Principled Pragmatism
Balancing ideological commitment and pragmatism
Over the last two years, I’ve enjoyed getting to know crypto-natives around the world and have especially come to deeply respect and admire their ideological commitment to the decentralisation of human coordination.
Bitcoin Culture.
What others see as “toxicity” from bitcoiners, I’ve come to appreciate as ideological intransigence required to win. I’ve learnt over the years, especially after spending time in San Francisco (cultural melee is all too well recorded). Whatever side you’re on — if you give an inch, you’ll lose a mile. Bitcoiners understand this all too well. Whether holding the line on block size or monetary policy - the most intolerant minority wins.
Remember - Bitcoin plebs are standing up to the elites of 20th century society — economists, academicians, central bankers and NYT columnists. They’re fighting credentialed, unelected power with... memes. Unless they employ the strategy of complete and total frame rejection with the outgroup, they won’t win. This is why we’re deeply supportive of bitcoiners and their mission even if their ways are often criticised.
It is also more accurate to see them as peaceful revolutionaries than agnostic tech investors.
Ethereum.
Fast forward to 2021 — crypto has come to mean more than bitcoin. Not only are the institutions (ie., boomers) getting involved, it is becoming feasible for crypto natives to conduct all their financial affairs on a distributed settlement network like Ethereum.
Admirably, the Ethereum community adopts a friendly, inclusive embrace (almost as a reaction to bitcoin culture) to welcome everyone. Ethereum is everything from ultrasound money to an internet bond to a world computer for smart contract settlement.
Yet, this ambition to be inclusive and host every asset imaginable from loans to NFTs is puzzlingly met with debates on what constitutes L2 and what doesn’t.
If there’s room to be a computation layer for everything from a 0.1 cent transaction to a 1 billion dollar loan — shouldn’t there naturally be room for every layer 2 settlement solution from an excel spreadsheet to a zk-rollup?
Ultimately, what matters is choice, right? An attribute of decentralisation is the number of supra-L1 settlement layers. Some will get attacked, others will survive and the market is the sorting function on a long enough time scale.
As an outsider, I just think Polygon may have actually saved Ethereum’s 2021 run — especially as projects like Solana that allow for composability and unfragmented liquidity are taking off. Check out this performance report put together by Joel John. I’m reproducing a graph below.
In addition — Not-layer-2 Polygon is already pivoting to become the backbone infrastructure for developers to adopt any Layer 2 solution they see fit — including rollups. In crypto, whenever someone scoffs at something, I’ve learnt that it is worth a second look. The growth of Binance Smart Chain was met with eye-rolls from much of the OG crypto community but gasps of “finally!” from users.
What is the market telling us?
As someone who’s from neither category — what if the market is telling us something we don’t want to hear? I think the market is signalling demand for “open state and open execution” settlement layers. Its an indictment on TradFi — that people are willing to trust a bunch of nodes maintained by CZ over their local bank (also digit yields lol). I admire Kain from Synthetix after this episode, where he admits that Solana could actually pose an existential threat to Ethereum — and that the Ethereum community may need to prioritise shipping to Layer 2.
The memes and ideological purity are critical social infrastructure for bitcoin. But in Ethereum’s case I can’t help ask myself: what role does pragmatism play?
Open Source, Open State and Open Execution
Balaji makes a key observation. Open state and open execution databases are going to compete with opaque centralised exchanges and services, not bitcoin. Networks like Polygon are decentralised compared to the former, and centralised compared to the latter. That’s fine!
As Chris Dixon describes here, blockchains are akin to a city rather than an amusement park. A city is an organic, bottom-up assembly of people and culture that hosts anyone who wants to live there. In contrast, amusement parks are centrally planned structures with intricately designed environments. While an amusement park can pick what rides to launch, a city doesn’t pick its best restaurants are — the inhabitants do. Blockchain inhabitants are its users.
Polygon: Principled Pragmatism
Where does ideological purity end and user preference begin? If the marginal return on decentralisation reduces with more nodes — is that worth trading off for usability? What if decentralisation isn’t as important as we think it is?
As long as Polygon approaches these quuestions in a principled manner, making and communicating the trade-offs being made — they’ve discharged their duty toward the community. The markets and the test of time will price that product. Traditional tech investors like Marc Cuban seem to care about adoption. BTW I quite like this definition of L2s.
We’re cheering for Polygon as they make Ethereum usable.
In fact, we’d go a step further and suggest that they may have an opportunity to go multi-chain and help make chains like Solana EVM compatible. They both have the shared mission of taking crypto to billions of users with what we know today. Pragmatism is not charismatic but it makes the usage graphs go up into the right - ultimately, that’s what matters for decentralised financial infrastructure that billions of people need to use.
Figure A is an ideologue in a revolution.
Figure B is the same ideologue inside a tech company.
