The Prisoner’s Dilemma On Crack

Why I Learned to Love the Blockchain

When I first got involved in the blockchain space, I was surprised by how frequently people would end their “origin stories” by saying something like, “And I literally dropped everything I was doing, quit my job, and never looked back…”

That same thing happened to me.

In the summer of 2013, I became obsessed with Bitcoin. Not because I believed it would work–I didn’t. In fact, I knew it wouldn’t — I wanted to prove it was bullshit.

I spent the whole summer trying to prove its bullshittyness to myself. I couldn’t, and in January of the following year, after eight months of indecision, I bought my first few Bitcoins. Two months later, Mt. Gox crashed to the ground.

Vindicated! I knew I was right.

A year and a half later, I stumbled upon Ethereum. A programmable blockchain–better than Bitcoin? I dove in head first.

“Hello, Bossman sir? Yeah. I quit.” I’ve never looked back.

In this post, I hope to explain why.

What Excites Me Most About Ethereum?

The two most important things that excited me about Ethereum were its transparency and its permissionlessness.

Remember, I had spent an entire summer studying Bitcoin, and, back then, nearly everything you would read about blockchains mentioned that they solved the Prisoner’s Dilemma.

I won’t explain the Prisoner’s Dilemma, but I can summarize it thus:

1. Human beings know (at their core) that working together provides a more optimal solution than “going it alone.” I believe this is true evolutionarily. We’re safer in a group than we are roaming around the savanna alone. Those poor unfortunates who believed otherwise were all eaten by lions. Lesson one: The group dynamic produces the best outcome.
2. Not being stupid, each person in a group is also aware that if they are nearer the center of the group, they are safer. They are less likely to be eaten than the poor unfortunates at the edge of the group. In other words, we recognize the benefit of the group dynamic, and we also — at the very same time — recognize that we can better our own personal outcome by staying close to the center. This is just a fact of nature. Lesson two: The group dynamic is great. The group dynamic while taking personal advantage is better.
3. Not being stupid and having an imagination, we also quickly realize that if we can take advantage, so can others. An obvious corollary is that if we don’t take advantage, others will, and we will be worse off. Lesson three: The group dynamic is great. The group dynamic, if we take advantage, is better. The group dynamic, if we don’t take advantage but others do, is WAY worse.

The only logical conclusion from the above is that we should take advantage. As a direct result of this, the group dynamic dies.

That’s the Prisoner’s Dilemma. Bitcoin solved that.

Remember now, we’re roaming around on the open savanna. We’ve only just recently noticed that we can use sticks to stab things. And there be lions out there. We’re food.

At first, the smart people realized they could get the stupid people to stand near the edge of the circle. They welcomed the stupid people to the group. But these “human shields” were quickly gobbled up. And that left only people who were naturally taking advantage. In a group where everyone naturally takes advantage, the next logical step is to combine resources. You distract them with interesting conversation, I’ll get them to ignore how close to the edge they are. Groups within groups are better than no groups at all. Thus is born the need for “trust.”

“I promise you I won’t take advantage of you if you work together with me to take advantage of others.”

Every person living on Earth knows this in our genes. We’re the survivors. It’s so ingrained we don’t even think about it.

Why the Current System Sucks So Much

The current system sucks so much because can’t trust others. The group dynamic has died.

This is due to a god-zillion factors. (That’s ‘1’ with a Jesus amount of zeros after it.)

To me, the two most prominent factors are:

1. Our groups have gotten too large — we don’t know what anyone else is doing, and
2. those in whom we’ve placed our trust are taking advantage of their privileged (central) positions — remember — they survived the “Golden Days of Lion Feasting.” They’re at the center of the circle.

(It’s a rough draft, so kill me…)

Transparency

Blockchains solve the first of these two problems. Blockchains are transparent.

Notwithstanding the efforts of nearly everyone to “solve” the problem of transparency using things like zk-Bullshit and Layer twos run by teams of ten, transparency remains one of the main tenets of blockchains. It’s literally impossible to lie. (If we build things right.)

Bitcoin (and Ethereum by extension) is the first human-built system that allows us to purposefully engineer situations that cannot be taken advantage of. Nothing can be hidden. We can trust these systems because we don’t have to trust them. They can’t be faked.

Permissionlessness

The second main primary reason why our current systems suck is because some people are closer to the center than others. (Leaving us poor unfortunates to fend for ourselves on the edge). And once these people are in the center, they take advantage — killing the group dynamic.

The fact that anyone on Earth (with a computer — an admittedly inconvenient fact) can join these blockchain networks and have exactly as much access to the information as any other person is at the heart of why blockchains work. There is no center. No one can take advantage.

Blockchains solve the prisoner’s dilemma because one need not trust.

Why Did Digital Money Fail Before Bitcoin?

There were many attempts at making digital money throughout the 1990s and early 2000s. I wasn’t directly involved in those efforts, but I remember. We all thought, “Of course, money should be digital. Everything else is becoming so.”

But why did it take so long for digital money (i.e., Bitcoin) to work? I think the answer lies in Bitcoin’s permissionlessness.

We’re the smart ones. We’re the ones that did not get eaten by the lions. We can clearly see and easily imagine whenever other people have an advantage over us. This is how we stayed alive.

I remember discussions in the 1990s about digital money where people would say, “Why would I ever use that money/reward points/token?” They can simply re-write the database records without me being able to do anything about it.”

It’s not complicated. It’s just straight-up human nature to know these things.

What Excited Me Most About Ethereum

Bitcoin showed us we can solve the Prisoner’s Dilemma. Ethereum puts that idea on crack.

I’ll conclude my post with this cartoon I commissioned a few years ago. It says it all.

Conclusion

We can solve the Prisoner’s Dilemma if we stick to the central tenets of the blockchain space: transparency and permissionless access. These two things are core. These two things will allow us to recapture the group dynamic where we are able to realize the best outcomes for all. No one has to get eaten. We can slay the lions if we work together and they continue to insist that we are food. Unite! We are not food! We are not food!

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