Abstract

Crypto services undermine traditional forms of governance because its users are anonymous. This assumes impunity from government and central authorities. The collective consensus of crypto coders, miners, and anonymous micro actors in a growing subculture. To date, crypto has been relatively untouched by the authorities of the “real-world” and raises important questions about how this space should be regulated. Techno-Libertarians envision utopian self-regulation, with codified rules that evolve with its technology. Crypto-anarchists envision a free-rule zone for autonomous businesses and unconstrained virtual currencies. Anyone who denies these programmatic rules essentially forfeits their right to participate.

In this second section, the crypto power hierarchy will be defined as a basis for understanding its governance in contrast to the real world.

What’s Next?

States have many legal challenges in cyberspace. The introduction of crypto has further complicated these efforts by orders of magnitude. Anonymity, Pandemic Protocols, and the over-arching removal of Big Brother’s oversight have diminished state control of its citizens.

This poses three questions:

How far can crypto evolve? Will crypto services continue to be developed unabated?
Will crypto be controlled, be a free-rule zone or self-regulated? Regulators typically lag technology advancements, and crypto is the latest example. Their challenge is how to regulate a market with anonymous actors using technology that is decentralized.
Is a virtual existence a trend for the future? The cyber market has created a platform where actors can live almost entirely in the virtual space. Crypto enables these actors to now be anonymous.

We will attempt to answer these questions throughout the remainder of this paper.

Power Hierarchy

To explain the dynamics between the real-world and cyberspace, evaluating the power hierarchy of both systems puts the current state of play into perspective. From a socioeconomic and cultural perspective, real-world citizens are at the bottom of the pyramid. They are controlled by companies because they hire, pay and fire their employees. Companies are controlled by banks because they provide the finances to run companies. Banks are controlled by governments because they create the legislative, judicial and regulatory oversight that everyone needs to follow.

In crypto the power hierarchy is inverted. At the top, there are core developers who design blockchains. In this system, developers have unanimous control over the programmatic rules they implement. Miners have secondary decision-making powers since they collect the appropriate cryptocurrencies from their efforts in mining. Next, in line are services such as exchanges that facilitate trading. At the bottom are crypto traders. Omitted from this hierarchy is mainstream citizens. This is due to several reasons, starting with the technical learning curve barrier. This creates an artificial exclusionary zone because mainstream applications have yet to accommodate laymen consumers.

The market waits with anticipation for the likes of Facebook, Apple, Amazon, Netflix, Google (aka. FAANG[i], on Wall Street) to join the crypto party. In the meantime, crypto faces a ping-pong effect of good and bad news. Earlier in 2018 cryptocurrency took a few steps backward, with Twitter, Facebook, and Google banning advertising, due to market volatility[ii]. Services that connect mainstream users are in development, and their success is one of anticipation and speculation.

“Apps focused solely on the crypto community
risk solidifying virtual currencies to a niche market.”

In developed countries, inclusiveness is driven by human rights, civil liberties, and freedom. In crypto, an unintentional exclusionary zone has been created accommodating techno-savvy individuals who can traverse a steep learning curve. To overcome these barriers, new services, middlemen and educational facilitators will be needed.

This exclusionary zone may not be purposeful, but it exists nonetheless. Traditional banks and governments are also excluded from the crypto power hierarchy. Financial institutions are being disrupted by volatile virtual currencies, while many governments reject crypto because of anonymity.

Crypto may look like a free-rule zone, but it still has governance on a micro-scale. In one sense, actors in crypto are treated as equals: No one knows their social, economic, political, or career status. All participants are members of a collective with respect earned by community dialog and crypto success. Despite an existing crypto social hierarchy, the pyramid is much flatter than in the real world. Actors at the top of the food chain are much more accessible. Judgments are not based on whether the user is sitting in a basement, or on a throne built from swords.

? Down the Crypto Rabbit Hole

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