While I am old enough to have grown up in a world that was dominated by centralized organizational models (e.g. corporations, governments, and Universities), I am also young enough to have witnessed and participated in the rise of the first wave of global, decentralized, community-driven cryptocurrency protocols.
As I’ve watched the early successes unfold, I’ve also witnessed what I would consider to be several significant failures (eg. Ripple, EOS), and, imho, much of the difference between success and failure can be attributed to the maturity of the founders in terms of their ability to lead in a decentralized context — how they approach organization of the project, the value placed on the Community, and the task of leadership using Twitter and Medium accounts.
For a new protocol to be embraced it requires widescale human adoption, and thus the number one factor in determining success and failure of a new protocol is how the Community ‘feels’ about it.
Human emotion towards the protocol matters. Love by the Community is essential! Crypto currencies are social currencies after all!
Without a loyal, vibrant, and healthy Community, a protocol is dead on arrival.
The persistence (and monetary value) of any informal institution lies entirely in the size of the Community and the repetition of the protocol being used within the Community. If nobody likes the protocol, nobody will use it.
No Community = No Value. It’s that simple.
Since the value of Bitcoin is socially-constructed, and lies in the massive community of people who buy it, HODL it, tell their friend’s about it, and spend with it, it is necessary that the people who promote the project maintain a healthy, decent, likable image.
The toxicity of some Bitcoin maximalists is actually working to their detriment, imho.
Moreover, for newer decentralized protocols, project founders who exhibit spectrum autism and who do not intuitively understand the basics of creating healthy social interaction and community goodwill tend to fare badly in building a strong Community.
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I. A Case Study of Failure Caused by Founders with a Centralized Mindset who Neglected the Importance of the Community
One of the projects that I invested in last year, which was founded by one of the most famous decentralized protocol engineers of the past decade, and has made several important technical contributions in mining efficiency, has completely failed in this Community building aspect.
Here are the major errors that were made:
* The founding organization took half of the value of the network in a pre-mine to create value for IPO shareholders, which has upset many of the community members, and is quite similar to the Community backlash problem Ripple has experienced.
* The marketing campaign for the project involved attacking Bitcoin, and pissing off every cryptocurrency enthusiast and blockchain builder who holds Bitcoin, which distanced a huge part of the global community in this industry,
* Everyone in the early community has been economically harmed due to massive competition at the launch to invest in mining hardware, which was partly caused by over-investment due to dishonest mining reward calculators. After a subsequent collapse in the price of the token, which put most of the miners underwater, if the founding team had empathy for the community, they could have tried to do reparations to make them whole. They did not. More than ten thousand individual miners who started out nine months ago wildly excited about the project and who invested their personal savings in mining rigs have now given up, exited at a loss, and have a sour memory. This could have been avoided if reparations from the massive ‘pre-mine’ had been implemented.
* The team has been vigorously defending their trademark IP, and instead of letting the community turn the logo into memes to promote the project all over the Internet, they are attacking community members who use the logo of the project.
* Early mining pool operators were criticized, their work was deemed of insufficient quality by the genius technical founder, who thinks of himself as a God of programming. If he would have been tactful, he could have come alongside the mining pool operator, and helped them to improve the security of their pool implementations, instead of shitting on them and distancing them, and leaving the entire project Community on Twitter feeling like it had been handled badly.
* The team has failed to build value transfer bridges between their network and other networks like Ethereum and Bitcoin. Thus it remains an isolated island.
* Moreover, even after all of this, the founders of the project are so tone deaf as to keep pronouncing, “we will be here to work on building out this protocol for the next 30 years, it is a lifelong project, we aren’t going anywhere.” When in fact, this is the opposite of the decentralized ethos whereby founders pledge to disappear following the example of Satoshi Nakomoto!
In summary, what started as a massively promising project due to the technical roadmap has now become a complete disaster due to the failure to honor and respect the role of the Community.
In one sense, decentralized protocols are like religions, and if people don’t want to be part of the religion because it hurts them, makes them feel disrespected, or causes them to feel deceived or lied to, then it becomes tarnished and it loses its social legitimacy and membership.
For example, there were large segments of the community that hated Ripple and EOS, and despite the early mover advantages of both projects, deep-seated hatred by the wider cryptocurrency community has been like a set of millstones around the necks of both projects that have been impossible to overcome. If I had to trace this community hatred back to its root, I would identify distrust of centralization inherent in the architectures, lack of respect exhibited by Ripple founders towards Bitcoin (trying to be a regulatory compliant ‘killer of Bitcoin’), lack of respect by EOS founders towards Ethereum (branding itself as an ‘Ethereum killer’), and lack of an initial fair distribution of tokens to the Community, as well.
Many of the leadership techniques that were used successfully in the centralized order are actually a detriment to founders in the decentralized order.
For example, trying to control intellectual property, attacking the competitor to bleed value away from it (which demonstrates a lack of respect for the people who created the entire space and the larger global community of cryptocurrency holders and enthusiasts), or trying to capture value from the network private shareholders in the founding company. All of these techniques come out of the mindset of the old centralized order, and, based on my own personal observations, all contribute to eventual Community rejection and failure.
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II. Examples of Projects that Exhibit the Decentralized Ethos
In contrast, projects that have shown us “the way” with decentralized leadership:
* Bitcoin – Satoshi Nakomoto stayed around on Bitcoin Talk long enough to teach a few hundred people how to use the protocol and then he disappeared.
* Stellar – Whereas Ripple has done many things wrong and is seen as too centralized, Jed McCaleb (the original founder of Ripple who went on to found Stellar after a terrible fight with the Ripple organization) has done many things right.
* Decred – The founder of the project, Jake Yocomb-Piatt, named his company “Company 0” which both recognizes it is the first of hundreds of contractors that will contribute to building out the protocol (and that as one of many contractors his organization has no more or less advantage than any of the others), and also that his company basically will become non-existent in the eyes of the community over time (it will eventually be of zero importance!).
* Terra – The founder, Do Kwon, has said that his organization TFL will not try to capture any of the value of the Terra/Luna network, and once the network is self-sustaining then TFL will disband and cease to exist.
The logic of the founder who understands the decentralized ethos is as follows:
* Code is published under an open source license,
* Respecting the community is of paramount importance — this includes being direct, being transparent, addressing emotional unrest on Twitter in real-time,
* If the community is harmed, doing reparations for the community,
* Creating decentralized governance where the community can participate in decisions,
* Understanding that the Community Fund is a powerful resource of the community to hire contractors to advance the goals of the project, and the best contractors should be chosen, not necessarily the founding organization,
* Understanding that the founding organization will exist only as long as necessary to create, document, test, and deliver the protocol — and then can be disbanded,
* Quickly shifting from a role of creating the core protocol to a role of mentoring and coaching contractors and teams who are inspired by the promise of the protocol and who arrive to make proposals and add their own contributions,
* Understanding that any kind of pre-mine is going to be looked at by the Community with skepticism and it had better be used to create value for the Community,
* Constructing tokenomics and initial distribution of the protocol token in a way that is fair and transparent,
Oftentimes, it is young people who were not steeped in the older centralized institutional models who have demonstrated the greatest aptitude for this new kind of community-based leadership.
There is research on how younger people are growing up on the concept of business ethics and morality mattering a great deal, and how a positive environment is more highly-valued by the younger generations.
High emotional intelligence and youthful zeal for an ethical society maybe on equal footing with technical intelligence for the task of establishing strong and engaged communities around decentralized protocols!
Humanity 3.0 