Crypto Is A Bet On Humanity's Ceaseless Desire For Progress
Introduction
Betting on crypto has essentially become representative of a bet that humanity will continue to seek acceleration in our processes. That seems like an easy bet.
The reason the time is now is precisely due to the birth of meaningful artificial intelligence, which finally gives us the tools to drastically change the shape of how we interact with crypto.
This article lays out why crypto is going to be an increasingly strategically important asset class.
Bottlenecked By Due Diligence
Humans have sought acceleration since the dawn of time. We measure success as a function of efficiency and have constantly reduced friction in all that we do. Where it used to take weeks to wire money over distances, it now takes seconds to do the same.
Today, most human processes are no longer bottlenecked by technology, but instead by the need for verification. Jobs, opening bank accounts, and raising funds take weeks not because the technology to complete those processes quickly does not exist, but because there is a need for humans to pay the cost of verification.
In the case of an employment process, the employer needs to verify that you are not a lemon. It’s not that you have never been hired before, but it’s still worth doing independent verification because your previous employers will not take responsibility if you turn out to be a poor hire. Further, there is an argument that the best employees stay employed. Lastly, different environments and job scopes also imply that past performance may not be indicative of future performance.
So, employers pay the cost of due diligence by way of several rounds of interviews and take-home assignments. This process takes time and human effort — it is messy, unstructured, and non-deterministic; and also why hiring processes are as much a function of luck (did your interviewer have a good morning before meeting you? Or did they just have a massive argument with their spouse?) as a function of skill.
It is fairly trivial to reason that all costs in such processes are costs of verification.
The actual act of officiating employment is quick and relatively painless — an email and a digital signature. This means that in theory, suppose there was a magic scoring box that could output the absolute scores of a candidate employee across every dimension you could possibly care about, and you trusted this score with a high degree of confidence. Then, in theory, the time taken to hire someone would be reduced to the algorithmic time of filtering and sorting for the scores you care about, then sending over an employment contract and having them sign it.
Forming A Trust Daisy Chain
The reason you are able to hire someone near-instantly with the addition of a magic scoring box is because you have delegated the responsibility of verification to it, and you have learned to trust it.
In practice, this happens all the time.
Potential employers within the same industry borrow the due diligence of past employers — your resume is less likely to be binned if you have been to top-tier institutions and have done difficult things before.
Whenever possible, humans pass on the cost of verification to a higher entity and trust that it has acted in their interest and done the prerequisite verification. For example, for the vast super-majority of humans, in place of conducting lengthy, detailed, and expensive due diligence on a bank before opening an account, we simply trust that the government’s banking oversight arm has done its job.
If we trust the government sufficiently and their ability to uphold the law, then we can take their word that the bank is solvent and safe for the conduct of our financial affairs.
This “trust daisy chain” happens everywhere, all the time, in things big and small. A start-up has no brand equity and therefore commands no inherent trust, but a large, reputable, and successful VC can lend the start-up brand equity by simply investing in it. The public, though unfamiliar with the start-up, trusts it if they trust the VC, since they are delegating the responsibility of verification to the VC’s due diligence process.
The Problem With Crypto
Crypto has traditionally offered no “higher entity” to which we can pass on the cost of verification. Having no higher entity to arbitrate honest mistakes — like swapping $50M USDC for $5K worth of tokens, or even sending it to the wrong address — implies that the cost of verification falls squarely on the user.
This is genuinely difficult, because smart contracts are not designed to be parsed by humans in under a second. This is essentially why most of crypto has remained relatively niche. Where there has been large adoption of crypto products by the retail masses, it has mostly come in the form of large, centralized institutions abstracting away the complexity of smart contracts (e.g. Binance and Coinbase).
These retail users may not understand how Aave smart contracts work, but they have learned to trust Binance, and therefore Binance can build a business out of abstracting the complexities of the smart contract from the user and wrapping it in a simple interface.
This means that technically light users really only have two options when it comes to crypto: wait for a centralized entity like Binance to offer an abstracted version with some fees, or interact directly with the protocols and risk catastrophe from doing so.
Despite crypto’s relative maturity, it is still extremely high-friction to work with, and it is still fundamentally scary to approve transactions — mostly because you know that if you mess up, there is no recourse. So you diligently verify, but it is not trivial to read and parse through every transaction you do on-chain, let alone deeply understand the smart contracts you are interacting with.
For those who understand software and its infinite composability, the allure of crypto has always been an ecosystem of modular components that could interact with each other in a trustless manner upheld by algorithmic law. The headwind faced on the way to that potential utopia is that bad actors and poorly designed edge cases necessitate humans paying the cost and friction of verifying each modular component.
Why This Time It’s Different
The rise of meaningful artificial intelligence allows us, for the first time, to delegate the responsibility of verification to a higher entity. This drastically changes our mode of interaction with smart contracts. We will no longer need to personally verify the design and behavior of smart contracts, or even necessarily understand the details of our transactions.
Instead, we learn to trust a single entity — our agents. This is already showing great promise, as agents already demonstrate considerable expertise in understanding and reasoning about code. They can tirelessly parse and check transactions and understand the algorithmic law that each smart contract upholds within seconds.
This implies that for the first time, through our agents, we can realize the potential of crypto. Need to interact with nine smart contracts in one atomic transaction to get what you want most efficiently? Have your agent verify that the transaction achieves the outcome you want and that no foul play is involved. Done.
With each successive generation of agents, they will only get better at this.
Implications Of Algorithmic Verification
If we can resolve the problem of needing to verify smart contracts and the transactions that arise from them, then we move toward the utopia of having all kinds of interactions available to us while remaining permissionless, trustless, and upheld by algorithmic law. If the cost of verifying a smart contract goes to zero, then we gain the benefits of all the verification and guarantees the smart contract brings for free.
The major consequence of this is that all processes that stay within the confines of this paradigm now move at the speed of compute. For a civilization determined to move faster, remove friction from processes, and become more efficient, it is hard to imagine us straying from this paradigm.
It only makes sense that more and more goods and services will have smart contract interfaces that determine exactly what you are going to get and what you will need to exchange in order to get it. It is also a paradigm that compounds on itself — every successful product would create a composable piece that can play into another product later on. For example, suppose a decentralized exchange created a reputation system for trading proficiency. People looking to hire traders using a trustless employment protocol might filter based on the unrelated decentralized exchange’s reputation contract. A lending protocol might use that as one dimension of credit scoring.
Such a paradigm would not only be extremely efficient — all processes and transactions moving at the speed of compute — but boundless, growing more powerful and unlocking more possibilities as a function of participation and time. It is a positively compounding paradigm.
Conclusion
Hence, if you believe that humans are going to continue moving in the direction of least resistance and seeking out solutions that allow us to move faster, be more efficient, and do more, it seems the time for crypto is now.