Can Crypto Save Democracy?

To entrepreneur Balaji Srinivasan, cryptographic technologies are a critical development for societal organization and humanity at large. Source: GoldCoinWeb

What in the world is going on with the world? Five years since the paradigm-shifting elections of 2016 and those directly following, the “rise of nationalism” is no longer the vogue, galvanizing phenomenon that it once was. This is no indication of its relegation to history, as the political Right seems firmly in the grasp of nationalistic rhetoric for the foreseeable future. It is more likely a reflection of our collective desensitization and willingness to readily accept new realities into our conceptions of the societal status quo.

 Framing nationalism’s ascendance to mainstream politics as a systematic breakdown of preexisting democratic norms is hardly a claim in need of fervent defense. We all watched as the nation’s Capitol was besieged by Trump supporters in a deluded attempt to stop the official certification of election results amid baseless allegations of fraud. The utter chaos that characterized the early months of the COVID-19 pandemic indicates that decline is not isolated to the political sphere. A cascade of critical institutional failures resulted in rampant levels of transmission, healthcare system breakdowns, and death rates that should not have been possible given the resources of wealthy, developed democracies. Why do democracy and its ability to provide the general good seem to be in a state of decline? Is it inevitable or is there a way forward in which democracy’s best outcomes are preserved? Such questions and their answers are likely to define the coming decades.

Research exploring potential causal mechanisms behind the rise of nationalism has only begun to emerge, offering useful yet limited insight into the relatively nascent trend. Contextualizing it as a development in a larger socioeconomic recoiling from globalization, nationalism’s surge in appeal is attributable perhaps to the Left and broader political establishment’s ongoing failure to ameliorate the negative outcomes suffered by the economic “losers” of free trade and international economic integration. While such studies are effective in explaining the influence of globalization and related macroeconomic trends in nationalism’s rise, there is likely a larger narrative at play; one that explains why the adoption of rhetoric and political strategies once considered debasing have been met with relatively little resistance from the mainstream Right.  

The modern democratic nation-state, the institutions that compose it, and indeed much of the existing world order were established in 1945 by U.S. President Woodrow Wilson and other leaders following the cataclysm that was WWII. Thanks to an accelerating rate of technological advancement and the social change ever-present in its wake, the “Post-Westphalian” global political system has shown signs of decomposition at a pace unseen even in the empires which preceded it. The creation of the internet and the ensuing explosion of technological and social change have slowly but surely decentralized and lowered access costs of information and capital — once the sole purviews of the state and the critical channels through which nations and politicians exercised control over their populous. 

Our institutions, designed to uphold a Post-Westphalian world, appear in rapid decay, hopelessly outdated in effectively controlling or regulating technology’s foundation-altering presence within their ambits. As power itself becomes decentralized, politicians must resort to new methods to achieve the same levels of control once enjoyed by their predecessors, resulting in the emergence and adoption of tribalistic rhetoric, populist and nationalist platforms, demagoguery, and all manner of ploys capable of compelling a powerful emotional response from voters. 

If left unaddressed, this struggle for control foreshadows the death of our institutions, remaining democratic norms, and perhaps democracy itself. What can be done? Is there an opportunity to drastically renovate our institutional models and save democracy in the absence of a global catastrophe like WWII? What would a new design capable of keeping up with technology even look like? Some think the answer is hiding in plain sight as one of Silicon Valley’s favorite topics.

You’d be hard-pressed to find someone more bullish on the future of cryptocurrency and underlying blockchain technology than Balaji Srinivasan. The polymathic entrepreneur is a former Stanford professor of computation and genomics, general partner at venture capital firm Andreessen-Horowitz, and CTO of Coinbase, a major cryptocurrency exchange. To Srinivasan, cryptographic technologies are a critical development for societal organization and humanity at large. Maintaining that technology is civilization’s true prevailing force, he sees the emergence and growing adoption of cryptocurrency and underlying blockchain as the cumulation of the very trends of decentralization that can be attributed to the nation-state’s decay.

Reaching far beyond its prima facie value as a method of overcoming the Byzantine Generals Problem and achieving “digital scarcity,” Srinivasan imagines a blockchain-enabled institutional model whose decentralized, peer-to-peer nature allows it to adapt to its regulatory environments in real-time. Enabling frictionless, agile adaptation, the proposed model could overcome several problems endemic to societal governance — like those formalized by economist Thorstein Veblen, who notably asserted that by nature the regulatory ability of institutions is constantly lagging behind and thus constraining the evolving productive capacity of human effort. 

Technological innovation’s ability to create more effective methods of regulation is already becoming apparent, even as outdated existing institutions, most made up of career politicians, make clumsily argued calls for cumbersome, often counterproductive regulation. Examples can be found on the platforms of industry disruptors like Amazon and Uber, whose built-in “rating” functions — provided to refine user experiences — have created drastically more effective regulatory mechanisms than the U.S. federal government ever has in their respective industries (though neither are without their unique problems). 

Even in its elementary application as a method of enabling the existence and exchange of digital currency, cryptographic technology is already helping safeguard some of democracy’s most cherished tenets. Cryptocurrencies like Bitcoin act as lifelines for citizens in nations undergoing hyperinflation, while also providing critical, expropriation-proof funding for human rights and opposition groups operating in oppressive regimes. Cryptography is also showing promise in addressing some of the pressing threats to democratic norms like free speech, as decentralized, on-chain social media networks and publications are beginning to offer viable alternatives to Big Tech’s over-moderated platforms.

Democracy is not the problem. What system of governance is better suited for the decentralized present and future than rule by and for the people? Recent geopolitical turmoil and mounting threats to democracy are the results of obsolete institutional models and the Old guard’s futile yet harmful attempts to regain the control they once had in a centralized world. Crypto is not perfect, it has contributed to global warming and has been a blessing for criminals. As technologists frequently remind us, no technology is inherently good or bad, it’s about how we use it. Srinivasan himself will admit that his vision of a quasi-utopian, blockchain-enabled society may sound like the delusions of a deranged tech bro, but given the threats facing democracy and the implications of its continued decline, lofty visions like his may be well worth entertaining.