You Shall Speculate, We Shall Coordinate: Interview with The Blockchain Socialist

Few people know the fun fact about Satoshi Nakamoto’s name, the mysterious collective behind the founding father of crypto. In his conversation with Craig Steven Wright, Andrew O’Hagan explains that Nakamoto was a eighteenth-century Japanese iconoclast who criticized all the beliefs of his time. As for Satoshi, ‘It means “ash”,’ he said. ‘The philosophy of Nakamoto is the neutral central path in trade. Our current system needs to be burned down and remade. That is what cryptocurrency does – it is the phoenix …’

‘So Satoshi is the ash from which the phoenix …’

‘Yes. And Ash is also the name of a silly Pokémon character. The guy with Pikachu.’ Wright smiled.

‘In Japan the name of Ash is Satoshi.’

In February 2024 the area around Venice was foggy and polluted. I therefore decided to escape it and investigate the state of the crypto world by going directly to the source of crypto-leftist activism. I joined Giulio Quarta from Crypto Commons Association at Joshua Dávila’s apartment in Alicante, Spain. I stayed there for a month, in a sort of unsolicited residency. It was a pleasant experience, because Josh – aka The Blockchain Socialist – is the closest thing that the left has to a crypto influencer: someone that pushes a certain narrative where it is mostly needed.

Josh knows the technical aspects of the blockchain, reads political theory, works hard and has witnessed the evolution of the cryptodream since the early days. Being also involved in implementing and experimenting in several projects – Breadchain is his favorite – he is the perfect candidate for explaining why the left should care about crypto. Josh has recently explained his view in an ambitious book entitled Blockchain Radicals: How Capitalism Ruined Crypto and How to Fix It, in which he tries to accomplish the impossible task of explaining the state of the blockchain to leftists and the left to blockchain people.

Half prophetic half troll, the crypto dream has fluctuated at the same rate of its financial speculations – which is something that made me dubious about it after a first phase of interest. However, by now we must acknowledge that the threat to the emerging crypto-structures are more quantum computers than nation states, and behind the hype there are real projects being built in several directions.

The next event organized by the Crypto Commons Association is the ReFi Unconference, which will take place in Barcelona from 20 to 25 April 2024.

 Gianmarco Cristofari: How did you get into the crypto world?

Joshua Dávila: I was broke when I got out of college and I needed a way to make some money. I had  recently graduated with a degree in neuroscience and was playing around with the idea of trading stocks in biotech. My thinking was that if I knew neuroscience well enough I could probably play the stock market. In these pharmaceutical companies, as soon as a drug is approved, there’s a huge spike and increase in the price of the stock. I now think it was a very silly and naive idea, and I was really bad at it. While  playing around I came across cryptocurrencies. I had heard of it in the context of Bitcoin and as being mainly used for buying drugs online (which I never really needed to do myself). But then I came across Ethereum. It had fairly recently been released at that point and it introduced smart contracts, which were very interesting to me.

At the same time, I was also going through a process of political radicalization. I was always on the left, but I became much more interested in radical politics, in reading political theory and in the meaning behind it. When I was living in New York I also got into a communist organization. I was seeing all these connections with what was going on in that space of crypto with left politics, but I also realized that there wasn’t really anybody kind of making those connections. Then eventually I got a job in Belgium, doing work with blockchain, but after a couple of years I became frustrated that there still wasn’t anyone out there talking about crypto from a left-wing point of view. Based on my experience of being in the crypto space, a lot of the left-wing analysis was not very good. So, I made the unfortunate decision one weekend to buy a website’s URL and just start blogging and posting online and then it’s grown since then. It’s become more of a podcast as well.

Reading your book, I liked how you report the impressive growth of blockchain applications. You mention three foundational metaphors of the crypto world: money, finance, and economic coordination. Why have you chosen these metaphors? Do you think that they are useful?

In the book I borrow the critique of representational thinking from Gilles Deleuze, which is basically saying that oftentimes we take models of the old and impose it on the new as a way to try and understand it. I think that is what happens in crypto constantly. People are creating metaphors to explain what this thing is, but also as a way to sell it. What I’ve seen is that the dominant metaphor has changed over time. It used to be really dominated with this idea of being a new monetary system. That was core to the creation of Bitcoin, its philosophy, its ideology and what’s baked into the code itself, as outlined in the white paper named “Peer to peer: digital system for peer-to-peer cash”.

But the advent of smart contracts and Ethereum really opened up a new space for what we can do with this technology. The narrative and the metaphor really changed; people started becoming more interested in complex financial products. More recently, people have thought about it in a more abstract sense that goes beyond the monetary or financial layer to become a medium or a substrate to help people coordinate over distance and time using the decentralized infrastructure that blockchains provide and smart contracts to automate a lot of interactions that people would have.

One thing that is always interesting but at the same time problematic is the drive to fully decentralize. We have seen this many times already, but especially with the early internet and the creation of protocols that could allow peer to peer generative interactions. But that was not really the case, and we have seen platformization spreading everywhere. In which sense can blockchain be used to decentralize? Can you bring some examples of projects that point in this direction? Moreover, is there the risk that this potential process of decentralization leads nowhere?

To this last question, yes, there’s always that risk. That’s always going to be something that could happen, and I think people actively try to do this in these types of systems. In terms of decentralizing the internet, like in these narratives of web one, two and three, I think it’s a very complex space to talk about because oftentimes people use the word centralization or decentralization loosely. If you look at this from a systems perspective, then of course you can say a system can be both decentralized and centralized at the same time, just at different levels.

It’s funny enough, like Vitalik Buterin  – Ethereum founder – made a Medium post back in the day where he talks about decentralization in the context of blockchains. He argued that blockchains are architecturally decentralized, which I agree with. He would say that they are politically decentralized because none necessarily owns the entire network. Oftentimes the NSA or whatever giant state agency can have an architecturally decentralized system because it’s more resilient and helpful, but it is obviously politically centralized because they own the entire thing. The third one was that blockchains are logically centralized because they follow a very specific protocol for their logic around how it handles data. And that’s how it’s able to achieve centralization in these other parts, because it has centralization in its logic.

I believe that there is a potential to make alternatives to dominant platform infrastructures, with a big tech company being in the center and then everyone else being around it. It is different from these walled garden metaphors because in the blockchain world everything is a protocol. Because of its logical centralization, it allows for a clear stepping point for anyone to enter and engage with the logic of that data because it’s centralized. In that way, you see these NFT platforms – places where you can buy and sell NFTs like OpenSea, Foundation or whatever else – where you are engaging just like any other application except you’re using crypto.

Interestingly, what happened a couple of years ago was that in the Tezos blockchain ecosystem there was a project called Hic et Nunc. It was very popular for a lot of artists because it offered cheap transaction fees and because Tezos focused a lot of their marketing around getting a lot of artists onto. At one point this platform went very viral very fast, but the guy who created it was like a hobbyist and he wasn’t necessarily looking to make a big startup. He burnt out and he shut everything down. There was a point where everyone started freaking out, all the artists started saying: did I lose my art?

It is something that has happened before on the internet: if a platform dies, then all of your content is lost because it was owned centrally in the company servers. In this case, because they were using a blockchain to host all of that data and information, then none of the artists actually lost their art, and there were a lot of people building new front ends to display the art that was previously hosted on the platform Hic and Nunc. Because it used the protocol for NFT standards and used it on the Tezos blockchain, there was no loss for any of the artists per se. Of course, you can argue about how that art is displayed and how it gets curated. But now there is a separation between front and back end in a way that wasn’t really existing so much before, where now we essentially have a shared back end – which is the blockchain – and anybody can create a front end on top of it to display the information however they want, for whatever their purposes are. This also gets into the interesting question of data, which has become very important. But it’s not only just the existence of data, but also how that data is displayed and analyzed and processed that can determine outcomes.

So, this ‘protocolization versus platformization’ perhaps allows for new affordances and new features, but of course it doesn’t solve all of our problems. I think we need to find a space where we can find certain things interesting or see it as potentially positive, while also acknowledging that we’re not techno solutionists, and it’s not going to solve every single problem. Someone has to decide how to curate all this information that’s being produced, but at least the raw form of that data in many ways, if it’s on a blockchain, is available to anyone.

Since you’re very good at explaining the blockchain to non-blockchain people, let’s take a step back. What do you think are the most relevant changes of the last years in the crypto world? For example, when I was looking into it in 2018, it was not possible to use a blockchain as layer one and then build a series of services and governance structures on it..

One is Ethereum’s move to proof of stake (PoS), which is a new consensus mechanism. Before a big criticism, which is still relevant for Bitcoin, is like the energy use. Ethereum, shifted from proof of work (PoW) to PoS consensus mechanism, which means that its energy use decreased by 99%. This is something that even the biggest haters of Ethereum have acknowledged, and they did it as the whole thing was running, which is technically a huge achievement. If you think about it is like changing out the parts of an airplane while it’s flying.So drastically reducing the energy consumption is a first novelty.

A second one is the increased scalability of the Ethereum ecosystem as a whole. You used the term ‘Layer 1’, which is the root blockchain, that in this case would be Ethereum. It is the blockchain that people think of as the most secure and the most decentralized infrastructure where you want the highest value.Now you have this proliferation of ‘Layer 2s’, which are blockchains that borrow from the security of Ethereum. It’s basically a separate blockchain where they post a hash of the data of transactions happening on their blockchain onto Ethereum. It’s called a roll up: all of the transactions that are happening, you’re rolling up into one transaction that you’re putting on the Ethereum blockchain. Let’s say that if they do it every block, and every block is a hundred transactions, then they’re doing one hundredth of the fee of one transaction on the Ethereum main net.

Another aspect is that now it is a lot cheaper to do a lot of actions on a blockchain. There has been the creation of different sub-ecosystems in each of these Layer 2 blockchains, they have their own kind of marketing and things that they’re specifically trying to push for the use of applications in their blockchain. Some are more focused on arts, some are more focused on decentralized finance (DeFi) and financial products. There are a lot of things happening at the same time. One of the difficulties with this space is that it’s information overload. Trying to keep up with the entire space is extremely difficult. And sometimes it’s hard to distinguish things that are still in the research phase, whether it’s going to actually be adopted at a larger scale or not.

I’ve discovered a bunch of terms like DeFi, ReFi, and CoFi, which seem to be not only about financial speculation, but as a way of borrowing money while having a positive impact in terms of what economists would call ‘externalities’. What do you think about those kinds of innovative forms of finance?

I think there’s a way to look at it very pessimistically and a way to look at it optimistically. For example, regenerative finance (ReFi) it’s generally more focused on finance as climate activism. It is not per se a new thing, but it is fairly new to the crypto world. It first started off really as: let’s tokenize carbon credits. They want to make carbon credit markets available to more people rather than just to corporations and their corporate responsibility, and then try to make it more of a market in order for people to drive up the prices of carbon and to make it profitable to do good. There is a certain amount of neoliberal ideology embedded in some of this that needs to be questioned, but there it has at least brought in a lot of people who are well meaning.

Since then, they are moving on to trying to do different things besides that. Some people who were involved in the beginning, realized it’s a little bit of a farce and they need to move on to other things that have been more interesting experimentations. Things that are perhaps more localized and looking at the difficulties with climate finance, which in many ways do come from regulation and basically using the technology to get around that. States are not really doing nearly enough to fight climate disaster, and so I can sympathize with the position that we need to do something now whether the law or regulations agree with that being done. If you can do it through technological means, why not just go for it?

Then there is CoFi, collaborative finance, which is taking a very different approach as far as thinking about credit. It is a very interesting development of taking the ability for credit clearing – which banks do amongst each other all the time – and trying to bring that into small businesses or even at the individual level. Credit clearing allows you to do more with less capital. If we’re looking at this from the perspective of a post-capitalist or a socialist, in order to enact our politics, we need to find ways to coordinate and allocate resources that don’t require capital. Being able to do credit clearing amongst ourselves allows us to not have to rely on needing injections of liquidity and large amounts of capital to be present for us to do the work that we want to do.

I think the work you’re doing – pushing a certain narrative in a world which is typically dominated by other political beliefs – is very important. But do you really think that the blockchain has some immanent potential to trigger radical changes? Can it be embedded at large scale and change institutional arrangements?

Blockchains are already a public infrastructure in some way. I mean public but without a state. It’s in this weird zone, it’s public but also commodified. To me, what blockchains bring is not how to make money. Of course, you see some states exhibiting interest in it, El Salvador is one, but then as well with central bank digital currencies. But I think where it’s most interesting is in the sector of society that doesn’t fit within the private or the public sector. People will call it like the civil sector or the autonomous sector, cooperatives, labor unions, churches, community gardens. Things that don’t have logic of profit built in neither the logic of the state. The reason is that the kind of resilience of the technology, it provides a new affordance of being able to create what some of my friends from BlockchainGov call ‘scaffolding for new institutions’.

In many ways, we can create and scale organizations that are more democratic and more solidaristic. The technology can be used for organizations that are not focused on profits. There are plenty of examples of those. The main example to look at is just WikiLeaks and SciHub. For me, if you are an anti-capitalist  and you want to create a new system, you want to fight capitalist institutions. The first thing that they’re going to do is shut off access to your bank account. That’s the easiest switch they can turn on and off if you are actually a threat. Just having some sort of contingency plan and having some cryptocurrency that can help you get around economic or financial sanctions is something powerful.

There are certain associations that are trying to push this narrative of like the blockchain as a common. Would you agree with that?

There’s a lot of contradictions in it. The thing is with the commons, there are resources and then there is the governance. In order to be a common it has to be a scarce but publicly available resource. But it also has to be governed like a commons. In the blockchain space, there are a lot of common goods, like the ability to create digital uniqueness – which is actually a very difficult thing to do in digital systems – but as a way to solve the double spend problem.

Computers are very good at copying things, but if I were to write an email, you would get a copy of your email and then there would be two emails. For a digital dollar it doesn’t make a lot of sense to have two copies of it. Whereas if I was like sending you mail, then I would not have the mail when I send it. And then you have mail where there is only one mail. The double spend problem was solved in some ways through Bitcoin and PoW. Now there is this kind of scarcity to digital things within this context on purpose and is enforced through digital means. But at the same time, there is this kind of contradiction of being publicly available on a digital system, which is 99% a giant copying machine. There’s a giant amount of abundance. It’s in this weird spot in the middle, which makes it a good candidate for commons, but it is still highly commoditized because essentially the commodity that blockchains provide is block space. The business of blockchains is block space, and everybody wants to purchase block space in order to put stuff on it, to make transactions, etcetera.

If you look at the example of NFTs I gave before, there was this argument between people when this hype was happening between the ‘hype men’ and the ‘gatekeepers’. The hype men are saying: “Oh, look at my monkey. This is a wonderful monkey. Don’t copy my monkey”. And then the gatekeepers will say: “Haha, I right click saved your monkey. It’s my monkey now”. And the other guy would be like: “Oh, no, I’m going to sue you”. The hype men thinking that they stole the private property of the guy who owned the picture of the monkey. However, this whole framework of the discussion was so ridiculous. They were just like two people not understanding the thing that they were arguing about. It was like a very stupid discussion to be having, because buying the NFT of the picture of the monkey does not prevent people from consuming the picture of the monkey. Just like any other piece of art, right? In the blockchain space, there is this in-between space where we’ve created unique digital things, but now we have to figure out what is the point of these digital things, and how are we governing around them.

In this case it sounds like a different way of proving someone’s property of things which is not based on a contract registered by a public official as a notary. But I know you are very active on a project which is called Breadchain. Can you tell us what it is and why do you like it?

The Breadchain Cooperative is a project that I co-founded with people that spun out of the crypto leftists online community that I started. Essentially it was an attempt to try to answer the question of how the left responds to the crypto space. We were against completely rejecting crypto and just ignoring it, but instead we wanted to find something productive. In the future, perhaps the left will become more and more interested or find usefulness in technology. There needs to be an infrastructure there for these people to plug into, because if everybody starts their own little left-wing project separately in different places, all alone, then none of them will be able to come.

A platform…

Yeah, there’s a need for some types of platform politics. It’s basically a federation of projects that are all working at least tangentially in the crypto space from a left-wing point of view. We use the term post-capitalist just because we find it to be a bit more inviting for people who are turned off by the word socialist. It’s an aligned group of projects, a federation, and one of the ways that we’re trying to build it out and bootstrap our workings is through our first application called the Bread Crowdstaking application. You can think of it as a mix of a local currency scheme and a credit union for the left.

The user would give a U.S. dollar stablecoin called DAI, and then we would take the DAI with our smart contract and earn interest on it. That interest would be generated to fund the cooperative. As a user, when you give DAI, you receive the BREAD token, which is a standard cryptocurrency token that you can spend and receive however you want. At any point, you can burn your BREAD, or you can return it to the contract and receive back your DAI, so you’re not making any kind of donation or anything like that. You’re just giving us the access to the yield being generated by your original token, and then that’s being used to fund the project. Moreover, as someone who gives DAI and takes part in this application, you are able to vote on how this interest is distributed amongst the different projects in the Federation.

I think this is interesting because large platforms are infrastructures for producing values between groups, and they take a large share of this value. Instead with these models you  both have a potential for participatory governance and a way to redistribute the value that is extracted.

For sure. It’s that we can choose to govern our resources more democratically at scale. We don’t have to come all together in the community hall, raise our hands to vote and do everything by paper. We can do this all on our phones, through the internet. It’s a way to make democracy more normalized, with the caveat that, at the moment, a lot of things in the crypto world are not done democratically. But it’s because they don’t choose those types of mechanisms to be implemented in their systems. There is a lot of libertarian ideology, a lot of people who believe that the free market will somehow magically produce the best outcomes. But that is often not the case. But with the same tools that you can build extreme free markets economic systems, you can also build post-capitalist economic democracy.

Maybe you can delve a little bit more into the governance aspect. Can you design a decentralized blockchain ecosystem so that with tokens you are allowed to vote and to take decisions?

A lot of the big DeFi projects do that. You get a governance token that allows you to decide, for example, which token pairs for their decentralized exchange get extra rewards for the next month. But then you also have decentralized autonomous organizations (DAOs) that also have their own governance token where the more you own, the more voting power you have. But then there’s also ones that are like one person, one vote, which just requires a lot more coordination to enforce that. Then there are delegated votes, so the Ethereum Naming Service (ENS) is a big project that does delegation where most people delegate their votes to someone else in the community who is keeping up with all the governance proposals. There is a big interest in liquid democracy in the crypto world where you can allocate your vote to someone else and then if you don’t like them anymore, you can change it to somebody else at any time.

To me it is mostly a good thing that there’s this kind of awareness that you must design the ecosystem from a political point of view and to discuss the governance structures inside the blockchain. At the same time, I see it as basically an acknowledgement that the initial dreams of Satoshi Nakamoto – decentralization, rendering banks useless, avoiding intermediation and using mathematics to produce trust – are no more. Once you acknowledge that ‘code is not law’, that you still need a huge amount of human political action to do stuff, what is left of the libertarian blockchain dream?

What I’ve noticed in my time is that there’s been some ways of maturing of the blockchain space where there was this naive thinking about being able to engineer the perfect governance system or the perfect economic system. A lot of that has been reduced and people are acknowledging the politics of it – but not at a rate that I think is fast enough, of course. There are still plenty of holes to fill. At the same time, in this context, mathematics and software are directly political, right? The mathematics that is used within the blockchain – whatever blockchain system you’re referring to – is going to have political effects. Just like the mathematics behind the Federal Reserve has huge political effects. What I’ve noticed is that when people who thought that blockchain has solved the problem go into a DAO they realized that it is much more hard and difficult to do. Then a lot of them become interested in cooperatives and they find out that there’s this whole other space of activity where people have been having very similar issues in which they have already been working on for hundreds of years at this moment. There’s a little bit of a pipeline between libertarians to cooperativists.

In the book you use the example of using the blockchain for enforcing housing rights. Can you tell us something about that?

That was a speculative use case that I thought of. I wrote this blog article during the start of the pandemic where people couldn’t go to work and so they were all afraid that they were going to be evicted. In the beginning, it wasn’t clear whether they were going to put a pause on evictions and such. I wanted to use it as an opportunity to showcase that the way that we allocate our housing resources is purely through private markets. Now, people lacking housing and being evicted from their homes is directly a consequence of that. I wanted to speculate on how we could instead think about using blockchains as a way to not feed further into the black hole of markets. I created this example of a housing-for-all token.

Let’s say we live in a socialist utopia called Mushroom Kingdom, where you have Mario and Luigi as two citizens. Every citizen in Mushroom Kingdom gets the right to a house, and that it is represented through a housing token on a blockchain. They can spend the token on one house, and they will receive it back whenever they leave that house. But what we can do as well is embed these tokens with information about the person who owns it, which can then help us inform perhaps what kinds of housing that person is eligible for.

Right now, if you are very rich, you can buy a very big house with very many rooms and own it yourself and you have nobody else to fill in the rest of the rooms. This is a very inefficient system of how we allocate our housing stock. But if we had a system where, for example, Mario is a single dad and Luigi is just a single guy. Perhaps Mario in his housing token embeds that he has a child and therefore is eligible to housing with at least two rooms. Maybe they’re also eligible for a larger backyard, so the kid has space to play, whereas Luigi, doesn’t really need so much space, and so he is eligible instead for a studio apartment or one bedroom apartment. To me it seemed like something that would be a much more reasonable way to allocate our resources using a decentralized infrastructure like a blockchain that doesn’t require a centralized state per se.

On that note I know you also are very critical of someone who really doesn’t like centralized states, and instead he wants a ‘network state’ to be built – a term which, by the way, has a much longer history.

The network state is an idea that was proposed by Balaji Srinivasan, who is a very popular venture capitalist in the crypto world. He made a lot of his money in the beginning from a genomics company that he sold for something like 300 million. Then he started a couple of Bitcoin startups that were bought by Coinbase, he was CTO of Coinbase for a while, and then he was a general partner at Andreessen Horowitz, the largest venture capital firm in the world. Andreessen Horowitz has invested millions and millions of dollars in the crypto world.

He proposed the network idea, which I would describe it as: imagine the state but run like a startup. He has been very consistent since at least 2013 about his distaste for regulation and his desire for a technologized form of government particularly run by Silicon Valley. In 2013, he had a presentation called “Silicon Valley’s Ultimate Exit” which he gave at Y Combinator, where he proposed basically the need for Silicon Valley to leave the United States. He was saying that they needed to have their own free market driven society and that it would be much more efficient and better, and they should fork from the government. I think this idea for him has probably just been festering in his brain for a while until he finally came out with the book from 2022, where he came up with a proposal on how to do it and half a manifesto of why communism is bad and why the state is bad. It’s pretty run of the mill, libertarian garbage – to be completely honest. It was a very difficult read for me to get through. It is essentially a remix or rehash of like seasteading of libertarian colonies on Mars or on the moon. I don’t know if you’ve ever played the game Bioshock, but it sounds like that. You can do whatever you want, it’s all a free association.

It reminds me also of another piece that came out recently, which is the techno optimist manifesto. It seems that they really haven’t learned anything from history. I think it is connected to the aesthetical categories of the crypto world. Are you Lunarpunk or Solarpunk?

I mean, I generally try to stay away from these kinds of things…I just think they can be a distraction. In some ways, they’re nice to help people identify themselves within an ecosystem. But I also worry that they can be largely cathartic exercises for people feeling like they’re doing politics and making change in the world in some way. I don’t know…I’m a socialist. That’s my main thing. I think what a lot of these punk aesthetics are alluding to is essentially everyone’s desire for something new, for something different than what is the status quo today. That’s what’s most important: that there’s a lot of people in the world who don’t like how the world is being run today and they would like something different.

Maybe they don’t have it all correct as far as their analysis of the material conditions or whatever. But they at least are ‘radical’ in that they are different and want something different than what is going on today. I think that’s permeated throughout societies in many countries, which is why you see the rise of populisms and whatever else. Solarpunks are more interested in trying to create a greener future, while lunarpunks are more interested in privacy oriented security, like protection from the surveillance states and for some surveillance capitalism as well.

If I don’t know about crypto but I’m interested, where do I start from?

One, read the book! I give that recommendation actually seriously as a way to get up to date with the current state of things. The additional thing is taking part in the space. I have a couple of online communities crypto leftists subreddit and discord that people can join.They can find a community of people who are also thinking similarly. We have weekly community calls. We have a lot of content that’s available for people to, if they want to learn more deeply about things.

On top of that, the honest truth is that if you want to take part in it and really understand it you have to own a little bit of cryptocurrency and use it for something. I’m not saying this to pump my bags or whatever else, but I think that in reality, if you really want to understand something, you have to use it. And there are ways to do that without, like, spending a bunch of money. With ten dollars you can buy a little bit of cryptocurrency and just play around with it and see how it works. I would definitely recommend taking part in that.