This quote from a piece last week on hit me like a gutpunch:
"That money is gone forever, having been converted to carbon and released into the atmosphere — making cryptocurrencies even worse than traditional Ponzi schemes." (thanks Max for tweeting it 🙌 )
And it got me thinking a lot about how weird our sense of ‘value’ is when we talk about blockchain. Loads of people raving about the mega value these tools offer, while others focusing on the climate devastation and the naïveté are actually harmful. And how do we weigh up the balance sheet of values and harms when something that rarely even comes to fruition?
Let’s break the value creation process of blockchain into phases:
- the dopamine hit
- the exchange value phase
- the use value-outcome.
The first wave of value is the pure dopamine hit.
Blockchain enthusiasts get a mental thrill when they daydream about the elegance of possibility: ‘a new system can do x and y in a way that no other system that has come before can!’ The world is a tabula rasa. Web3 ideas are paintbrushes and paint. Obviously that’s not how it works. As Madeleine Elish says, systems aren’t ‘deployed’ but rather ‘integrated’ into existing systems. But that doesn’t matter. The hype engine is turning.
If you go to the next layer of value proposition it gets weirder still.
The second wave is the exchange value phase.
Exchange value is the ‘price’ someone is willing to pay for something. Once a blockchain system is actually built, it is primarily focused on adding exchange value. This means adding value for people who participate in a market and transact and position themselves as benefiting from increased margin and price in the trading of goods. (Hello NFTs!) They are laser-focussed on lowering transaction fees, and bypassing institutions with rules that slow or eat exchange value, and ballooning artificial prices with pump and dump schemes, FOMO, and good ole fashioned multi-level marketing.
The third wave is the one that never arrives. It is the use value phase.
Use value is the value someone gets from actually using a thing. What a concept. So at this point, we have a system which is amazing at generating exchange value, but what can I use it for?
Uh oh panic time! We can’t buy anything with it because it’s too volatile. It’s not actually opening up financial opportunity because it’s so speculative, high-risk, and technically complex that your average Joe isn’t benefitting. It starts to SLOW as more users engage and more transactions take place, and the computational power needed to process said transactions is accelerating climate change in fresh new ways.
So at this stage, exchange value actually undermines USE.
And the only use value is the negative effects on the world.
When we ask ‘what is the use of current blockchain projects’ the answers we get are vague (and actually more to do exchange value):
- Community. What is that? Sounds like it could have huge use value. But how would we measure that? And is the community just a multi-level marketing scheme? Not sure about you, but I've never made a friend while standing in line waiting to deposit a check at the bank.
- Decentralisation. How democratising! Oh but wait. Decentralisation — the idea that a system can run without centralised controls — isn’t really about ‘use value’ or the politics of control. In many cases it just makes it harder to use, and in turn even more controlled by those that can be bothered. And in many cases it’s even more centralised than what came before. Decentralisation feels more like a bait and switch that increases exchange value (or rent seeking from gatekeepers).
- FOMO. That creates a feeling of scarcity, which is purely used to drive exchange value. And I don’t know about you, but to me FOMO feels more like getting used than getting something useful. (okay maybe people don't say this is of use, but it does seem to be the main byproduct)
If blockchain has ridiculous exchange value (for some) and negative use value for all, how should we think about it as a system? And maybe more importantly, how should we think about it as a society?