Feudal Japan used a class system based on a simple hierarchy. There were four classes: Warriors called Samurai at the very top and Merchants at the very bottom. In the middle were Farmers and Artisans (craftsmen).
Merchants were at the bottom because they were both the most despised and the most threatening to the established order. It was believed Merchants did not contribute real value to society. Their function as middlemen who allocated resources, bringing goods and services to where they were most needed, was not appreciated. This role was seen as parasitic; capable of playing both sides, extracting both profit and information from a privileged position, and ultimately capable of accumulating enough power to threaten the ruling class.
Today, the order is reversed. Merchants have gobbled up the other classes, and the only one that remains is the stubborn Warrior. The modern-day Merchant is not the humble shopkeeper or curator of interesting provisions, but a profit-maximizing machine. An entity too big to compete with, creating products too addicting to give up, and always hungry for more. The modern-day Warrior is the artist, the activist, the scientist, the scholar and anyone else who follows an internalized code of honor from which they derive their actions and behaviors. Samurai called their code bushido. And Orwell provides a fitting description for the class I am attempting to describe as “the minority of gifted, willful people who are determined to live their own lives to the end…”
In the modern world, Warriors are forced to play money games – Squid Games where nothing is sacred – games they are poorly suited to play because they are more committed to their code, and their story, than they are to the money. Merchants have an easier time following the money. Both ideas are made-up. Both are powerful sources of motivation.
I’m not advocating for a return to a feudal system with violent warlords at the very top. I advocate for more options. It is not necessary for profit-maximizers to have the most power and influence in society. There are other ways we can organize ourselves.
Here, Ethereum offers a solution: to replace nearly all middlemen with fair, transparent rules. Protocols can sit in the middle of interactions, extracting profits when called on and distributing those profits exactly as programmed. Corporations can be dismantled by replacing each of their functions piece by piece. If it is, once again, time for society to be rebalanced and for the order to be rearranged, Ethereum has the power to build it in a new way.
Entire classes of smaller merchants have already been outcompeted by the faster, more efficient, and yes more useful Amazon. And the world’s largest modern merchant already uses machines and code to replace human laborers. Clicking a button to complete our order sets off a chain of events in which many functions are fulfilled without human intervention: money is transferred, confirmations are sent, labels are printed, a robot is sent from its charging bay to the part of the warehouse where your item is waiting to be picked up. It’s fair game to take this automation further.
Ethereum is all about creating powerful little rules. Not all functions make sense to move to a blockchain, but rules or contracts involving money are some of the most obvious to start with because money must move between parties who want to trust each other.
The function of middlemen can be pushed into a box via smart contracts aka the code on Ethereum. Take for example, the Uniswap protocol. Known as a decentralized exchange, Uniswap is a set of smart contracts that automatically performs trades on behalf of the user. If you have ETH and I have USDC and we both agree on the price, then the Uniswap code lets us swap using a cold set of logic. There is no backdoor for swindlers to dip their fingers in.
FTX took the opposite approach. FTX was a centralized exchange, which meant between the time you deposit and withdraw your money from their system, human decisions makers ultimately decided what to do with your money. Since these middlemen sit in a special position, they must be trusted to keep people’s money safe and perform their duties as expected. People who choose Uniswap don’t have to worry about this because the code in the middle can only do a few simple functions. In other words, the code doesn’t know how to steal or “temporarily borrow” the money. There is still risk. The risk just moves away from the middleman as a fallible human, and toward the logic and setup of the rules that replace the middleman.
The Wikipedia article about secure multi-party computation (MPC), a privacy-preserving cryptographic technique, introduces a nice way to think about what cryptographic protocols do in general. Think about the protocol as a person you can trust. So instead of thinking about a decentralized exchange like Uniswap as an incomprehensible set of zeroes and ones, think of it as a person. Let’s call this person Sam Bankman-Fried. You can trust Sam to do his job because deep down he is made of logic that can’t break the rules of math. When both you and I agree on a price for a trade, we give our money to Sam who swaps the assets for us. That’s it. Sam always does his job reliably. He is incorruptible. He’s like a vending machine that just sits there until called on to do his duties.
These types of protocols can replace many other functions, not just trading. You trust (or don’t trust) a government to count your votes correctly? A protocol could do this. You trust (or don’t trust) a company to keep your data private? A protocol could do this. Exactly how it is all done and where the humans come in or don’t come in are questions we are just beginning to ponder. If every contract has loopholes, then much of the human work that remains will be about minimizing these loopholes. We are trying to create ever more perfect laws. And since these are public protocols, they require public sentiment to truly be legitimate. Setting up these protocols is like setting up new micro-constitutions. Once set up, they will be difficult to change. But if enough people believe in them and they are robust and useful enough, then we will have created enduring economic and social structures that we can keep building upon.
Ethereum can be just as good at replacing bureaucrats as it is at replacing middlemen. By shrinking the role of people in enforcing the rules, we can free up our collective energy for creating better rules, thinking about and designing the machines instead of being expected to function like one.
There is a concept of leadership as being either transactional or transformational. Transactional leadership is about offering trades, bargains, and deals to appeal to people’s self-interest. Transformational leadership is about inspiring people to act for something bigger than themselves: an ideal like a culture, a community, a sense of justice. The Merchant is more transactional. The Warrior, more transformational.
One side of the spectrum is not better than the other. Each character comes with trade-offs. One end is ruled by the heart, the other by the mind. One is more interested in winning games. The other more interested in transcending games. If the time for change is now and we have a small opportunity to break out of the money game we are all trapped in, then a battle for hearts and minds is inevitable, and in this battle, the mind always follows the heart.
Ethereum is more transformational in spirit than its transactional surface would make things appear. It has the power to turn our entire world into a series of trades. Everything seems to be for the Merchant. At the same time, Ethereum is profoundly transformational. It allows us to collectively rewrite the rules, in any way we want. It lets us build new worlds, piece-by-piece, with the spirit of a Warrior.