Centralization Strikes Again - October edition
“A good policy looks at the world and adapts to it in order to correct what is wrong and to enable what is good. I’m convinced that when you enable the most powerful industrial actors to decide what policy should be, you don’t go that way.” - Jérémie Zimmermann
Hate it when the red banner on Substack pops up with the “near email length limit” warning. One, because I have to be selective with the most indicting news bulletins. Two, because the centralization failures just don’t stop-a-comin’. Feed me more #CSA on Twitter pls. - Tim
Timeline
Oct 2 - Coinbase experiences major outages with US bank accounts, limiting customers from conducting transactions. Source Source2
Oct 2 - User reports show centralized crypto exchange (CEX) FTX imposing jurisdictional restrictions on its Brazilian elections prediction market. Source
Oct 3 - Reports reveal founder of defunct (and centralized) Crypto-lending platform Celsius withdrew $10mn in funds weeks ahead of the company freezing user withdrawals and declaring bankruptcy. Source
Oct 3 - UK property funds led by BlackRock, Shroders, and Columbia impose restrictions on redemption requests from institutional real estate funds. Source
Oct 4 - In a long running gag to prove censorship on Venmo, crypto personalities Neeraj Agrawal and Nic Carter finally see their 2-year old pending transaction rejected due to inclusion of terms “Persian”, “Cuban”, “tardigrades”, and “North Korea” in the payment message. Source
Oct 6 - The European Union issues complete ban on all crypto transactions between EU service providers and Russian accounts. Source
Oct 6 - Crypto (CEX) Binance pauses its Binance Smart Chain (BNB) following a $600mn hack. Source
Oct 6 - Centralized crypto-lending platform Celsius reveals names and transaction history of hundreds of thousands of customers in a 14,500 page document in court filings. Source
Oct 7 - Meta warns 1mn Facebook users their login info may have been compromised through OAuth vulnerability. Source
Oct 8 - PayPal unveils new Acceptable Use Policy (AUP), which allows the company to fine $2.5k from an account should they find “misinformation”. Source
Oct 9 - Creator of popular NFT collection NBA Top Shots, Dapper Labs, imposes withdrawal restrictions on Russian users. Source (thanks to @philngo_)
Oct 10 - PayPal issues apology for “confusion” over its AUP, citing new policy was “in error”. Source
Oct 10 - Twitter and Instagram locks Kanye West’s account over anti-Semitic comments. Source
Oct 11 - Security researchers reveal Apple services such as Maps, Health, Wallet, etc. leak DNS requests outside of an active VPN tunnel. Source
Oct 12 - JP Morgan Chase terminates banking relationship with Kanye West over ongoing anti-Semitic controversies. Source
Oct 15 - Google faces lawsuit over Chrome browser data collection even when users are in “Incognito” mode. Source (thanks to @alexmattm)
Oct 17 - NFT-based domain name platform Unstoppable Domains discontinues its “.coin” offering upon discovering potential collision. Source
Oct 20 - Reports surface of TikTok parent company ByteDance’s intent to use app to monitor the physical location of specific American citizens. Source
Oct 21 - Microsoft confirms server misconfiguration led to 2.4TB data breach affecting 65k+ entities across 111 countries. Source
Oct 24 - Apple updates its App Store terms regarding NFT sales, allowing developers to sell NFTs as long as they do not unlock features. Source
Oct 24 - Australian insurance company Medibank confirms that up to 4mn customer’s healthcare data have been stolen. Source
Oct 25 - After publicly apologizing for its AUP, PayPal reinserts $2.5k fine into its terms of agreement by adjusting language to include “forms of intolerance”. Source (thanks to @0x_colin)
Oct 25 - Biden administration wants to make it easier to seize crypto assets without criminal charges; buries proposal deep within a 61-page report by the US Attorney General. Source
Oct 27 - Thomson Reuters leaks over 3TB of sensitive customer data, including unsecured plain text passwords. Source
Oct 31 - Instagram fixes outage that told millions their accounts were suspended. Source
Oct 31 - Leaked documents reveal DHS collaborated with Facebook to target “disinformation”. Source
Op-Ed
If you are interested in contributing to this OpEd, please reach out!
The following is part 3 of a 3-parter series by ChainSafe’s Elizabeth Kukka.
The views expressed are those of the author’s and may not reflect those of ChainSafe’s.
DecentralMania
Part 3 - Co-ownership
The first and second write-ups in this series speak to what’s possible on a global scale without centralized governments, authorities, or traditional corporate structures, as well as the importance of digital ownership. In this final piece, we attempt to marry the two concepts and show a vision of the future where they work in concert.
Value, a moving target
Over the last forty-years, CEOs have seen a 1,000% increase in compensation while the average employee has seen an increase of 12%. When accounting for inflation, that 12% increase over forty-years may actually mean a decline or flatline in-terms of purchasing power. Are CEOs really working 1,000x harder than the average employee? Of course not! Starting in the late 1970s, there was a shift that moved away from valuing the everyday employee to providing as much value to shareholders as possible while rewarding successful CEOs and executives for doing so. This has led to some of the extreme negative externalities plaguing our world today, notably production of excessive waste and its management, climate change, and predatory practices by Web2 organizations.
This story is not entirely hopeless. In 2019, it was acknowledged (by some global business leaders) that focusing on shareholder value is a toxic way to run a business. The future would require a new way of thinking. The term describing this new approach is called Customer Capitalism and is defined as “human beings creating value for other human beings” - an Earth shattering idea, I know. It has also been called the Fourth Industrial Revolution, an approach to business that focuses on innovation and being adaptable based on the needs of the customer.
What if creating value for other human beings is as simple as switching from a consumer and customer model to one where we co-create and co-own together? This isn’t a new concept – worker owned cooperatives, community banks, and mutual insurance companies have been around since the 1800s. However, in the web3 world, these are known as Decentralized Autonomous Organizations, or DAOs.
Decentralized Autonomous Organizations (DAOs)
There are a lot of reasons to go the way of the DAO instead of following a traditional corporate structure. First, 90% of startups fail. They are capital-intensive, hard, and time consuming. And, they are focused on competition over collaboration in a “winner takes all” model (think Amazon, Facebook, Disney, and Google). And, the vast majority of employees never see the big pay-off — the day when a company finally gets bought-out or goes public. This is either because they don’t stay at the company long enough, or the company doesn’t make it. In the end, the winners are almost always the founders and their investors.
How are DAOs different? Each DAO is structured differently, so it depends. But, some key differentiators are that the participants are also the decision makers, voting on different projects and initiatives that they want to see move forward. Smart contracts and on-chain transactions bring transparency to decision making and help to avoid human interference and some of the pitfalls of centralization. And, in a token based economy, liquidity is made available exponentially faster. On the other hand, in a traditional venture backed startup model, an employee might cross her fingers and toes hoping that the company gets bought-out or goes public in 7-10+ years. Not only that, they’d have to be able to afford a stock purchase in the first place! Whereas in a token economy, a liquidity event can occur within 1-2 years time.
Success stories
There have been a lot of false starts when it comes to DAOs, but there have also been successes. The most impressive, to date, is ShapeShift, a crypto exchange that was started in 2014. Eight years later, the organization has untangled itself of any corporate structure or ownings. Although ShapeShift does not follow the model of most other fully open-source web3 organizations, they are a leader in demonstrating how to decentralize a company and a flag bearer for CEOs giving up ultimate control.
Another organization that has been at the forefront of DAO-like operation is Polkadot, the blockchain network. While most may not immediately conjure up Polkadot as the spitting image of a DAO, Polkadot has complex governance mechanisms based on DAO principles. By providing network stakeholders with voting rights, the Polkadot community is empowered to debate and accept or reject proposals. This has allowed Polkadot to enact sweeping network upgrades completely on-chain!
Hope and possibility: for the Internet, for humanity, and beyond
DAOs bring Internet-scale rapid iteration on the forms and mechanisms for governance. In this way, they may be able to outpace their more traditional counterparts on the innovation front in order to solve for the extreme negative externalities brought on by stakeholder capitalism and even customer capitalism. The hope is that through DAOs, otherwise physically disparate individuals may be able to better coordinate to align value creation and capture. All through the magic of aligned incentives and co-ownership. All through a vision for the future that is web3.
After all, if you could co-own saving the Earth, wouldn’t you?
[For a great read on DAOs, we recommend reading The Future of DAOs: Building Out The Organizational Primitives of web3.]
If you have any feedback, send them my way or reach out via Twitter or Telegram (@haochizzle).
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ChainSafe is a leading blockchain research and development firm specializing in infrastructure solutions for web3. Alongside its contributions to major ecosystems such as Ethereum, Polkadot, Filecoin, and more, ChainSafe creates solutions for developers and teams across the web3 space utilizing our expertise in gaming, bridging, NFTs, and decentralized storage. As part of its mission to build innovative products for users and improved tooling for developers, ChainSafe embodies an open source and community-oriented ethos to advance the future of the internet. To learn more, click here.
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