Crypto is not an alternative to Capitalism

Blockchain is a technology, but for many, it’s also a promise of escaping the current financial system rigged by the ruling class and generational wealth. Cryptocurrencies can replace dreaded banks, and DAOs can supplant corporations. Once they do, everything will be good and fair.

On a fundamental level, you can think of DAOs as internet-native constitutions. Like regular constitutions, DAOs embed a fundamental set of rules and principles that establish an organization and determine its governance structure. But unlike regular constitutions, DAOs can execute some activities fully autonomously. For example, a DAO with its own internal capital can automatically buy and sell cryptocurrencies based on specific programmatic conditions.

One example of a fully decentralized institution is Uniswap:

Uniswap doesn’t actually exist in any technological (servers, accounts, log-ins, etc.) or legal (LLC, S-corp) form that we’re used to.* Rather, Uniswap is a decentralized protocol, and the governing body of that protocol is a decentralized autonomous organization (DAO) on the Ethereum blockchain

DAOs are appealing to the anarchists out there, looking for their perfect slice of non-capitalist utopia. But DAOs are built on top of the Ethereum network to execute smart contracts making it work. The more Ethereum you have, the more influence you can have over the organizations. They are literally running on money.

There are solutions to that inequality – for example, you can limit the number of voting rights a person can have or regulate smart contracts in a way to provide equity according to a more fair set of rules.

Proof of Stake

One valid criticism of Bitcoin and other cryptocurrencies is the significant environmental impact. New York Times explains that Bitcoin uses as much electricity as Finland or Washington State.

That is because the proof-of-work system is basically exchanging electricity to “mine” new Bitcoin or Ethereum. The brilliant minds behind Ethereum want to change that: Instead of working and burning electricity, they want you to just put up your existing Ethereum to mine a new one without using any energy.

In a proof-of-stake model, owners put up their tokens as collateral. In return, they get authority over the token in proportion to the amount they stake. Generally, these token stakers get additional ownership in the token over time via network fees, newly minted tokens or other such reward mechanisms.

US News

Proof of stake solves the problem of the environmental impact because it is using the more efficient system: You get more power according to how many resources you have.

That is the essence of Capitalism.

I don’t consider it a bad thing. Capitalism is very effective at solving problems of people who have capital and inefficiencies of alternatives are wildly documented. I grew up in communist Poland and still remember meat shortages.

Blockchain technology promised to reinvent everything from the first principles and it arrived at a conclusion that capitalism is the most efficient way to allocate resources. Anyone from communist Poland could tell you that.


  1. > and inefficiencies of alternatives are wildly documented. I grew up in communist Poland and still remember meat shortages.

    I have heard a bunch of people from the eastern block countries saying different things along the lines of this. I wonder how much of these experiences come from growing up during a worldwide recession but are blamed on the economic system back in the day.

    I mean, I’m not saying that growing up in a capitalist country in the 80s was the same than a communist one, of course. But I grew up in the very capitalistic 80’s Spain, and while I don’t remember ‘meat shortages’, I remember chicken being the ‘fancy food that we can only afford to eat every other sunday’. I remember my mom getting chocolate maybe once a month. I don’t doubt there wasn’t a chocolate shortage, it was just that my family couldn’t afford to have chocolate every time, just as something special from time to time. I remember how “going on a holiday” meant “setting up a tent in a camping site 100km away from home”, and how the first time I ever slept on a hotel or a rental apartment for holidays was in the late 90s. I remember going to school with shoes with a hole in the sole because that wasn’t ‘broken enough’ to justify buying new ones.

    And yeah, I was from a working class family, but we weren’t particularly poor. I would say we were, at least, at the same economic level of most of the people in my town. My grandparents, in contrast, were some of the ‘rich’ folks of the town (my grandpa was an accountant for the local mine, which was considered a fancy position). The difference with my family was that my grandparents usually could afford having chocolate and fancy stuff like Pepsi.

    So… even having the differences into account, I’m not sure how many of the usual ‘growing up in a communist country’ experiences have to do with “communism being inefficient” and how many of them were just “the 70s destroyed the world’s economy and the 80s everyone was poor everywhere”, but the US propaganda machine made everyone (us included, I was convinced that everyone in communist countries were in the brink of starvation and about to freeze in winter, while being shot by soldiers) convinced that everything was a-ok in the capitalist side while communism was just bad for everything

    1. Artur Piszek says:

      I have to say that the narrative has shifted and American cultural propaganda is now blaming capitalism for everything wrong with America, but I digress.

      The inefficiencies of Communism are by design, because Communism has just different objectives which it’s fulfilling fantastically:

      – Everybody has a job
      – There is no wild disparities between people (or at least, disparities are hidden well)

      I didn’t write anything in this post to praise capitalism, I am saving that for another one :D!
      But what I love about capitalism is that it creates a feedback loop and allows for improvment, where centrally-planned economy just cannot be as efficient.
      But as I said – different objectives.

      1. Yeah, but at the end of the day it’s all about the quality of life people can have under each system.

        Capitalism is EXCELLENT at providing a incredible quality of life to, maybe, 5 or 10% of society, while the rest is more or less at mercy of the economic tides. My impression is that the communism experience was similar, but replacing that 10% for maybe 1% and in exchange avoiding the very worse possibilities of capitalism (not having food or living in the streets being the most extreme, but even things like “not being able to have heating in the middle of winter”, which still are very common here nowadays). I guess my point is that on theory the differences are obvious, but in the day to day lives of people … Things weren’t as bad in the eastern block as most of us westerners thought, at least compared with our own lifes

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