September 26, 2022

Dcentral vs. Consensus: Are institutions “frens” or enemies of crypto?

As a part of an ethnographic study on blockchain organizations, I recently attended two major conferences – Dcentral Con and Consensus – held back-to-back in Austin, Texas during a blistering heatwave. My collaborator, Johannes Lenhard, and I had conducted a handful of interviews with angel investors, founders, and venture capitalists, but we’d yet to conduct any fieldwork to observe these types of operators in the wild. Dcentral, held at Austin’s Long Center for the Performing Arts, and Consensus, held at the Austin Convention Center and other venues throughout downtown, provided the perfect opportunity. The speaker and panel topics at both conferences varied widely–from non-fungible tokens (NFTs), to the metaverse, to decentralized finance (DeFi). At both conferences an underlying debate regarding the role of established institutions repeatedly bubbled to the surface. The differences between the two conferences themselves offered a stark contrast between those who envision a new frontier of crypto cowboys dismantling existing social and economic hierarchies and those who envision that same industry gaining traction and legitimacy through collaboration with regulators and the traditional financial (aka “TradFi”) sector. 

Dcentral was populated by scrappy developers of emerging protocols, avid gamers, and advocates for edgy decentralized autonomous organizations (DAOs), such as Treat DAO, which allows adult content creators to sell “NSFW” (i.e., not safe for work) NFTs. Attendees at Dcentral sported promotional t-shirts and sneakers, and a few even showed up in Comic Con style garb, flaunting flowing white togas and head-to-toe blue body paint. Over the course of Dcentral, many speakers and attendees crafted passionate arguments around common libertarian talking points–self sovereignty, individualism, opposition to the Federal Reserve, and skepticism about government oversight more broadly. Yet governments were not the only institutions drawing the ire of the Dcentral crowd. Speakers and attendees alike took aim at corporate actors from traditional finance systems as well as venture capital (VC) firms and accredited investors.

Perhaps the most acerbic critique of institutionalization in the crypto sector was issued by Stefan Rust, founder and CEO of Laguna. Wearing a white cowboy hat, he opened his presentation [see 3:19] with a criticism of protocols that impose undesirable “middlemen” between the user and their intended transactions:

“This is what we want to avoid. We invited these institutions into our ecosystem and we now have layers, on layers, on layers that have been created in order to take a decentralized peer-to-peer electronic cash ecosystem to fit a traditional, TradFi world, the system that we’ve been fighting so hard since 2008 to combat […]. Do we want this? I don’t know. I didn’t sign up to get into crypto and Bitcoin and a peer-to-peer electronic cash system for multiple layers of multiple middlemen and multiple fees”

Stefan Rust, Laguna

In his view, increasing involvement of institutional actors could lead to “SSDD.” That is, same shit, different day, which according to Rust, is exactly what the ecosystem should be dismantling.

Consensus, held directly after Dcentral, had an entirely different feel. In contrast to the casual dress of Dcentral, many attendees at Consensus wore conservative silk dresses, high heel pumps, or well-tailored suits, despite temperatures that topped 100 degrees just outside the conference center doors. In a panel aptly entitled, “Wall Street Suits Meet Hoodies,” Ryan VanGrack, a former advisor at the Securities and Exchange Commission (SEC), opened with a comment about how he felt uncomfortably informal in his crisp button-down shirt, slacks, and pristine gray sneakers. According to one marketer at a well-known technology company, the cost of hosting a booth on the exhibit floor was in the neighborhood of 75K. This was not the ragtag gang of artists and emerging protocols from Dcentral; these people were established crypto players who saw the pathway to revolution as running straight through the front door of institutions rather than by burning them to the ground.

Like Dcentral, speakers and panelists at Consensus called for the reform of the financial industry, often similarly drawing from libertarian values and arguments; however, unlike Dcentral, many at Consensus emphasized that regulation of the crypto industry is not only warranted, but necessary to expand its scope and market adoption. According to them, the lack of regulation has imposed an artificial ceiling on what the crypto sector can achieve because retail investors, would-be protocol founders, and institutional players are still “waiting on the sidelines” for regulatory clarity. This position was not merely abstract rhetoric. Current and former government actors such as Rostin Behnam, Chairman of the  Commodity Futures Trading Commission (CFTC) as well as Senators Kirsten Gillibrand, Cynthia Lummis, and Pat Toomey, participated in panels. These panels focused on the role of regulation in the crypto ecosystem, such as measures that preserve innovation while also preventing catastrophic failures such as the recent collapse of Terra, which financially decimated many retail investors. 

At Consensus, advocates of institutionalization were no less enthusiastic in their endorsement of the mission of crypto and web3 than the anti-institutionalists at Dcentral. In other words, they too were true believers, just with a different theory of change. On Friday night I was invited to attend an event hosted by Pantera Capital, a top-tier crypto VC fund. I mentioned to one of the other attendees that I had attended Dcentral. His face pulled into a grimace. “Why the look of disgust?” I asked. He clarified that while “disgust” was too strong of a word, he felt that events like Dcentral delegitimize what the industry seeks to accomplish. Rather than being the true embodiment of the web3 ethos, he felt these crypto cowboys and their antagonistic rhetoric risked undermining the very efforts that were likely to have the biggest impact.

At the conference, panelists and attendees referred to Terra as the “elephant in the room.” But it struck me that personal wealth and its tension with the crypto vision was a much bigger and far less acknowledged elephant. Possibly the only speaker to directly and unambiguously call attention to this was Assistant Professor of Law Rohan Grey. In a panel entitled “Who Should be Allowed to Issue Digital Dollars,” Grey noted that as the “resident pet skeptic” he would act as a rare detractor to the “self-congratulatory industry love-fest” or “circle jerk” that would unfold at Consensus. Establishing common ground with the crypto community, he noted that he too supported efforts to resist “Big Brother as well as Wall Street and Silicon Valley.” But then he offered a withering critique of crypto industry actors, especially those with ties to the established financial sector:

“We should be very clear about the difference between private, for-profit actors providing public goods for their own material benefit and actual public goods. So, who are the people who want to issue digital dollars if not the government? We’re talking about licensed limited liability companies backed by venture capitalists, many of whom are standard Wall Street actors. We’re talking about people with a fiduciary responsibility to a particular group of shareholders. We’re talking about decisions being made on behalf of the public by private individuals who are there only because of their capacity to hold wealth initially, and those actors will then be lobbying for laws favorable to themselves in government and creating the same revolving door that we’ve seen with Wall Street for decades.” 

Rohan Grey, Assistant Professor at Willamette University College of Law

The idea that private sector actors who made their fortunes in the traditional financial sector could serve as the vanguard of a financial revolution certainly merits scrutiny. Yet, even if somewhat dubious, it is at least possible that these actors, having seen from the inside the corruption and ill-effects of existing financial institutions, could leverage their insight to import better, more democratic values into an emerging crypto financial system. Along these lines, one man I chatted with at an after party said it was his experience witnessing what he felt were morally reprehensible, exploitative lending policies while working at a bank that ultimately pushed him to adopt the crypto vision. Still, more than a little skepticism is warranted given that institutional or even anti-institutional actors stand to materially benefit from greater adoption of crypto and its associated technologies, a point that Grey himself underscored.

Following such skepticism, a cynical take is that people will always behave in alignment with their own incentives, even when doing so causes harm to others. I have heard people espouse exactly this sentiment when excoriating scams, NFT “rug pulls,” or even failed DeFi applications. Yet such a bleak view of humanity is overly simplistic given the body of empirical data about human prosocial behavior (e.g., Fehr, Fischbacher & Kosfeld, 2005). People can and often do behave in ways that are altruistic or in the service of others, even at a cost to themselves. Many advocates both for and against institutionalization of the web3 and cryptocurrency sector are likely motivated by a sincere desire to benefit their fellow man. But intentions aren’t the only thing that matters. The positive and negative real-world impacts of blockchain applications both direct and indirect are critical. Whether this increasingly institutionalized sector will spark a real revolution or further entrench SSDD remains to be seen.

Will Web3 Follow in the Footsteps of the AI Hype Cycle?

For many, the global financial crisis of 2008 marked a turning point for trust in established institutions. It is unsurprising that during this same historical time period, Bitcoin, a decentralized cryptocurrency that aspired to operate independent from state manipulation, began gaining traction. Since the birth of Bitcoin, other decentralized technologies have been introduced that enable a broader range of functionalities including decentralized finance (DeFi), non-fungible tokens (NFTs), a wide range of other cryptocurrencies, and decentralized autonomous organizations (DAOs). 

These types of technologies constitute what is sometimes referred to as “web3.” In contrast to web2, our current version of the web, which relies heavily on centralized platforms and corporate intermediaries–think Facebook’s social network or Amazon’s webshop–web3 promises to redistribute power and agency back into the hands of users through decentralized peer-to-peer technology. Although web3 has garnered fervent support and equally fervent critique, it is undeniable that cryptocurrencies and other decentralized technologies have captured the mainstream imagination. 

What is less clear is whether the goals and practices of emerging businesses in the web3 sector align with, or stand in conflict with, the ideologies of web3’s most enthusiastic supporters. Organizational sociology has long established that organizations’ external rhetoric, which is shaped by a field’s perception of what is culturally and socially legitimate, may not fully align with their internal rhetoric or day-to-day practices. Continuing in this tradition, in a recent study, my colleague at Princeton’s Center for Information Technology Policy, researcher Elizabeth Watkins, and I sought to understand how people working at artificial intelligence (AI) startups think about, build, and publicly discuss their technology. We conducted interviews with 23 individuals working at early-stage AI startups across a variety of industry domains including healthcare, agriculture, business intelligence, and others. We asked them about how their AI works as well as about the pressures they face as they try to grow their companies.

In our interviews, the most prevalent theme we observed was that startup founders and employees felt they needed to hype up their AI to potential investors and clients. Widespread narratives about the transformative potential of AI have led non-AI savvy stakeholders to have unrealistic expectations about what AI can do– expectations that AI startups must contend with to gain market adoption. Some, for instance, have resorted to presenting artificially inflated estimates of their models’ performance to satisfy the demands of investors or clients that don’t really understand how models work or how they should be evaluated. From the perspective of the startup entrepreneurs we interviewed, if other AI startups promise the moon, it is difficult for their companies to compete if all they promise is a moon-shaped rock, especially if potential clients and investors cannot tell the difference. At the same time, these startup entrepreneurs did not actually buy into the hype themselves. Afterall, as AI practitioners, they know as well as any other tech skeptic what the limitations of AI are. 

In our AI startups study, several participants likened the hype surrounding AI to the hype that also surrounds blockchain, the backbone that undergirds decentralized technology. Yet unlike AI companies who hope to disrupt existing modes of performing tasks, hardline web3 evangelists see decentralized technology as a mechanism for disrupting the existing social, political, and economic order. That kind of disruption would take place on an entirely different scale than AI companies attempting to make tedious or boring tasks a little more automatic. But are web3 businesses actually hoping to effect the same kind of wide sweeping societal change web3 evangelists are hoping for?

In a study I’m kicking off with Johannes Lenhard, an anthropologist at the University of Cambridge who studies venture capital investors, we aim to understand where the ideological rubber of web3 meets the often unforgiving road to commercial success. We will interview entrepreneurs working at web3 businesses and investors working at investment firms with a focus on web3. Through these interviews, we aim to understand what their ideological visions of web3 are and the extent to which they have been able to realize those visions into real-world technology and business practices. 

As a preliminary glimpse into these questions, I did a quick and dirty analysis* of content from the blogs that Andreessen Horowitz (a16z), a prominent venture capital firm, posted about the companies in their web3 portfolio (top image). In order to get insight into the rhetoric of the companies themselves, I also looked at content from the landing pages of several of a16z’s web3 portfolio companies (bottom image). Visualization of the most frequently used terms of both data sources are below where bigger words are those that are used more frequently.

Word cloud from a16z’s blog posts

Word cloud from portfolio companies’ landing pages

Although this analysis is by no means scientific, it suggests that whereas companies’ external rhetoric emphasizes technical components, investors’ external rhetoric emphasizes vision. 

We don’t yet know whether we will observe these kinds of trends in our new study, but we hope to gain deeper empirical insights into both the public facing discourse of web3 stakeholder groups as well as into the rhetoric they use internally to shape their own self-perception and practices. Will blockchain shepherd in a newer, more democratic version of the web? A borderless society? Decentralized governance by algorithms? Or will it instead deliver only a few interesting widgets and business as usual? We’ll report back when we find out!

Interested in hearing more about the study or participating? Send me an email at .

*analysis performed on March 9th, 2022