Blockchains are internet-native governments. They replace
- government forms with websites
- hand-written signatures with digital signatures
- government-id with cryptographic ID
- paper-money with internet money
- the postal service with instant messaging
- laws with code
- ballots with liquid tokens
Mainstream narratives counter that it is just a casino, a scam, a tool for money laundering, a convenient way to buy drugs, etc. All of these are true, but they overlook the most important point: blockchains are sovereign states. The most important megapolitical shift of the 21st century will be the adoption of blockchains by nation states, and the transformation of blockchains into states themselves.
The Boomer-Gov vs the Zoomer-Gov
The boomer governments (nation states) and the zoomer governments (blockchains) have many analogous pieces:
Validators are Judges
Everyday law is executed by judges (and juries sometimes) where fuzzy human langauge is transformed into deterministic judgements. The lack of clarity in human langauge is source of endless complexity, costs, debating, study, philosophizing, etc. which really doesn't need to be there in the first place. In the zoomer-gov, these "judges" are called validators or miners, and their job is literally deterministic: they execute code. There is no ambiguity, there is only one way the code should execute, and so they do. If you somehow fuck up (maliciously or accidentally) and get the wrong result, the government will burn your house down (we call this "slashing"). Because of this strong penalty, validators are the ideal executors of the law.
The Constitution is the Virtual Machine
Not only do chains have judges and courts to execute the law, but they can change the law itself. The boomer-gov would call these "constitutional amendments" - while the zoomer govs call these "hard forks". They can change everything from inflation or economic policies, siezing/freezing funds, speeding-up (or slowing down) certain procedures, change the costs for the entire system, literally anything you can imagine. When the boomer-gov "hard forks," it usually involves lots of violence, civil war, assassinations, asset siezure, revolutions, etc. Sometimes everyone just agrees that the system is broken and agrees to fix it non-violently (though this is exceptional). I'm not aware of any blockchain hardfork that resulted in death or civil war.
Corporations are DAOs
On top of this constitution + legal framework, blockchains let you permissionlessly launch corporations (sometimes called DAOs). A DAO cannot do anything that goes against the core rules of the sovereign, much like how a corporation ultimately respects the legal system it incorporates within. In addition to respecting the sovereign, they can pass their own bylaws and the judges (validators) will enforce them at every step. These DAOs can take many forms, most commonly just a partnership (multisig) or a joint-stock corporation (DAO).
What are the limits of on-chain government?
A decent rule of thumb is that any government service that is purely paper or finance (drivers licenses, birth certificates, healthcare records, passports, permitting, financial contracts, banking, ...) should be onchain. There are a lot of parts of our society that are extremely "offchain" like police, military, utilities, fire departments, etc. While it's easy to imagine how these could be onchain, it's hard to imagine why that would be better or why an onchain military would defeat an offchain one. What is clear is that any paper-bureaucracy can be replaced with a set of smart contracts with no tradeoffs.
I encourage people in crypto to zoom out and think about exactly what we are building: an sovereign digital legal system. If we look out beyond the gambling, drugs, and e-prosties, etc. and look forward to the 22nd century, we'll see that blockchains are much more than just vehicles for degeneracy and crime: they are the next evolution of society and government itself.