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Proof of History: Culture as the Lifeblood of Blockchain
✍️ This opinion piece was contributed by Diaryco-founder and COO of NFT Minimum Price ✍️
Hard Power Versus Soft Power
Most analyses of what makes a Layer (L1) blockchain superior to others and a great investment usually emphasize the technical aspects. They often describe innovative and revolutionary attributes, which are supposed to act as a panacea, solving all the inherent problems and dilemmas that public blockchains have faced since their inception.
And while it is absolutely clear that technology is critical and that constant improvements and breakthroughs in consensus design, cryptography, and distributed systems engineering (strong power) are essential to make this technology accessible to everyone in the world, but it is important to remember that blockchains are not just technology.
Indeed, blockchains are built on community faith (attention), rooted in shared values, culture, and, at best, a universally accessible ethos. They offer everyone the opportunity to participate in an open, optimistic story that is both recorded in blocks and embraced by the community’s imagination. This is what we call soft power of a blockchain.
through 0xDesigner
Blockchains are the ultimate coordination tool, the ultimate ledgers where humanity can record its existence and its digital history. Blockchains are technology, but they are much more than technology. And if you judge them only by technical standards, if you evaluate only their technical features and ignore their soft power, you will miss the bigger picture.
On history, writing and accounting
As Yuval Noah Harari explains in WisdomHumans have come to dominate the world because of our ability to cooperate in large numbers, because of our unique ability to believe in things, that is, stories, that exist purely in our imagination.
These stories based on shared belief systems, these cultural artifacts that encode different aspects of human existence, when combined and recorded, give rise to history.
And how do we record history? By writing.
So, on the one hand, we can define history as a sum of shared stories on which human communities have a consensus about their importance and validity. And on the other hand, we can say that history and writing are interconnected, since you can’t have a real history without a system of recording.
Let’s add another piece here. The world’s oldest writing, cuneiform, originated from an ancient accounting system that used clay tokens to track goods such as livestock and grain in early Near Eastern agricultural societies. Initially, these tokens various goods representedwith different shapes indicating different items or quantities, such as a cone for a small amount of barley.
Around 3500 BC, with the emergence of cities and the increasing complexity of the economy, the variety of tokens expanded to about 300 different shapes to cover a wider range of goods produced in urban areas. Interestingly, the final push towards the development of writing came from Mesopotamian society’s shared belief in an afterlife.
History, shared beliefs, a system of record-keeping, an accounting mechanism, tokens… do these concepts sound familiar, anon?
Money and money as shared beliefs
According to the aforementioned Harari, the human ability to coordinate large numbers comes from our unique ability to believe in things that exist purely in the imagination, such as gods, nations, money, and law.
In other words, large-scale systems of cooperation such as religions, trade networks, and political institutions are the result of a unique human capacity for fiction.
In this framework, money exists only as long as there is a shared belief in it as a system of mutual trust. And in this sense, Harari’s thesis is directly linked to the subjective theory of value. This postulates that the value of any good is not determined by the intrinsic property of the good, nor by the cumulative value of the components or labor needed to produce or manufacture it, but rather by the individuals or entities that buy or sell the object in question.
Thanks to this concept, the value of an object can increase significantly from the moment it is created, as it becomes considered more valuable or desirable in certain cultural contexts. Many factors can impact this evolution, such as changes in age, personal attachment, rarity, etc. In short, cultural relevance.
But why is all this important?
The Subjective Theory of Value (STV) helps us make sense of all the stores of value that humanity has adopted throughout history, such as salt, cattle, seashells, gold, and even cryptocurrencies like bitcoin and ether.
However, only by understanding Harari’s thesis about the key role that shared beliefs have played in human history can we truly make sense of the full power of STV and how it works.
Like human history itself, the success of money and stores of value are not just the product of shared initial and fundamental beliefs, but are interconnected artifacts that require constant attention!
No money, no fun, some would say. In the case of blockchains, you’d better make sure your favorite L1 has a store of value as its native asset before claiming it’s superior to its peers. If it’s not good money, it’s not going to have good economic security. Period.
And how can you be sure that your native asset has truly become a store of value and not just a passing fad?
History and cultural vivacityHere is the answer.
Blockchains as Records of Digital History
Remember that a public blockchain like Ethereum or Bitcoin is a shared, decentralized, immutable, and censorship-resistant ledger that makes it easy to record transactions and track assets.
In other words, once information is recorded on a blockchain, it cannot be easily altered or deleted. This feature is crucial when it comes to preserving historical records, as it ensures the authenticity of documents or transactions stored on the blockchain.
We give a lot of credit to the ingenious system that allows for trustless management of transactions and balances. But what about the actual history that is recorded? Isn’t that as fundamentally important as the underlying technology itself?
In my opinion, definitely yes.
ETH, the native asset of Ethereum, derives its value from its cryptoeconomic properties, according to the rules established by the protocol. However, as we have already noted, this would mean nothing without a loyal and large community of humans who see value in both using the network and storing wealth in the native asset.
The community’s shared belief in the value of the network creates a rich economic history that is recorded on the Ethereum blockchain as a public ledger. And it is this rich history, this shared community culture, that leads to a positive feedback loop that constantly reinforces the value of ETH, its native asset.
History is nothing but the sum of shared stories that have meaning for a community, with a social consensus on their importance. In the case of blockchains, their history reflects the social and economic relationships that develop between members of their community.
These relationships should not only be measured in quantitative terms, but also qualitatively, as a reflection of the culture that supports them:
- Is it fair to compare the impact of the creation of CryptoPunks and their second-order effects, which led to the development of an entire industry, with the launch of a low-cost NFT collection that led to a temporary craze?
- Can we compare the impact of Uniswap and other 0-to-1 DeFi innovations to simpler 1-to-N protocols that offer incremental improvements and sometimes seem like excuses to sell a token?
So while one could argue that all L1s have their own history inscribed in the form of blocks, unfortunately not all blockchain histories are born and raised equal, and the influence they exert on their native assets (and more specifically, on their ability to accumulate value over long periods of time and become stores of value) is not the same.
Zoom out
An L1 has value as a coordination tool and decentralized ledger on which to build an economy and community of communities. However, not all blockchains are created equal. Attributes such as decentralization, censorship resistance, and trustlessness begin as technical features but evolve into core values (a shared belief system/narrative) that bind a community together.
Without a strong belief in these values and ethos, and without a vibrant and creative community that chooses blockchain as a home for their projects and a repository for their creations and wealth, it is impossible to develop a rich and lasting story. This shared story attracts new members who will help grow the network. It is this story that provides the asset with an invisible but crucial support: the faith and constant attention of the community.
Consider Ethereum: imagine how much it would be worth and how it would have held its value for ten years if Vitalik had not launched through an ICO and created a foundation to manage it. What if he had not implemented a Proof of Work phase to prevent excessive concentration of tokens? What if he had acted deceitfully and not prioritized the best interests of the network? What if Ethereum had not been chosen as the home base by Larva Labs, Hayden Adams, and many other founders?
The community and history of Ethereum would be completely different. Technology is not the main problem because it is upgradeable, although it is subject to challenges due to technical debt. History, however, is unrepeatable, irreplaceable and indelible. Only through a rich and lasting history can a blockchain’s native asset develop a premium!