My final semester at CU Boulder, I was able to take a really nice class on Crypto that was taught by two engineers from the Ethereum Foundation. I came out of the class realizing that we are looking at Crypto from the wrong perspective.

A replacement of the dollar?

We are thinking about crypto wrong, it isn't just a replacement for the dollar. Instead, blockchains are a new way to do government and currencies are a nice side effect of the system. Our way of doing government hasn't fundamentally changed in 250 years, and its efficiency has stayed roughly constant. Blockchains are so, so, so young and will only get better from here. Eventually, as they continue to improve, they will surpass the efficacy of our current way of government and the monetary systems. Blockchains are 17 years old, and we have yet to explore all the possibilities of them. How ironed-out was democracy 17 years after the first person thought of it? As the tech improves, people will learn to trust them more than they can trust banks. They will become a centerstone of society. Properly designed, these blockchains create win-win-win situations, fairer forms of voting, and will allow us build a new form of government meant for the age of technology.

Inefficient Voting

Our current form of voting is inefficient. Most people I know vote only once every four years. Is this optimal? Probably not.

It is so inefficient to vote that our system isn't even a true democracy, but a republic instead. Voting is so inefficient that we vote for others (representatives) to vote for us. This is great idea, until a representative figures how to concentrate power to the unelected. Unfortunately the longest lasting representative democracy (that I know of) lasted less than 500 years. It was the Roman Republic, which was then turned into the Roman Empire. Is this why? Democracy and republics seem to be very brittle in the long term. Only remarkably robust forms can survive centuries, and none have survived millennia.

Pure Direct Democracy

A blockchain voting system could potentially put power back into the hands of the people, literally, by allowing everyone to easily vote from their phones. Such a system would allow the purest form of democracy that the Greeks dreamed of. Imagine an open source government, with the constitution stored as a GitHub repository. All changes to laws are easily findable as git diffs. Anyone can create a proposal as a PR.

For example, we would be able to hold much more frequent and ongoing votes. To give people enough time to vote, say that there are 3 month period to vote on issues. Anyone would be able to propose an idea during this time frame, and if it gains a majority of votes after 3 months, then the proposal would be put into law. This would allow for much more frequent and fair voting. It would allow for voting on individual issues, instead of massive 1,000+ page bills. If you want to vote in person, you can vote. Too lazy to go in person and vote? No problem, open up the app on your phone and submit your decision. Don't care enough to vote? That's fine, you don't have to vote. We can vote on a per-issue basis. No more mega-bills.

Quadratic Voting

One novel system that is unlocked with Crypto is quadratic voting. Take any issue. If you care more about the issue, you can cast more votes, but at a cost. For example, assume that to vote once it costs $5. If you want to vote twice, you can cast another vote, but this time for $25. Another? Then it would cost $625. This is quadratic voting, where each vote costs the squared amount of the previous vote. This is beneficial because people who really care about a certain issue can cast more towards that issue. Those who don't care can still vote, and those who don't want to vote don't have to.

However, this isn't very fair. How do you prevent the rich from controlling every vote? To fix this, you must create an artificial currency, a voting currency. At every voting cycle, everyone is given 100 voting tokens. This ensures the ability to do quadratic voting, whilst keeping voting fair.

How do you create an artificial voting currency? Crypto. Boom. Now you see how Crypto allows for new forms of governance.

Why Crypto is (Probably?) Inevitable

The dollar is not backed by gold anymore. Instead, it is known as a FIAT currency, one where the government can mint however much money whenever they see fit. This system works great in the short term, but is inherently unsustainable in the long term. Eventually, the country will have to face tough decisions and will have to enter a recession. But, you could also just mint money to pay off your debts, and go along pretending that nothing ever happened. However, with one bad government this will lead to hyperinflation and the currency will die.

This is where currency backed by gold comes into play, like how the US used to be and how China is today. Just price your currency towards something valuable and stable right? Like gold or any other precious metal.

This, however, has one major flaw. It isn't future proof. It isn't technology proof. What happens to your backed-by-gold dollar once asteroid mining becomes a thing? What happens when you process an asteroid that makes the price of gold drop to zero? In a world of abundance and increasingly better technology, it will be harder and harder to find something to base your money off of. This is where cryptocurrency comes to shine. You can create a system that has a limited amount of coins in production, resulting in a monetary system that is technology-proof.

Nodes will be incentivized to verify blocks by being paid in transaction fees. These coins will be valuable because they are scarce, and because everyone agrees that they are valuable (just like current day money). Hence why we see it being called digital gold.

Planetary Cryptocurrencies

Different planets and different societies will likely want to implement their own cryptocurrencies. Each blockchain will be tweaked to their likening. Don't want 51% approval to implement an action? Maybe 60% consensus? Go ahead, any society can tweak the numbers as they see fit. There will be exchange rates for each of these societies, and for each of these planets. Want to travel to Mars but only have EarthCoin? No problem, once you arrive at the space station you can use UniSwap, pay a transaction fee, and then you can instantly be apart of the society.

Initially Unfair Coin Distributions Don't Matter

58% of bitcoin is owned by the top 0.001% of wallets. This might seem unfair at first, until you realize that the number of coins != voting power. Instead, Proof Of Work and Proof Of Stake keep the chain secured and a majority of accounts will still have to vote for the blockchain to change. If these HODLers decide to sell, then they benefit in the short term, but the chain itself isn't effected in the long run. If you want to swap your crypto for dollars, fine. But in a society that switches to crypto, those dollars are useless. Bitcoin does face this problem (Satoshi owns 5.2% of bitcoin), but a custom-made cryptocurrency can have a fair distribution from the start.

What about Rug-Pulls?

If the founders own an unfair distribution of the currency, then the system likely isn't well thought out and will not be lasting. Even if they do rug-pull, a good chain will survive. Eventually this rug-pulled money will be diffused back into the system. Possibly evenly split between their children, and their children, and their children. After a few generations the initial sum of money has been distributed throughout society. In addition, the descendants will be viewed as having gained that money unfairly, creating an incentive for others to not rug-pull.

This is why the idea of Satoshi Nakamoto was so important, a successful chain cannot have an owner. Memecoins and rug-pulls plague the community today, but not tomorrow. People will accept the fact that memecoins exist, and to not interact with them. Likely, our personal AIs will mark these as spam and scams. As humans, we often forget the long term, and successful blockchains will outlast us and be stable for generations.

Conclusion

Would these systems actually work? I have no idea, but a responsible way to test this out would be at a city level. This is a part of the beauty of this system, you can freely modify the government. Eventually, through super-intelligent AI or evolution, we will find a very robust cryptographic governance system. It will mitigate the pain points and amplify the benefits and create more benefits that are unthinkable at this time. Even if this doesn't end up working out, I found this perspective to be interesting and refreshing from all of the other nonsense going around in the space.