The Most Important Scarce Resource is Legitimacy

Key ideas

Buterin argues capital in crypto is governed by what communities collectively accept, and that communities can use this legitimacy to direct funding to public goods.

1. 1

   Ownership rests on social acceptance

   Buterin uses the Steem and Hive fork as his main case: when a buyer of the company tried to use its tokens against the community's wishes, the community copied the chain and left out the balances involved in the attack. He concludes the company never truly owned those coins. He applies the same reasoning to the ENS multisig.

2. 2

   Legitimacy comes from coordination

   Buterin defines legitimacy as higher-order acceptance: people go along with an outcome because they expect everyone else to. He says it matters wherever acting alone gets you nowhere, as with choosing which side of the road to drive on. Whatever mechanism settles such choices holds a lot of power, and he argues blockchains are full of these situations.

3. 3

   Legitimacy has several sources

   Buterin lists brute force, continuity, fairness, process, performance and participation, while saying no full list is possible. He stresses the concept is descriptive, so something can be legitimate even if you think it is horrible. If enough people do think so, he says, the chance rises that the legitimacy eventually falls away.

4. 4

   Reward projects that fund shared goods

   Buterin argues any single funder will have blindspots, and that relying on one or a few central organizations holds them to an unfair standard. Adapting the old Bitshares model, he proposes that communities back application-layer projects that give part of their treasuries to public goods, and withhold that support from forks that give nothing back. He offers 5% of spending to the broader ecosystem and 1% beyond blockchain as an example, leaving the choice of recipients to good faith.

5. 5

   Know the limits of community pressure

   Buterin concedes users will move to a much better product whatever the community urges. Tether versus DAI is his test: traders stay with Tether, but he says far more applications use DAI. He takes this to mean there is enough leverage to get projects giving a few percent of budgets, and adds a selfish reason to take part: wallet developers or newsletter authors will favor the project that funds them.

In Vitalik’s words

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