Technology, Complexity, and Networks of Trust
Is Blockchain really better than Hawala? Why do we try to use technology to solve human problems?
Back in the late 90s when I was working at a fancy boutique ad agency, I used to spend my down time hanging out with the IT guy the server room (Hey Jeremy!). That’s how I started to learn about how computers and the internet worked, learned HTML, etc. Anyway, I remember - or at least I think I remember - him telling me that most of the tech requests he fielded were a PICNIC to to deal with, PICNIC standing for “Problem In Chair, Not In Computer”.
This insight applies to almost everything technology-related and, alongside the “Triple Constraint” as taught to me by PS122 Technical Director Derek Lloyd (of blessed memory), has served me well over the years.
I wanted to start there because most of the world’s problems are human problems, not technology problems. So why do we, as a society, keep trying to solve human problems with technology rather than by actually engaging with other humans?
For example, most people probably have only the vaguest notion of what cryptocurrency is or how the underlying Blockchain technology works. And even if you have a decent-enough, barebones understanding of what they are - crypto is digital money, blockchain is a digital ledger - it is still a huge leap to understand how these so-called “decentralized” technologies work or how Web 3.0 is going to revolutionize the Internet.
I started learning about crypto and blockchain when the conversation around artists and NFTs started to heat up. In fact I was involved in a project during the pandemic called “How Are We”, where we created an NFT that was minted to a blockchain and got paid in crypto, the whole thing was managed using a “smart contract”. I’m still not sure how it worked and I’m pretty sure my crypto is worthless, but so be it. All I know for sure is that NFT technology was invented to help artists but as far as I can tell it hasn’t, not really. (Just ask Anil Dash).
As I’ve mentioned many, many times, one of the things that makes me crazy about the tech world is that every idea seems predicated on “what problem are you trying to solve?”. I’m pretty confident that blockchain, crypto and NFTs are trying to solve problems that aren’t really problems except for the folks who are hyping these technologies.
[I’ve been working on this essay in one form or another for years, so to refresh my memory, I went back through my notes and re-listened to two Ezra Klein podcast episodes, “A Crypto Optimist and a Crypto Skeptic Walk Into a Podcast Studio” with Katie Haun, and “The Most Thorough Case Against Crypto I’ve Heard” with Dan Olson. Definitely listen to these podcasts for the deep dive.]
There are three key “problems” that crypto, blockchain and NFTs purport to solve that I don’t believe are problems:
“Trustless” Transactions
Digital Ownership
Centralization
One of the big recurring themes around blockchain and crypto is the “problem” of trust. How do you conduct anonymous transactions around the world without an intermediary? I’m not sure why, exactly, this is a problem, but Katie Haun offers, “If you’re on the other side of the world and I don’t know you, and we promise to send each other money, how are we going to do that without an intermediary that we both trust? […] Historically, that would be some kind of formal financial institution or bank — or other payment system.”
The problem, then, for Haun and all the crypto/blockchain enthusiasts is a distrust of banks and government, or third parties like Venmo, PayPal, Zelle, Cash App, etc. And, implicitly, a distrust of all other people. I think there’s an assumption among the crypto/blockchain set that that no-one is trustworthy and therefore trust must be outsourced to machines. Haun says as much, “What now all of a sudden blockchains allow for is the removal of an intermediary or a kind of trusted party.”
Here’s a case of making a really complicated technological solution to a problem that is not a problem. You might have heard of hawala, which is an “informal value transfer system” - basically a way to move money from one place to another via trusted brokers knowns as hawaladars. (For a deeper dive, check out this article about the benefits and risks of hawala on DowJones.com.)
The Hawala system has been working, successfully, for over 700 years. It has become infamous since 2001 when the West realized that this informal banking system rooted in the Islamic world was used to fund terrorism and other criminal endeavors. But of course, that was also part of the impetus for Blockchain - how to conduct illicit business without leaving a record or getting caught. So, hawala does what Blockchain does through human networks of trust safeguarded by a system of reputational value.
So there’s this bullshit idea that blockchain is solving the problem or trust, which is really a sleight of hand to distract from another motive. Haun offers that removing the need for a trusted party, “has really profound implications, where you’re talking also about digital ownership.”
Which leads to the idea of “digital ownership”.
Let’s start with the fact that the Internet was originally built as a network among universities and research labs. “Information wants to be free,” as the saying goes, and the original impulse of the Internet was to promote the free exchange of information and build a publicly available resource containing the ever-evolving whole of human knowledge and learning, for the betterment of all humanity.
The crypto/blockchain enthusiasts are trying to re-engineer the Internet from a place of abundance to an environment of scarcity. The premise behind “digital ownership” is, first and foremost, to create “digitally scarce goods” that can be effectively monetized.
On the surface NFTs seem like they’re trying to solve the problem of artists getting paid for their work. If everything you create and put on the Internet is endlessly reproducible and you don’t get any money from it, that sucks. I’m not sure, however, that introducing artificially created scarcity is the answer to the problem of compensating artists. I’m deeply skeptical of the notion that replicating the ownership economy of the material world in a digital environment is going to solve the problem of paying artists for their work. In fact, if the past is any predictor of the future, the Spotifys of the world will always figure out how to get the money instead of the artists.
It is far more likely that crypto/blockchain enthusiasts are building a closed system that is expensive to build and maintain, complex to the point of incomprehensibility to the average person, that will, in the end, only benefit the builders, owners and maintainers of the system.
The crypto/blockchain enthusiasts will decry “centralization” and offer Web 3.0 as the antidote, but every version of the web so far has said it would resist centralization only to become centralized. This is a human problem. Building technology is complicated. Most people want things that are not complicated.
People quickly got tired of Napster and Limewire, quickly migrating to Spotify. Most people aren’t going to build their own Diaspora node, they’re going to join Facebook. Some people will join Mastodon or Blue Sky, most will stay on X or migrate to Threads or give up entirely. Crypto and Blockchain will only really take off with the general public (if they take off) when someone builds easy-to-use interfaces and platforms, like a SquareSpace or Venmo or whatever. Maybe this new generation of digital natives will dive right in to the system as-is, but it seems unlikely to me.
Once again, the “problem” of centralization is not really a problem. I mean, it is a problem, but not one that will be solved by blockchain or crypto. IMHO the problem of centralization is actually a problem of ubiquity and mediation; solving the problem of centralization would be about fundamentally re-thinking the ways that human beings interact with information and each other in digital spaces.
I’ve been thinking a lot about this lately as I’ve been learning more about the close relationship between JD Vance and Peter Thiel and the intersection of VC, techno-libertarianism, MAGA and Catholic Postliberalism.
In late August, I got an email from Model View Culture (aka Feminist Technology Collective, Inc.) about the REBOOT 2024 conference that happened on September 4 and 5 in San Francisco, with speakers from “Palantir, YCombinator, Founder's Fund (Peter Thiel's VC firm) and weapons startup Anduril ... along with speakers from the Heritage Foundation, the Catholic University of America, and the Pronatalism Initiative.”
The email warned that, “Venture capital is teaming up with the Heritage Foundation and Project 2025 to install Trump in power and dismantle liberal democracy,” and that the REBOOT conference “highlights the dangerous interaction happening between tech fascism and MAGA Republicanism.”
This may be hyperbolic but it is worth considering how the underlying beliefs and values of the people in tech determine what they make and how they make them. Their values and worldview inform what they perceive to be problems and what they consider to be “good” solutions, regardless of the impact on others. As they build the tools that increasingly mediate our interactions with each other and the world, we must remain vigilant about how these tools shape our thoughts and actions in the world. And, when necessary, resist their influence by building different solutions, and finding ways to stay human.