The Social Layer - The Daily Gwei #461
The most important layer isn't a technical one.
Hey readers - apologies for not publishing a piece for the last 4 days - I was traveling and just didn’t have the time to put something together. Though don’t fear - I’m back home now and will be putting out pieces at the regular cadence going forward (well, at least until I head to Amsterdam in mid-April)!
I strongly believe that the “social layer” of a crypto ecosystem is the most important property - even more important than all of the technical details. This is because the social layer is the layer of last defense in the event of any malicious activity or attacks - especially if that attack comes from nation states. And don’t get me wrong - building a strong and healthy social layer is no small feat - but it is absolutely critical if crypto-networks want to survive concerted attacks against them.
Let’s run through an example so that I can clearly illustrate the importance of a strong social layer. Hypothetically speaking, imagine that a nation state has been able to covertly obtain 51% of the hashing power on the Bitcoin or pre-merge Ethereum networks. At some point in time, the nation state decides to exert this power by forking the chain with a breaking change (such as giving themselves newly minted coins). Technically, based on the view of the protocol, the nation state chain would be the “canonical” one since it has the most accumulated Proof of Work. Though this is where the social layer kicks in and rejects this as the canonical chain - instead choosing to stick with the chain that has less accumulated Proof of Work because it has the backing of social consensus.
I strongly believe that the make up of a social layer of a chain is dictated by the chain itself. For example, because Bitcoin is a very simple network (it basically just secures BTC), it attracts those who really only care about one thing (in the case of Bitcoin, non-nation state money). Whereas a network like Ethereum is extremely expressive and attracts all kinds of individuals that may not necessarily be interested in the same things. I’m personally very interested in the core protocol and layer 2 work being done in Ethereum but don’t really follow NFTs too closely or care to keep up with the day to day happenings of that area.
Lastly, a strong social layer is not something that money can buy and we’ve seen this put to the test plenty of times over the years. In 2017, there was lots of money being thrown around by alternative layer 1’s to attract people to their platforms (especially developers). But what this did was just attract mercenaries instead of missionaries which were quick to leave once the money ran out - sounds familiar to liquidity mining/yield farming, doesn’t it? There’s plenty of lessons to be learned from this that can be applied to modern day networks and projects - namely, balancing mercenaries and missionaries is critical for the long-term health of a project.
At this point in time I’d say that only the Bitcoin and Ethereum networks have a strong enough social layer to resist nation state level attacks and also continue thriving far into the future. Though funny enough, even though the Bitcoin and Ethereum communities couldn’t be more different from eachother, they do have one thing in common - they will both defend their respective networks with everything they’ve got.
Have a great weekend everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.