aside and put aside the fact that they burned some phenomenal amount of carbon in the process of doing all of that, even if that DAO worked the way that it was supposed, isn’t it ultimately based around this idea of one token, one vote? Is there not a sense in which the emergence of these tokenized democracies, are these not the scariest technologies for inequality that we’ve seen in the last 20-plus years?
Well, from the beginning, I have heard from boosters of these technologies that this is going to unlock the global south, this is going to bank the unbanked, and that never happens, and often, it’s a bunch of privileged folks getting richer. I share the cynicism, and I think it’s a reminder that with these new technologies, technologies are more likely to amplify the inequalities and the injustices of a society than to undo them, and we need to be really attentive to that.
You always see in these generative moments though, those paths that we could go down. For instance, addressing that question of plutocracy and voting, a lot of these new kind of decision-making models that folks are exploring here attempt to address just that. So one example is quadratic voting, where the more tokens you stake, the less the value each one has in the vote, and small voters have more power collectively. Another approach is one called conviction voting, where the more time you stake your vote, the more it’s worth. These are things that are often really just not available and they don’t come to mind in other kinds of context. And these kinds of things are being invented all the time again. And so that kind of froth is super exciting.
But what we have to be very aware of and what I think is kind of the Achilles heel of Web 3.0, as with Web 2.0, is this belief that decentralized technology produces decentralized social outcomes. And we saw that with the growth of Web 2.0, where there’s this great line in Tim Berners-Lee’s 1999 memoir, where he talks about how no company can ever take control of this because it’s decentralized, and we know how that turned out and so does he.
Web 3.0, when you look at the power of protocols compared to platforms, the way in which protocols have this incredible hedge of money, that there is actually the potential for more centralized power to form on these technologies than the world has ever seen. And that’s why Facebook wants it. They know that. I’ve argued for instance, that we need to, as in antitrust law, for instance, create forms of accountable centralization in order to protect the kinds of decentralization we want. We need to intentionally create the social structures that protect against accumulations of power, rather than assuming as I think, far too many people in the kind of Web 3.0 space do right now, that technologies that appear to be structurally decentralized are going to produce decentralized outcomes. I think there’s a lot of reason to think that’s not the case.
Already, just real quick, one example is of a regulatory intervention actually. As much of these as these folks despise the government often, the SEC ruled that in order to get a securities’ exemption, a kind of a safe harbor, these protocols have to be what they call sufficiently decentralized. This rule, this centralized rule has forced a lot of these token systems to actually decentralize their ownership. And it’s these kinds of interventions that I think we need to start taking seriously and recognize that decentralization is not just a technical phenomenon. It’s also a social and economic one.
I think this is a really hard reality for some fans of decentralization to accept, which is that you might need these centralized regulatory authorities to make decentralization possible in meaningful ways. One of the interesting things about the early story of Bitcoin was watching this impossibly decentralized technology that couldn’t be controlled by anyone suddenly controlled by about four Chinese mining pools.
And very reasonable questions about whether those pools in collusion had the possibility of a 51% attack, which functionally control the value of that currency and be able to avoid transactions at that point.
I think what’s an interesting challenge for me on all of this is you are thinking very hard about how to reorder the space of innovation. A lot of the ideas that you put on the table able to sound the most practical, come down to regulatory changes like ways to create pools of capital for shared ownership. And those feel like the sort of things that are going to have to go through our centralized and by the way, highly dysfunctional and somewhat paralyzed government system. What are the projects that you are most hopeful about at the moment, given those real constraints, given the fact that it is incredibly hard right now to accomplish anything at the federal level? What do you look, look at from the regulatory point of view? What do you look at from the creative financial point of view? What’s the project that you sort of look towards that that gives you hope for this notion of capital for innovation that isn’t coming out so much of the venture community, but it’s really coming out of cooperative and collective power?
Well, I think it has to happen at a lot of levels. And you’re absolutely right, I mean, we don’t have the kind of political will to say, “Oh, this is a great idea. Let’s do it.” It’s, getting simple, good ideas through in our current environment is very hard. And I think there’s an interesting opportunity for a dynamic relationship between some of these new spaces that are emerging. I mean, I am a bit of techno-utopian in the sense that I think that technology is creating an opportunity for us to have levels of governance that go beyond the territorial nation-state. I think nation-states are should be important for territorial things, but we are creating potentially new governance layers.
When I say we need to start thinking about regulatory intervention, like in the crypto space, sure the SEC I think has done a really helpful thing with that idea, but actually, something like the Ethereum protocol could also have that same rule built into it, and it could actually be enforced more powerfully, and it becomes a kind of transnational governance layer. It could, and actually already is. I’ve had conversations for instance, with people developing the future of the Ethereum protocol on how to create public goods funding out of that.
Some of the new layers being developed right now, they’re recognizing, based on their mistakes with the first version, that we need to build in a public goods funding layer at the core of the new pieces that are being introduced into the system. And those are being designed in a way that is much more kind of collective ownership compatible than for instance, venture capital. So this can be done with some of these technologies.
So when I talk about kind of the regulatory and political conversations we need to be having, I think those can be had both in kind of meet space legal environments, as well as in some of these new emerging protocols, which are themselves emerging governance slays. There are, of course, lots of more local strategies. So for instance, here in Colorado, many, many US platform co-ops are incorporating here because we have really flexible co-op laws, we have a state government that’s super supportive and has created lending pools and has started doing things it can at a state level to encourage this stuff. And now even, we’re seeing DOAs incorporate as tokenized cooperatives here in Colorado because of even that very local recognition and innovation.
I think the answer to that question is multiple sites. But I do think we need to start, as Lawrence Lessig argued long ago, recognize that code is law, particularly in these smart contract environments. And I’ve been trying to encourage the designers of these systems to think of themselves, not simply as designing economic structures, but political structures as well, and to kind of get used to that.
Well, Nathan, I’m really glad to hear that someone is standing up for public goods and making the case for collective ownership and collective benefit in a world that so often seems like it’s tied up with casino economics and the hopes that we’re all going to get rich off of Board Apes. What a delightful conversation. We’ve really covered all over the map. Nathan Schneider, thank you so much for being with us today.
It’s such a pleasure. Thank you.