Decentralisation, Taxis and the Freedom to Transact

Welcome to Notes from the Lab. Subscribe and follow me on Twitter for more breakdowns and commentaries about all things NFT and Web3. Thanks and glad to have you onboard!

Why do we even need crypto in the first place?

Because it ensures that we have the Freedom to Transact.

This is a short but important summary of why the Freedom to Transact is especially vital in our society today, and what crypto can do to uphold this value.

These insights are from a timeless interview given by Punk 6529, an esteemed thought leader in the space.

I highly recommend using this article as an introductory read, followed by deep diving into his recent thread and interview on the same topic.

If you’ve ever pondered ‘Why Crypto?’, here’s the answer for you.

What is the Freedom to Transact?

With the rise of software and IT today, a saying rings true louder than ever:

Over the years, there has been a gradual but significant shift in power that towards software firms.

This is mainly due to the fact that they typically have “Power Law” outcomes. This refers to how the biggest firm in a category will be by far the most successful compared to the competition, because distribution costs are close to zero online.

As such, there will be significant monopoly from these internet firms (see: Google, Tiktok, Apple). While the Power Law effect might be well intentioned to begin with in driving economies of scale, they can also lead to adverse second order effects.

With the increasing monopoly of these internet firms, their databases are also by definition centralised - where someone has the authority over the entire database.

In light of this increasing trend of centralisation of database chokepoints and media, little decentralisation remains.

If nothing is done, Freedom to transact can easily be taken away in future.

Using Taxis and Uber as an Analogy

The process of hailing a taxi in the past was fundamentally decentralised and in the public sphere.

You get down to the street, raise your arm, and any available taxi in the vicinity can stop and have you onboard.

Fast forward to today, apps like Uber and Lyft have token over, owning over 80% market share. They provide many benefits: including convenience, on demand ride hailing, competitive prices etc.

At the same time, they also hold significant power. With one command or field change on their database, they can suspend anyone from using their apps anywhere in the world.

This is a simple but stark reflection of the rapid centralisation and opaqueness that is prevalent in today’s world.

Implications of Centralisation

Extrapolating this example to other sectors, everything can be centralised and intermediated by a few dozen corporate and governmental databases in future.

This can have severe outcomes.

Among corporate companies, they will likely start taking more rent-seeking actions as they have captured widespread network effects. They will likely also use their monopoly to hinder new competitors, bringing about less innovation.

Political implications are even more chilling. Persons in power of centralised databases over an entire nation have unlimited power, and can have the potential to exploit this power.

The Case for Crypto

To combat this, we need to preserve some space for freedom, some public commons, some digital lands that are controlled by nobody.

If crypto survives, it can serve to counteract this trend towards centralisation, as crypto and blockchain have no central chokepoints.

With crypto, no one single person or entity has the power to control databases, deny access to platforms, or take any other potentially nefarious actions.

Enjoyed this summary?

Do give the full thread by Punk 6529 a read here, he goes into a lot more detail around this profound topic.

If you are more of an audio person, do check out his recent interview with Bankless here as well.

Be sure to also follow Notes from the Lab on Twitter and Telegram.

Feel free to drop me a DM and send any feedback, suggestions or takeaways over!