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Decentralization for the Poor

"The best way to predict the future is to invent it" - Alan Kay

Storytime

Wake Up

The way we help is broken and it’s systemic. Traditional corporate and non-profit structures are severely limited for the purpose of public goods serving the bottom of the pyramid. Even B Corps and other variations on traditional legal structures, etc. are limited by bounding itself to variations on traditional, hierarchical structures.

Crypto can completely break the way we think of these structures, their investors, and ultimately, their community by decentralizing the power and control of the organizations that empower poor people in ways traditional charity falls short of doing.

So, let’s take a look at how these different structures actually function power and control wise as is relevant to the bottom of the pyramid in the US.

Non-profits

(Diagram of how non-profits get funded.) example of how non-profits that are attempting to serve public good pro’s: - no need to be sustainable - can apply for federal and state grants - tax benefits con’s: - reliance on grants/panic every grant cycle - labor trafficking of their targeted user/customer/client - arguably end up gathering numbers for grants, rather than focusing on listening to their users - this leads to the worst impact possible as they cannot change their grants and are not in control of the public policy that governs the grant stats required for funding.

C Corporations

(Diagram of how C corps work.) example of C Corps serving public good? ex. Yelp pro’s: - raise lots of money built into the structure - move fast - can scale faster than other structures con’s: - startup costs - benefits a small number of people who own the C Corp

LLCs

(Diagram of how LLCs work.) example of LLC serving public good? pro’s: - private members - tax incentives con’s: - for lifestyle businesses - does not scale well?

Benefit Corporations

(Diagram of how B Corps work.) example of B certified B corps providing public goods pro’s: - do good and do well - value-aligned investors - triple-bottom line goals con’s: - pay for an audit every 2 years - how much good they are doing vs. posturing and value signaling is debateable

Refocusing on Important Problems

Too many US startups are focusing on problems that do not matter to poor people. More Americans are facing eviction, homelessness, and poverty than ever with COVID-19. While the stimulus checks are nice in the US, many Americans find there is a lack of a stable support network for them available should they hit bottom. It is the unexotic underclass, as C.Z. Nnaemeka writes, that are suffering from the neglect of brilliant startup minds, especially in crypto.

Although MIT Entrepreneurship Review published an article in May/June of 2013 addressing this concern, the startup ‘scene’ (so to speak) hasn’t much listened to the call to action. Even now, there are many more funds allocated to flashy crypto startups that have no real impact on the immediate needs of the underclass or under-represented/under-capitalized founders.

In addition, it is difficult to ascertain who is doing good and who is making problems worse. The social impact investing space is filled with companies with good intentions failing due to lack of proper user research and a flawed power dynamic with their users that echoes traditional corporate structures of benefiting the wealthy at the expense of the many.

Just DAO It

Yet, crypto is best suited for disrupting the way we help each other. DAOs allow for decentralized autonomous ways of asynchronously achieving consensus. Utility tokens and reverse IPOs benefit many users interested in governance and hodling a stake in their favorite projects. These DAOs can be used to level the playing field and make true do-cracies of people aiming to achieve a greater good and give more people financial stability and an ownership stake in their value created.

(Diagram for crypto DAO/decentralization of the network based on friendships and values.) potential example of crypto DAO/decentralization of the network serves public goods, unbounded by geographical limitations. pro’s: - spread out, not bound by geography - compensation based on contribution to the community - get to have some ownership that is spread across the members of the community - voting and governance on major policies - unlimited raise capacity - creates the most value-aligned people engaged in a do-cracy con’s: - UI/UX onboarding to crypto friction - need consistent internet access/internet skills - initial education barrier on importance of it - conflict resolution legally murky

Wen DAO?

Problems with general crypto is that, despite calls for fiscal inclusion, the crypto game is fairly pay to play. You must have assets to take advantage of DeFi lending rates. You must pay expensive costs to do basic transactions on Ethereum now (as of this writing). It’s 50-70 dollars to mint an NFT. It’s pretty clear that crypto right now is for the rich getting richer, not the democratization of asset allocation as some dreamers imagined, at least mainnet Ethereum.

With diversity scant in hiring practices in crypto startups, there is a flood of startups that are solving rich people problems like options trading insurance. Yet crypto can be used for addressing the needs of the underclass, there are use cases for voting. There are crypto startups like Circle that are aiming to create a crypto Universal Basic Income. It is not all crypto startups, but even wallets are feeling the squeeze of the Ethereum fees such as Argent, which recently instituted a $40 charge to even setup a wallet due to fees going up.

The Moral Economy of Do-Gooding

For a deeper dive into the history of social work and how helping can hurt poor people, please read The Violent History of Benevolence. It’s an excellent book detailing the history of social work as a way of policing social norms and stigmatizing the poor, as well as how social work has helped and harmed the poor.

For a deeper dive into how to design for good, read about possible solutions in Design Justice.

Call to Action

If you are interested in investing in a crypto startup making an impact, feel free to shoot me an email or DM me on Twitter @maxxgrok.

Overall:

  • We need investors with patient capital who are willing to invest in crypto for good.

  • Current impact investors need to educate themselves on crypto, if they are unfamiliar.

  • ‘Crypto for Good’ people need to connect with impact investors.

  • Folks aiming to do good need to talk to target users more frequently, tightening up development cycles with user feedback that actually gets incorporated into product, instead of developing a product-centered culture in-house.

  • We need a new set of leaders as servants who usher in a collaborative, decentralized approach to building tech products that actually empower, not hurt the poor.

Conclusion

Traditional ways of helping are limited by their patronizing attitude, mechanisms of contributing, and hierarchical structure.

In crypto, while there is a lot of unrealized potential, buidlers are primarily focused on DeFi and NFTs, not real world disruptions of the social system that so many of us are embedded in.

This focus will change as many of the industries get disrupted by blockchain technology and funding will diversify, but I’m impatient with this approach right now.

Published Oct 5, 2021

interdisciplinary engineer.