Cryptocurrency Gives Digital Citizens the Power of Self-Governance

Crypto's value proposition is user control over money, data, and social connections. This is due to a rewrite of internet service architecture, moving away from the traditional client/server relationship and enabling individuals to "own" their side of the equation. This concept of "community ownership" has been explored by Nathan Schneider, who argues that the internet's problems arise from societal choices and that we can make better ones, collectively running companies or experimenting as entrepreneurs. Schneider advocates for blockchain's role in expanding democratic control online, citing its network design that doesn't rely on a single server and enables new forms of exploration in governance.

Cryptocurrency and the Empowerment of Digital Citizens

At its core, the allure of cryptocurrency lies in its fundamental proposition: it grants users unprecedented autonomy in managing their financial resources, personal data, and social connections. This transformative power stems from a paradigm shift in how internet services are architected. In contrast to the traditional client/server relationship that dominated the pre-blockchain era, individuals and communities now possess the ability to "own" their side of the equation.

Nathan Schneider, a media studies professor at the University of Colorado Boulder, has long been an advocate for the concept of "community ownership." As an active participant in the Occupy Wall Street protests that coincided with Bitcoin's introduction to the public in 2011, Schneider has witnessed firsthand the shortcomings of centralized governance models.

Throughout his career, Schneider has developed a compelling theory that many of the internet's most intractable problems are rooted in society's choices. By embracing decentralization and experimentation, we can fashion more effective solutions, whether it entails managing organizations like Twitter/X collectively or encouraging entrepreneurial innovation.

Schneider's latest book, "Governable Spaces: Democratic Design for Online Life," delves into the intricate relationship between blockchain technology and democratic control in the digital realm. While his previous works have explored political theory, "Governable Spaces" represents Schneider's most comprehensive analysis to date on how to translate the principles and practices of self-governance into the online environment.

"In other spheres of our existence, we overwhelmingly resolve issues through local self-governance: school boards, city councils, local clubs, and so on," Schneider explained in an interview with CoinDesk. "We recognize that one-size-fits-all solutions are ineffective, and top-down approaches will invariably alienate half of the population."

Blockchain's Role in Expanding Democratic Control

In Schneider's view, blockchain technology holds immense promise for expanding democratic control online. By eliminating reliance on centralized servers, blockchain creates a network design that empowers individuals and communities to govern their own spaces.

However, Schneider also acknowledges that current decentralized autonomous organizations (DAOs) fall short of ideal governance practices. "If I ask DAO builders today, the response is typically, 'no, we're still discovering the best approach'," Schneider said. "In some ways, this exposes the relative infancy of the challenge. We've always delegated governance to admins and moderators, and we're now painfully learning the complexities of self-governance. It's like reinventing the wheel within the context of DAOs."

Despite the challenges, Schneider is optimistic about the governance innovations emerging within the DAO ecosystem. "What excites me about DAOs is the creativity and experimentation with different voting mechanisms and identity representation methods that I believe the rest of the world needs to witness," he said.

Lessons from Real-World Democracy

While there is no universal solution to online governance, Schneider believes we can draw valuable lessons from real-world democratic institutions. A foundational step is establishing the necessary framework, which is currently underway.

"A few years ago, my team proposed 'modular politics' as a framework for designing online spaces," Schneider explained. "Just as we expect modularity in our computer applications, we can assemble different apps—plugins for WordPress websites or Discord bots—to govern online environments. Tools like Aragon demonstrate the practical implementation of this modular logic."

Alongside technical infrastructure, securing financial sustainability is crucial for protecting collective governance. Schneider emphasizes the need for financing mechanisms that are compatible with collective ownership and value preservation. "Venture capital offers can often lead to the re-centralization of DAOs," he said. "To safeguard collective governance, we must prioritize tools that support promising projects without compromising ownership."

Balancing Efficiency and Democratic Values

Given the crypto industry's focus on market solutions and efficiency, Schneider acknowledges the potential for conflicts with democratic governance. "We must determine efficiency for what purpose," he said. "Certain market solutions may not be effective for addressing broader societal needs. For instance, token-based voting disproportionately empowers token holders, undermining the goal of harnessing collective intelligence."

Schneider believes that financial mechanisms alone have limitations and highlights the importance of non-financial strategies, such as soulbound tokens. He also draws inspiration from initiatives like Decidim, a platform developed in Barcelona that empowers citizens to participate in municipal governance without financial incentives.

The Importance of Identity

In the context of online co-governance, Schneider recognizes the significance of identity, while acknowledging the limitations of relying solely on a single identity. "Identity is certainly important, but we shouldn't restrict ourselves to a solitary identity," he said. "We've traditionally relied heavily on nation-state identities, where every landmass belongs to a specific country. Networks, however, invite us to explore nonexclusive sovereignties, a concept eloquently articulated by indigenous scholar Glen Coulthard. This perspective empowers individuals to assume different forms of self-presentation in online spaces."

Schneider advocates for the development of proof-of-personhood mechanisms to ensure accountability, while recognizing the limitations of relying exclusively on nation-state identities.

Friction vs. Value

Schneider addresses the potential for online governance to impede the inherent value of the internet, namely the seamless navigation between websites without barriers. "It's a valid concern," Schneider said. "In fact, it's the topic of my first paper after completing the book with my collaborators at Metagov."

Schneider believes in striking a balance between participation and accessibility. "There are some spaces where I enjoy participating in governance, like my small Mastodon server community," he said. "Conversely, I rely on a credit union for financial services, which is complex and involves spreadsheets—I'm thankful that I'm not responsible for their governance. However, there are accountability mechanisms in place to ensure responsiveness to my needs."

Schneider suggests exploring novel governance forms tailored to the level of engagement with different communities and platforms. "In Europe, citizens' assemblies involve selecting a representative group of citizens who dedicate time to studying issues and devising proposals," he said. "This approach has proven successful in overcoming legislative gridlocks and could be applicable to online governance, enabling participation without overburdening individuals."

DAO Governance Challenges

Schneider has observed low participation in voting proposals within DAOs, which he believes signals a need for reassessment. "It's crucial to recognize that low voter turnout indicates a disconnect somewhere in the system," he said. "Instead of solely aiming for increased token-voting, we should focus on eliciting better information and ensuring that participants feel a sense of accountability while maintaining reasonable obligations."

Decentralized Social Media: A Personal Perspective

Schneider's involvement in running a Mastodon server has reignited his enthusiasm for social media. "I experience a genuine sense of community, not a corporation trying to extract something from me," he said. However, he acknowledges the underinvestment in decentralized social media platforms, particularly Mastodon, which has rejected venture capital.

Cooperative Economics and the Future of Crypto

Schneider believes that cooperative economics holds potential for transforming the online economy, but recognizes its complexity. He draws inspiration from cooperative models that have achieved success in sectors like agriculture and rural electrification. "We have the legacy of cooperative capital and financing, but we need to adapt it to the digital realm," he said.

Schneider is actively pursuing collaborations between advocates of cooperative economics and decentralized finance enthusiasts to explore synergies and foster the development of tools that enable democratic and sustainable online financing.

The Role of the Crypto Ecosystem in User Responsibility

Schneider emphasizes the importance of recognizing the regulatory implications of blockchain technology and the responsibility of the crypto ecosystem to safeguard users. "Every time we code, we engage in a form of regulation," he said. "We establish governance structures and create a kind of law. The question is, whose priorities are we addressing and to whom are we accountable?"

Schneider calls for increased accountability and user protection within the crypto industry. "We've witnessed numerous trust breakdowns and disasters like FTX," he said. "It's alarming how few resources are dedicated to addressing these problems. Investors deserve economic justice and protection."

Schneider advocates for fundamental reforms in fiscal policy, labor protections, and basic protections to address the needs of individuals participating in the crypto economy. He believes that acknowledging the inherent governance aspects of blockchain technology is the first step towards a more responsible and sustainable future for the industry.