When Erik first brought up the idea of ShapeShift to me in early 2014, it was before I personally had any interest in any digital asset outside of Bitcoin. Then, nothing but Bitcoin seemed particularly interesting; every other coin seemed like just copy/paste clones of Bitcoin with a few of the parameters changed (and this was the vast majority of altcoin experimentation at that point in time). In some ways, it was hard to know then why the early version of ShapeShift would even be useful to the broader Bitcoin ecosystem.
When I started my journey working with Erik to build the initial ShapeShift prototype, I was mostly excited about the idea of just working full time developing interesting things in the Bitcoin space. The concept of “crypto” hadn’t even fully started to enter the industry yet in any significant form.
At the time, altcoins seemed like an agent of chaos in the space, spreading confusion and ideas that made it harder for the average user to understand the core value proposition around Bitcoin and why it was important. Yet, it is important to look back upon what has transpired since ShapeShift launched in 2014 and the immense amount of value that has come out of that chaos over the years.
We generally have a natural connotation in our language that makes us automatically think of “chaos” as a bad thing and “order” as a good thing, but I think this misses a lot of nuance on the spectrum between these two concepts. Many of the most important innovations in human history have come from chaos in one form or another, and many of the greatest evils humans have ever perpetrated came from an overabundance of order. Our language tricks us into thinking chaos is of only one kind—and the same for order. Either can actually be good or bad depending on the context. Another way of thinking about this is chaos tends to go hand in hand with any change, while order goes hand in hand with things staying how they already are. The chaos that comes with change can lead to something better, while order may make things run more efficiently—it rarely changes anything at all, much less changes it fundamentally for the better.
We experienced this many times in the early days of ShapeShift, dealing with large amounts of chaos in our early operations, but much of that chaos spawned further innovation and opportunities even within our own product. Every new coin daemon we dealt with brought its own little bit of chaos compared to bitcoind (and really even bitcoind itself would later spring its own chaos upon us down the line when 2017 brought us the great coin migration battles), but importantly, harnessing that chaos allowed ShapeShift to lead in the space in terms of our ability to add new interesting assets and allow access to this emerging Cambrian explosion of assets in the crypto space. Similarly, when our development resources were particularly limited in our first few years, we embraced plenty of chaos in terms of having a totally manual balancing system, primarily run by myself during those early days. The “hamster wheel,” as we called it, because you could never stop running lest the machine grind to a halt, was a hellish beast that never relented and drove my own personal relationships to the brink because of the constant demand on my time (especially with my wife, who clearly loves and supports me or she wouldn’t still be with me), but it did lead to us understanding the issues of liquidity provision in a way few other crypto projects ever did. It spawned the beginnings of our self-balancing software, which of course brought its own level of chaos to the system. Yet, things incrementally improved over time, and these experiences allowed ShapeShift to grow bigger and stronger in its early years, and these developments happened unquestionably faster than had we tried to figure out all these problems before ever turning ShapeShift online in production for real trades with users as a more orderly approach may have dictated.
In the case of the larger crypto industry, many of the most important new concepts and experiments that have entered our space have been inseparable from chaotic elements. The first altcoins that ShapeShift made easily accessible to the world, like Namecoin, Peercoin, Litecoin, and of course Dogecoin, all sprung forth from the chaos of decentralized innovation.
To people focused on just bringing Bitcoin to the world at the time, this seemed like unnecessary chaos, almost heresy, but it gave birth to all sorts of experimentation around different mining algorithms and crypto economic systems, and even the genesis of new consensus mechanism ideas like Proof of Stake. These were all worthwhile and important innovations that emerged from the chaos and arguably would not have existed or taken a lot longer to take hold without the decentralized community embracing and supporting what, at the time, seemed to many as chaos incarnate.
This trend of chaos and experimentation really accelerated with the launch of Ethereum and the subsequent explosion of tokenization, smart contracts, and ICOs that gave birth to the boom times of the 2017 crypto bullrun. Once again, to many bitcoiners, the whole Ethereum experiment seemed to distract from the core mission of bringing sound money to the world—and maybe it did a little bit, but despite all the chaos around the Cambrian explosion of tokens and ICOs, these were incredibly important experiments without which things like Decentralized Finance (DeFi) would never be where they are today.
Once again, the chaos brought changes, those changes begot more chaos, which begot more changes—a turbulent but virtuous cycle of innovation. Tokens became easy to create via ERC-20s for any reason under the sun, and projects used this to raise funds via ICOs. For all the hand-wringing and pushback from regulators and the media in 2017, ICOs proved a viable funding mechanism, which, in a number of cases, led to some of the best returns investors had seen in centuries of economic activity. Yes there were many bad things that happened with tokens and ICOs during this time, and of course scams ran rampant, but give me that innovation and chaotic change any day over just letting whatever the status quo is run its course.
During this same era, NFTs burst onto the scene in the form of CryptoKitties, the furry, digital collectibles that clogged the Ethereum tubes and caused ShapeShift all sorts of problems. It seemed like nothing but chaos—yet our adaptability to this new element made our ShapeShift systems stronger. It forced us to innovate our Ethereum architecture in new ways, making us more resilient and scalable over the long term. We see now that NFT’s are on a path to becoming a truly valuable and important innovation in numerous sectors, most prominently art and gaming today, but tomorrow, in the spirit of decentralization, this will likely spread in every direction imaginable. That is the beauty of decentralized chaos: it can allow for building everything at once in all directions, many of which will fail, but a few of which will dramatically alter the course of the world and human history.
Going over some of these chaotic-but-brilliant innovations that first evolved in the fires of the 2017 crypto bullrun naturally brings us to the Decentralized Autonomous Organization (DAO). The original DAO in many ways pre-dated many of these other phenomena. It was the genesis of the first useful ERC-20 tokens (DAO tokens), and used a funding mechanism they called a DAO creation event that pooled all the funds for owners of the DAO tokens to allocate via governance. Everything about the DAO was chaotic when it burst on the scene—the concept, the creation itself where over $150 million worth of ETH was thrown into this early smart contract, specific clarity around how any of this would work—all culminating with the DAO exploding in spectacularly chaotic fashion, with over 10 percent of all ETH in circulation locked up in it, leading to the ETH/ETC hard fork.
Again at the time, it was hard to see beyond the chaos that permeated all these things, so much so DAO’s took longer than almost any other crypto innovation to become acceptable again, but over the past year as the chaos of experimentation has once again sprung forth, we see all that the DAO actually got right with its seemingly crazy experiment. It’s initial implementation may have been premature, but its idea of a Decentralized Autonomous Organization pooling crypto assets and working on behalf of token owners governing it has spawned what I believe will prove to be the next great innovation in how humans can collectively coordinate on accomplishing and incentivizing the operation of shared goals. Perhaps it will even prove to be the greatest such innovation in not just centuries, but millennia of humans learning to work with each other. The proliferation of these entirely new DAO-powered economies popping up all over the internet and ShapeShift itself coming full circle to actually giving birth to and becoming a DAO itself speaks volumes.
DAOs are still very new on the stage. They’ve only really become popular over the past year or so in connection with the explosion of interest from the DeFi summer. For a DAO to truly succeed, change must be embraced at nearly every turn. A DAO is not a new type of company or just a new way of governing things; it contains those aspects, but it is so much more than the sum of these parts. It is an entirely new type of economic activity and system we don’t yet have the full language to describe yet, and much less have the language to describe where it will go. By the nature of their decentralized foundation, DAOs will be able to evolve more continually than a company, government, or any other centralized way of organizing people ever could. The more we can embrace and harness this, the more good will continually sprout from the things we at first think are nothing more than just agents of chaos. From that, the positive sum wealth and good created for the world will be more than we can currently imagine is possible, all powered by decentralized global actors engaging in nothing but entirely voluntary activity.
None of these innovations, including DeFi, tokens, NFTs, DAOs and ShapeShift’s current pioneering path, would have been possible without so many decentralized actors in the space embracing the good that chaos can bring instead of just fearing it. It takes bravery to step into and harness the chaos, to become comfortable with the uncertainty, and allow for change and experimentation without having an orderly path for how to do many of these things, but that is precisely, I would argue, where the most important innovations in human history always stem from. When we are forced to adapt on the frontier, that is when our creative energies truly shine.
I am reminded of a passage from one of my favorite books that I am currently re-reading:
“The human race is not divided into the irrational and the rational, as some idealists think. All humans are irrational, but there are two different kinds of irrationality — those who love old ideas and hate and fear new ones, and those who despise old ideas and joyfully embrace new ones. Homo neophobus and homo neophilus. Neophobus is the original human stock, the stock that hardly changed at all for the first four million years of human history. Neo-philius is the creative mutation that has shown up at regular intervals during the past million years, gives the race little forward pushes, the kind you give a wheel to make it spin faster and faster. Neophilius makes a lot of mistakes, but he or she moves. They live life the way it should be lived, ninety-nine percent mistakes one percent viable mutations” (RAW, Illuminatus! p. 202).
As we step forward into this new version of ShapeShift as a DAO powered by a decentralized and global community, I want us to all to remember this bit of wisdom: There will be numerous mistakes as we find our way in this new world. There will be a litany of failed experiments, and there will be a hefty serving of chaos to go around for everyone involved. Yet this does not have to be a bad thing! It will serve all of us well to learn to embrace the chaos as an important agent of change for the better. We can harness the chaos for our purposes and from it can spring something beautiful and incredibly powerful for all humankind that would not find its way into existence otherwise. We can all try to be a bit more neophilius and a bit less neophobus, embrace change, experimentation, and the uncertainty that comes with it and it will bear fruit for generations to come. This will happen not just in spite of the numerous and unavoidable mistakes we make, but fundamentally because of them.
If you take anything away from this piece, I want it to be this: do not dismiss chaos out of hand as bad or embrace order automatically as good. Understand the good that chaotic change can bring and the bad that order can trap us with by encouraging and cementing a lack of change. Neither chaos nor order are “good” or “bad”; they are simply concepts fashioned by humans that can be utilized as tools for our ends. Step into the chaos, embrace and harness it even when it seems overwhelming at times, and make order a tool that you wield, not an authority that you blindly obey.