Like a city, a crypto network is a community of loosely affiliated individuals who agree on a set of rules for how they live and work – laws for cities, protocols for crypto networks.
Unlike firms, cities and crypto networks are organized from the bottom up rather than the top down.
Individual leaders matter more for firms than cities. Who the CEO of a firm is plays a major role in an investment decision, whereas who the mayor of a city is plays little role in a person’s choice to move there. Many bitcoin investors can not name a single core developer, but that plays little role in the investment decision.
The growth of firms tends to slow down as they get larger, but the growth of cities tends to speed up even as the population increases because of network effects. The 18 million people already living in New York are “a feature, not a bug.”
The same is true of crypto networks; the larger and more robust the community, the more valuable the crypto network.
This analogy is important because the way you architect a successful city and the way you architect a successful firm are very different.
If we take the lessons of how to build successful firms and apply them to build crypto networks, it will end in failure. We must study not how successful firms are built, but how successful cities are built and apply those lessons to crypto networks.
Bitcoin is worse is better
In his essay Bitcoin-is-Worse-is-Better, early bitcoin researcher Gwern argues:
“Bitcoin’s long gestation and early opposition indicates it is an example of the ‘worse is better’ paradigm in which an ugly complex design with few attractive theoretical properties compared to purer competitors nevertheless successfully takes over.”
From a network design perspective, bitcoin is ugly and inelegant.
It’s ugly and inelegant because the network’s security depends solely on having more brute-force computing power than your opponents. It’s ugly and inelegant because the hash tree never stops growing.
And what’s with the arbitrary 21 million bitcoin limit? Couldn’t it have been a rounder number or a power of 2?
Lessons from Brasilia
In his book, Scott asked why so many utopian schemes had failed miserably in the twentieth century. One of the primary areas he studied was the construction of cities, and in particular he compared Paris with Brazil’s new capital, Brasilia, which was built from scratch in the 1950s.
The architects and city planners in charge of the project believed they could design Brasilia to be the perfect city.
Unlike working with an existing city where they felt encumbered by existing infrastructure, they had a completely blank slate without the baggage that encumbered existing cities like Paris.
If you look at a map of a major city like Paris, it looks, well, ugly and inelegant.
On a map, Brasilia has a look of beauty and elegance. Straight roads and geometric buildings are interspersed with equally geometric parks.
It is the pinnacle of what Scott calls “high modernism,” the desire to make a city aesthetically pleasing from the perspective of a central planner.
And yet, the neatly ordered plan in Brasilia vs. the messy evolved reality in Paris makes the lived experience of Brasilia feels soulless and empty while Paris feels vibrant and rich.
From a central planner perspective, Paris is a mess with apartments on top of stores and factories, while Brasilia is neatly ordered with separate residential and commercial areas.
Yet, which of these two cities would you rather live in? […]