Exploring the Core of Crypto-Anarchism: A Reflection on Arjun Bhuptani's Vision at Bankless Summit 2024

welcome to the bankless summit a series of talks from speakers all around the etherium ecosystem which were all presented at a one-day event hosted the day after Devcon called The bankless Summit we are releasing some of these talks on the podcast all throughout this week and next and the rest are available on the bank list premium feed you're about to hear Argent bani the CEO of Everclear formerly connects who gave what I think might have been the crowd favorite talk at this Summit this year Argent takes us back to our crypto Anarchist roots and gives a stellar

account of what it means to all be in crypto I had goosebumps the entire time he got a roaring Applause from the audience so strap yourself in because I think you're about to get some Goosebumps as well but first a message from some of these fantastic sponsors that make the show possible if you want a crypto trading experience backed by worldclass security and awardwinning support teams then head over to Kraken one of the longest standing and most secure crypto Platforms in the world Kraken is on a journey to build a more accessible inclusive and Fair Financial system making it simple and secure for everyone everywhere to trade crypto

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ethereum since 2016 um I helped with a lot of like early L2 research actually if you were here for Aman's talk earlier he talked about building the first L2 on ethereum um First Bank chain I also helped build that um and uh and then also was involved deeply in a lot of like early thinking around Dows and most recently interoperability this talk is called why are we here um it is not a technical talk which is unusual for me uh it's a much more kind of like systems and economics and political and philosophy oriented talk

and my hope is that people in this audience uh people who are watching recordings of this talk at some point in the future can use this as a way to kind of reflect on the core ideas behind why this space needs to exist in the first place because we're in this like very very special place where we're we're kind of it looks like we might cross the chasm into the mainstream um for the first time ever and uh and if we do that uh I hope that we don't kind of like forget some of the core reasons for why blockchains should be around in the first place we live in a weird time um

over the course of the last I would say like hundred years or so uh the world has kind of gotten increasingly authoritarian part of this is propelled by technology part of it is just propelled by uh where we are in the life cycle of the the American hemony and Empire um this is a graph that shows just the like the the level of democracy that exists in the world and you can see that it's it's really decreasing very significantly over time um this is a trend that has been going on for some time and it's also mirrored by like similar Trends in uh in corporations as

well um there's a there's this like strong centralizing effect where more and more organizations are consolidating to become these large super monopolies uh super governments that uh that unfortunately could wield like pretty much unchecked power um and at the same time we have this like secondary thing that's happening is we're seeing an increase in the number of negative externalities associated with the systems that we live in right there's something very broken about the world that we're in right now um this is uh you know Global emissions of CO2 this is

deforestation you could really pull up like a lot of other charts that look like this these are just two examples but um it seems like there's something in the way that human beings are operating right now that is leading to us not effectively thinking about the long-term uh like outcome for verus the short-term benefit of a few stakeholders what I want to do is try to understand a little bit more about like why we're here why did we end up in this place right um what is the what is so

broken about systems today that leads us to continually fall into this cycle because this isn't the first time that this has happened if you look at throughout history I was trying to find a good graph of this but wasn't able to find this last night throughout history you see this like continuous cycle of like rise of Empires over a long period of time followed by a crash followed by rise of Empires over a long period of time followed Follow by a crash right and every time that happens who suffers it's it's people so what is it fundamental to these systems that is a little bit broken who here knows what the tragedy of the commons is cool okay good that it's most people

um for anybody that doesn't the tragedy of the commons is an allegory that uh kind of talks about the failures of human coordination um there's a lot of similar allegories in fact I uh if you are familiar with mik and the mik Dow we talked about this extensively back in the day um uh and the the ategory kind of goes like well if you have a pasture that has a carrying capacity of like 10 sheep um and there are 10 Farmers each with one sheep on this pasture um that is a sustainable system however without any kind of external policing there's no incentive for a farmer to only have one

sheep in that system right because if you add another sheep it increases your output your output of wool or whatever by 100% And The cost is not actually born by you it's shared amongst everybody else so like the the kind of benefit that you get is 100% the cost that you pay is only 10% um and then obviously this leads to this like death spiral where uh over time everybody just gets more and more sheep and then the pasture gets over grazed and then you have like envir environmental impacts throughout the world for all sorts of things like CO2 um um there's a really really

interesting person named Ela ostram um who's a Nobel prize winning Economist she actually doesn't get enough credit for a lot of the work that she does um elenir spent the majority of her life actually working on understanding the tragedy of the commons and basically how you can actually sustainably govern Commons systems what you called common pool resources um and ostrom's research found three possible ways to do this um the first is uh centralization right you have some State come and just like take ownership of the system this is sort of

like how Communism works um you the state just impose imposes rules on how many sheep everybody can have and how they can graze and when they can graze and that's basically it um but of course you trust this state unilaterally right uh the state is telling you 100% of what is okay and if the state decides to cheat there's not really anything that stops that so you have this who watches the Watchmen problem um that kind of exists in in any kind of system where you have this like Godlike uh uh role uh option number two is privatization this

is kind of where we're headed right now with the US economy um and where uh usually is this spoused as this like this solution to centralization risk um in a lot of cases but um unfortunately privatization also has a lot of flaws so one is it's very unclear as to how you define property rights in general um who owned these things in the first place right who how what if you don't necessarily know who owned the land um and then similarly you have the secondary problem of like well how do you enforce these property rights how do you enforce private privatization how do you scale that enforcement ultimately you have the same problem as option number one which is who watches the

Watchmen and then there's option number three and this is this was what ostram ended up kind of concluding was like you actually can beat the tragedy of the comments and in fact there's lots and lots of examples where human beings have done this there are are tons and tons of cases where human beings have coordinated around a shared resource for hundreds sometimes thousands of years um and done so effectively and sustainably however and there's one very very important caveat to this uh it doesn't scale right uh you can enforce these things on a peer-to-peer basis by like

within your community who of everybody that you know the name of you can convince them to not do things wrong and if they do things wrong you can publicly shame them um but how do you do this in even in a in an ecosystem of thousands of people right how do you do this in an ecosystem of billions of people how do you solve some of the biggest world's problems when the world's biggest problems when you you can't do this thing uh where you can't solve this problem of social scalability right how do you enforce rules on a global basis in a way that is ideally peer-to-peer

now unfortunately until somewhat recently the answer was you can't right and so the natural conclusion of all of this was the very very unfortunate realization that institutions don't scale as a thought experiment I would like you to spend some time thinking about this interesting question that I have actually asked a lot of people over the last couple of years can you think of a single instance in history where a large scale institution has effectively represented its constituents for a long period of time without getting

corrupted I've never actually gotten anyone that has given me a real answer that's really bleak right there's something inherent to to humanity there's inherent something inherent to The Human Condition that leads us to continually uh get to this output which is every single time we try to build an institution it breaks and when we rely on these institutions to create goods for us right any sort of any sort of output that we need to need in order to survive as a species those goods are themselves

broken why does that happen so there's this really interesting notion in in kind of Economics that is that uh talks about the way that goods are developed um and so Goods uh and this by this I mean really like any kind of product any kind of innovation follows a fairly predictable life cycle um going from being breakthrough Innovation and then over time o uh over the course of like Innovation over the course of competition getting to the point where they're just complete public goods right effectively utilities um you can map out most

Innovations in this kind of a chart today right so all the way on this end you have Fusion reactors which are this really really highly custom thing today um right we don't have Fusion reactors in our home you can't buy a fusion reactor on Amazon God I hope you can never do that um and then all the way on the other end of the spectrum you have things like electricity and the internet right the internet is is a public good um it's effectively open to anybody and as long as you have electricity and as long as you have a computer and as long as you have a few other dependencies it is something that is fundamentally public it's not owned by anybody um and

then everything else kind of Falls in between right you have things like comput and storage with AWS where it's aggressively commoditized but it's not a public utility yet um payments are kind of in that category um AI is just now breaking through into becoming something that's productized but not yet commoditized and you can also plot a lot of sovereign Goods in this chart too they kind of behave in a very similar way right all the way on one end of the spectrum you have combat drones right obviously the US government obviously combat drones should not be commoditized the US government has these as like

fairly custom things but you also have things like voting systems right voting voting systems are not actually very easily and widely available because as we talked about earlier they require enforcement and then on all the way on the other end you have things like roads right anybody can use roads so how do how do Innovations move through this uh through this system let's talk about payments for instance um payments uh for example Visa um uh are a are a Innovation that have especially digital payments are Innovation that have been around for some time they really should be

commoditized right Visa charges like anywhere between 30 basis points to like several percent on making transactions um that's a that's a fee rate that is honestly way too high for the world that we live in today doesn't really make any sense but they stay there um they don't move towards becoming a utility um and this is somewhat intentional because one of the things that's actually really critical to this pattern to this to this life cycle of goods is that when companies are creating Goods when and governments are creating Goods they don't necessarily

want these Goods to become utilities um they don't want every good to become a utility and they want to limit the ability for their good to become effectively get disrupted as a result of moving further along in this timeline so for payments that means uh you know working with governments to regulate the way who has access to payments um requiring kyc things like that basically making it impossible for new entrance to come into the market to disrupt visa and MasterCard this is a strategy that you see everywhere right health insurance in the

US is a really great example of this health insurance should be commoditized it doesn't really make sense that it's not uh but in the US it is not a commodity good it's a product um and you pay for it like a product it is much more expensive than many many other parts of the world and the evidence that it's a product is just you can kind of see the distribution of health insurance providers right this is not this is not what a commodity good looks like a commodity good is way more fragmented and that's a good thing right that's how you drive prices down that's how you actually create competition there is not competition here why isn't there

competition honestly because of a broken system you have this uh you have this unfortunate thing that happens over and over again where like corporate monopolies will work together with governments uh to effectively uh basically keep themselves in power usually at the cost of users there's a there's a flywheel that kind of represents how this happens right you have a a incumbent corporations will fund politicians uh those politicians will be elected and they'll go and uh

pass policy and the policy that they pass will protect the donors that funded them uh once they pass that policy those corporations will solidify their monopolies grow revenue and become basically super super dominant and then they'll partner back with the governments to give them technology dominance right so governments will then leverage the exact same technology example Twitter to control people's opinions to control the way that they think um and to then fund more politicians and kind of go around in this in this cycle um where of course

unfortunately you are the one that's losing we talk so much about incentives in this space um and and that's such a core part of the way that we think about about blockchains about building building infrastructure um but there's also similar kind of like system of incentives that exists around governance right now around policy and regardless of whether you fall into the economic right or right or left um the system of incentives unfortunately continues to drive us upwards which is no matter what

happens every single cycle we get more and more authoritarian right um even if you even I mean we we'll see kind of what happens with this presidency but even when you when you have net reductions in complexity of legal systems we have not yet seen a net reduction in authoritarianism we have only seen the slow and gradual reduction in civil liberties over time and in history the only instances where that's changed is when you have a revolution so hopefully we don't have to hit that point what we do need is ideally something that is not a revolution but

something that pulls us strongly in the other direction towards anarchism now I'm sure the word anarchism makes people a little uncomfy um it makes me a little uncomfy right there's a lot of brainwashing around anarchism where like the first thing I think of when when someone says anarchism is like cars on fire right like that is that is the first mental image that you have that's not actually what anarchism is at all um it's just like the association that has been drawn which you're just like okay

it's a person in all black that is like throwing a Molotov cocktail um but it's it's not that it's it's this much more simple notion that actually when you go and talk to anybody regardless of where they're from regardless of the political backgrounds when you go and you talk to anybody about this idea and you talk about hey what do you feel about trying to dismantle some of the problematic systems that that that kind of govern the world that we live in today I have yet to meet anybody that's like no I think that's a bad idea um and that's this is what's kind of important right it's like anarchism

is not this notion of like no rules it's this notion of no rulers uh it's not a and state it's a methodology and crypto anarchism um crypto anarchism is an extension of that methodology now this isn't exactly the definition but this is my definition and it's my talk I can give a definition um my definition of crypto anarchism is this notion of working to dismantle oppressive systems of power and replace them with technology where enforcement

can happen peerto peer right technology that we now know exists that lets us fix things like the tragedy of the commons that lets us build these socially scalable systems that have never existed before um where no one needs to police them where we don't have Watchmen right where the Watchmen are every person that is running in ethereum node which is a completely different Paradigm it's the first time in human history that we have ever had the ability to create these kinds of systems where the cost of policing them the cost of operating them is near zero and when they're where they're fundamentally

untable so if we if we all share this belief that you know we can we can use cryptography we can use technology we can use incentives to build these kinds of systems then that means you are also probably a crypto an you should cheer yeah absolutely because honestly when it comes down to it decentralization is

anarchism right that's what it means you're you're taking away power from a bunch of centralized entities you're breaking up monopolies you're breaking up these like oppressive systems that is decentralization crypto anarchism breaks this spiral that we have been locked into and it does it in this in this it's honestly in a way that is effectively political protest right even though we may not think about it that way even though we are all to an extent also working to build like businesses or something that kind of looks like

businesses effectively what we're doing by disrupting these organizations by kind of resisting against these existing systems is protest right it's a it's a form of of rebellion against this like cycle that we have been trapped in really for for all of human history and the way that this happens is instead of elective governments uh you know stopping there from being any competition we just build protocols that are not stoppable and we compete anyway and in addition to that we also

accelerate the transition of goods into being utilities right there's something really interesting that happens this is one of the things that's maybe sometimes a little bit challenging in this space is uh is things are so incredibly competitive that you have someone goes and creates a breakthrough Innovation right uh and uh and they go and they talk about it on Twitter they raise around in approximately 2 weeks there are 1,500 competitors uh and all of a sudden you have this thing that's like this very very custom system that was built for a very custom use case that everybody's super excited about and now everyone and their mother is running a

bridge and all of a sudden Bridges become utilities all of a sudden you know reaking becomes a utility all of a sudden l2s become utilities and that's a good thing right and that's effectively what we end up doing to the rest of the world to the rest of a lot of these like a lot of the kinds of innovations that are out there especially digital Innovations like voting systems is we take them we pluck them out of being these custom systems and put them into being utilities and we disrupt things like payments we disrupt all of these different ways in which institutions

kind of resist being disrupted obviously they don't like this it shouldn't need to be said um Aman talked about this a bunch which was like what happens when a lot of the assumptions that we hold true about this space today like you know the US government likes what's going on uh a bunch of other governments like what's going on uh usdc is not actively being used as a tool for sensorship when what happens when those when those those assumptions break down I don't think

we're really thinking about that deeply enough and in fact this is the time to really really think about them deeply because as I mentioned earlier we are crossing the chasm right and because we're crossing the kasm we're starting to experience what it looks like to actually have products that appeal to the mass market and that also step on people's toes one of the big mistakes that I think a lot of people make this is um this is chain from poly Market um if you don't know poly Market obviously blew up but a few days later um Shane's uh Shane's house was raid and then his

electronics reped this is obviously like bizarre behavior right there's no there's no point to this at all it doesn't really make any sense legally but this just goes to highlight that like we think about governments as this like homogeneous blob but that's not what actually exists in practice even within the United States governments there are different factions some of whom will not agree with you and will not agree with the technology that you're building let alone all of the many other governments that live in the world that that in the rest of the world that are often times opposed to the US government's regulations and views right

maybe maybe you are partnering really closely with the US government to build your protocol and you're fine you're bonafied within within like the US economy but what happens in Russia what happens when you travel and all of a sudden uh you are now the focus of a bunch of uh you get arrested in another country because you actually violated their laws even though you didn't violate anything in the United States this will happen policies between countries are actually not unified and in many cases conflicting this is why

fundamentally if you think about it right if we went and we built the internet today it would not look like it does today because everybody would try to regulate it and you would not actually have an outcome where the the like output makes any sense at all you have to build the internet you have to build technology in the space in a way that is fundamentally neutral and in a way that is fundamentally Unstoppable and this maybe brings me to one of my last points which is that decentralization is not just the ends it

is the means and what that means is that no pun intended what that means is that we uh we need to actually build technology that can't be stopped we can't just talk about Building Technology that can't be stopped right rollups are extremely censorable right now um that is a problem we need to fix that problem as soon as possible if we scale in the way that we expect to scale and by the way I'm the biggest like bull of all of this stuff I have been saying for years that we need to move towards a world with like hundreds of rollups I've been

saying for years that there's a benefit to organizations having sovereignty around building their own execution environment maintaining their own execution environment however if we end up in a world where every single application running on blockchains is running on top of rollup today and then we hit Mass scale we are so screwed and that that should keep you up at night it keeps me up at night and so we're we're kind of at this precipice right we are we're like in the next 12 to 24 months we are going to hit

this very very interesting period And I think in the next 12 to 24 months we are going to lock ourselves into one of these three outcomes which is terrifying outcome number one is really the worst outcome that I can possibly imagine which is we don't just fail in our mission to reduce the scope of systems of power but we actively make them so much worse because we build the perfect tool to control every single aspect of our lives

forever we are currently on this path it would be really nice to get out of that path and head towards one of the other two options option number two being we fail and just end up in the same spot again right uh eventually all of these organizations all the organizations that we're building don't successfully resist government control don't successfully resist capture don't actually become decentralized and then just get folded under the exact same regulatory framework that exists now ideally what we want is the

third option and at least that's why I got into this space that's what I'm personally fighting for and that's what I will continue to fight for is this notion that we actually can fix Humanity's coordination failures right the whole goal of this talk if we can do that and if our thesis in this space is correct then that means we can actually get past this place that Humanity has been stuck in for the last 10,000 years where we've failed to actually like coales around what we all want to do together and we can work towards a world where we can we can actually imagine if we were all like rowing in the same direction for the first time ever it

would be crazy we would get so much done we are entering the endgame I think that this is really where things kind of get decided and it's I think it's up to like every person that's in this room every person that listens to this talk to think about where they fit into this into this story and think about where they want this story to end up and so I'd like you to do that like uh this is this is really this is the last slide of the talk I think I might have a minute for questions after this but um I would like you to do this after

this talk and when you go home think about where you want this industry to end up and think about what it would take to get there because I currently am not super happy and super uh stoked about the direction that we're headed and you probably shouldn't be too thank you so much wow that was amazing oh my God one more round of applause that was really cool

all right real quick questions real quick questions you bring up this interesting point about the movement of say products to utilities like uh Bridges but can you comment on the consolidate the uh capital's tendency to consolidate around one or few things yeah um I mean capital's tendency to consolidate around one or few things is usually something that is like okay

so like in in competitive free markets you don't have monopolies you just don't right monopolies are an indication that like your capitalism is breaking down effectively there's some cases where that's not the case right when you have like massive economies of scale associated with giving a certain good or service but that's usually again an instance where like you have created an inefficient system because uh some underlying means of production is being monopolized so for example with like Facebook there is an underlying social graph that they are effectively monopolizing right and they're selling to other people with Google it's like a search graph with uh Amazon it's like

tons of warehouses um with Twitter I don't know musk I guess um and you know the the right answer is over time to actually just like decentralize that means of production right that's how you actually get from these things being like products or Commodities into becoming utilities is that like the means of production is something that then anyone can do or at least or at least like is is widespread enough like with electricity that like people it's like an open system and anyone can participate in it the best real example of this is the internet where like

nobody owns the internet nobody owns the network itself nobody owns the underlying like Network effects of the network and anyone can participate in it it might be harder in some places than others but anyone can participate in it um that I think is is how you break through exactly what you're saying which is like the the centralizing effects of being at a certain point in this flow does that help sorry and I guess I'm kind of worried about the in the context of blockchain

and and decentralization you know you see say like Bas is awesome but it is taking up all the Mind share yeah um yeah I mean I think uh yeah it's going to be interesting to see how this this Market plays out um I think there are certainly places in which there are organizations that have retained monopolies over certain kinds of things but at the moment I would say crypto is in an interesting place where every single founder even if you are in a position in the market where you're winning and absolutely dominating every

single founder is terrified about like competition and being disrupted because really it seems like the main thing that matters here is mind share and attention right and that's actually that's actually how you know that these are commodity Goods right like toothpaste uh there's no real difference between types of toothpaste but you know the big Brands because they win all the M sh turn attention um and and I think the same kind of thing exists with dexes or lending protocols where it's like ultimately you know there are some Network effects associated with like you know Unis swaps liquidity for instance

right but the the differential in price is actually so small fundamentally that for for the most part most users probably wouldn't even know um if you were to switch to something else but why does un swap win well because they're everywhere right like you literally for the longest time we would all be like okay what is a what is an example of a quintessential application built on top of a blockchain we can all think about and like talk about it was Unis Swap and like they're not just like the decentralized exchange they are the app which is crazy um I think that that is those are all like indicators that like we're kind of