Nihilism is Not the Answer. But Speculation Could Be.

Financial nihilism is ascendant. Social isolation, disaffection, and perceived economic exclusion have resulted in a rise in gambling. Crypto's global “trenches” — the celebrified conference tours complete with panels and photo ops — are saturated by shills marketing their tokens without even attempting a “pretense that any of this shit does anything or ever will.” This is symptomatic of a severe directional disease whose terminus is self-immolation. The vision of crypto is not to produce kleptocratic institutions. How do we cure ourselves and reignite optimism for securing individual economic liberty?

We don't claim to have the answer. But a first step, paradoxically, may be hidden in the nihilism we wish to extinguish. Like fire, speculative energy is not inherently destructive. Speculation is market activity that builds consensus on structured beliefs in the form of price. This energy can be focused towards questions consequential to our future. But first, we need more non-reflexive markets.

Cryptography Provides Evidence. Not Truth.

Cryptography captures a class of social technologies for verifiably demonstrating specific, well-defined properties about information and how it is communicated. Key exchange equips us with secure channels. Digital signatures and their exotic variants give us various forms of attestation. Basic encryption implicitly does the same, but in a privacy preserving manner. When fully homomorphic, it additionally unlocks arbitrary computation on the hidden information. And succinct arguments of knowledge are tools for efficient and powerful persuasion that we possess information to tractably witness the validity of arbitrary statements.

While the mathematics is deep, the details inaccessible, and the security proofs tedious, the fundamental way in which cryptography manages all of these diverse but mutually sympathetic tasks is by algorithmically generating and evaluating evidence. A group signature is evidence of attestation on behalf of an authority; a Merkle authentication path is evidence of membership for an element in a particular set; a range proof is evidence that a value lives in some interval, and so on. Increasingly expressive cryptography allows the production of evidence for increasingly complex claims.

Resilient social institutions are composed of processes that are secured by the production, delivery, and evaluation of high-quality evidence. At their best, peer review and justice systems are such institutions. To the extent that they break down, they do so because evidence is either improperly produced (e.g., experimental falsification), improperly obtained (e.g., “fruit of the poisoned tree”) or improperly evaluated (e.g., misinterpretation of data). Cryptographically generated evidence distributed via smart contracts suffers from none of these frailties.

To build persistent social institutions on-chain, crypto must enable its participants to efficiently coordinate eclectic forms of evidence.

Evidence Will Enable New Capital.

Markets function as positive-sum games for the coordination of capital, information, and action. Risk is an aggregate measure of how good the commitments (e.g., collateral or laws) are for all three that hedge against the expected losses of negative outcomes. But commitment quality has been historically difficult to determine.

Tokens, by construction, have verifiable properties that are inherited from the ledger on which they exist. Introducing enforced margin took these guarantees one step further by bounding worst case losses. Still, this is just the beginning. Cryptographic evidence can be used to indicate collateral quality, provide precise guarantees about information, or programmatically trigger fine-grained punishments for violating binding agreements.

Expanding the set of verifiable properties for tokens leads to more accurate pricing by reducing the cost of evaluating commitment quality. The result is not just increased capital efficiency but net-new capital formation.