Crypto is fundamentally a cultural movement aided by technology, not the other way around. The success of Web3 depends on the ability to sustain a culture that prioritizes long-term prosperity over short-term gain. Manufacturing this culture from scratch - by the founding of a utopian “network state” - may be difficult. But fortunately, it may not be necessary.
“In terms of the cryptocurrency economy, the criteria for desirable and undesirable behaviors are not short-term profits of individuals, but long-term co-prosperity in which the entire ecosystem can grow and individuals can benefit.”
“How to Design Cryptocurrency Value and How to Secure Its Sustainability in the Market”, Professor Soonduck Yoo, Hansei University, Korea (Section 3.2.1)
Where do you place long-term bets in the world of Web3?
A state of continual, primordial chaos, with new firms, chains, and communities emerging (and vanishing) by the day, is a difficult environment to make long-term decisions. And it seems we are still at the beginning of the beginning, with many existential questions still unanswered.
In the first part of this article, we will attempt to articulate two of these existential questions, reframing the discussion as fundamentally pertaining to culture rather than technology.
In the second, we will dive deeper into the cultural substrate, or the internal and external conditions required for a successful long-term, crypto-based society.
Part A: Fundamental Questions
Question 1: What is a sustainable cryptocurrency, and how can it be created?
An ambitious and highly interesting paper by Professor Soonduck Yoo of Hansei University in South Korea, released in 2021, suggests an answer to the above question. Yoo wrote the paper for a friend who was planning to start a blockchain-based business and wanted to know the best way to go about it.
Carefully arguing from first principles, Yoo concludes what is empirically obvious to many experienced crypto investors: a protocol only works long-term if the majority of people make a conscious decision to forgo short-term profits for long-term co-prosperity.
In other words, technology, tokenomics, and governance may be necessary to enable long-term sustainability, but not sufficient to ensure it.
If these factors are ultimately secondary, the single most important factor in determining the future viability of a cryptocurrency or protocol is in fact culture. That is, the fundamental code or "Layer 0" of human society.
Yoo’s thesis creates a problem for the Anglo-Saxon West, which has put individualism as a cornerstone of its culture, and can justifiably point to the success of capitalism as evidence of its efficacy. As every investor knows, however, past performance is no guarantee of future success.
It’s not clear yet if a culture based on individualism will work in the futuristic world of crypto. This is tied up with the next big question hanging over the future of Web3.
Question 2: What is the role of government and the nation-state, if any?
His argument is that nation-states are a failing, transitory concept that had their heyday in the “peak centralization” days of the 1950s. Blockchain technology enables us to form entirely new states on-chain, composed of individuals who already share the same values and culture.
It’s true that large countries tend to acquire large central bureaucracies that by nature excel in times of stability and as a result, vigorously resist change. But not every state is a megastate, and not all scale leads to centralization. Indeed the concept of a state is preserved in the very name ‘Network State’ - it is simply a question of keeping the scale below a certain level.
Genetic evolution is acknowledged to have taken millions of years. Evolution sped up considerably when it migrated from the level of genes to the level of memes (i.e. culture, tradition, language, literature), but even so, the process of evolution requires time.
If we accept for a moment that creating a robust, antifragile culture must necessarily take millennia, the only logical place to search for this cultural substrate is an existing nation-state.
Such as, for instance?
Korean civilization has an unusually long history, stretching back to 2,333 BC. Having been invaded nearly a thousand times, it is also a country that understands survival (which is another word for sustainability).
It is possible that, even for Balaji, Korea’s cultural code is worth a second look before doing away with the nation-state altogether.
Until recently, and perhaps for many even today, the Korean brand has remained associated with the tragedy of the Korean War and the subsequent dictatorship of the Kim family in North Korea.
North Korea is a recent phenomenon, and according to the Lindy rule has at the very most another half-century of existence. Contrast this with South Korea, which is running on a cultural code that can be dated back to the country’s founding in the third millennium BC.
The founding legend of Korea is both interesting and relevant to this discussion. Central to the legend is the country’s founding philosophy. Known as ‘Hongik Ingan’ (‘For the benefit of all mankind’), it is an expression and concept with which all Koreans are familiar from birth.
Hongik Ingan: Korea's cultural 'genesis block'
More than just a founding myth, it could be seen as the “genesis block” of the Korean cultural chain. It runs like a seam through Korean culture horizontally (art, science, literature) and vertically (through the actions of its heroes and great historical figures) over the ages.
In recent decades, South Korea has risen from the ashes of the Korean War to attain a world-leading position in multiple industries, including entertainment. Could the blockchain be next?
The country’s achievements of the past fifty years are a result of government policy and investment, but have ultimately been possible thanks to the culture of Korean togetherness. It’s not unreasonable to expect that this culture might contain insights about how to build things that last.
Part B: Korea's Cultural Code
While it is hard to answer both of the above questions in a single article, my hope is that by learning more about the Korean cultural code, it should be possible to gain an insight into how the Web3 future could play out.
Having stumbled across the paper by Professor Yoo referenced at the beginning of this piece, I was intrigued to know more. In preparation for the article, I emailed for an interview, and received a phone call the following Saturday morning, which turned into a lengthy Zoom conversation.
Like most things in Korea, many of the insights were between the lines rather than stated explicitly, but they hopefully give breadth and depth to the ideas outlined so far.
Professor Yoo’s background is non-typical, both as a Korean and an academic. After graduating from Yonsei University (one of the three SKY universities, or Korea’s Ivy League) she studied for four years at Newcastle University in the UK. In the first six months, she forced herself to learn English by avoiding Korean acquaintances and by leaving the television on as she slept.
The only foreigner in a class of 15, she was also the sole student to finish the program, to the surprise of her supervisor. “He asked me how Korean people manage to work so hard, and I told him, ‘I don’t know, I’m just trying to save tuition fees!’”
She then worked for Samsung in London as a software engineer (focusing on the payments sector), and eventually returned to Korea. After twenty years of working in industry, she began a new career in academia in 2013.
While her main job consists of university teaching and research, the majority of her income is from projects with the Korean government, whom she advises on technology investment.
“Most of the papers I’m doing are sponsored by the government. They want to know what strategy they should have for the future.” She is currently working on a project relating to the impact of AI, a subject she believes is vital to the development of the metaverse and the use of cryptocurrency as a gateway back to the fiat world.
Uphill struggle and the adaptive valley
As I listen to the story of her career and education, certain things leap out. A recurring theme is starting at the bottom of a pyramid and progressing to the top.
Whether this was beginning in the bottom half of her university class in Korea and making it to the top 10%, learning English in six months, or changing careers at the age of 42, there is a clear willingness to dive headfirst into difficulty.
This seems related to the history of Korea. “In our country, there are no natural resources. We only have manpower. If you want to get something you have to work.”
The adaptive valley: from Peak 1 to Peak 2
This uphill struggle is highly linked with an evolutionary paradigm expressed in shifting balance theory, also known as the ‘adaptive valley’. Many will be familiar with it from the Innovator’s Dilemma, wherein incremental innovation (which favors large companies) is distinguished from transformational innovation (which favors smaller companies).
More poetically, it is encapsulated in the mellifluous words of the poet and polymath Eric Weinstein:
“Genius, at a technical level, is the modality combining the farsightedness needed to deduce the existence of a higher peak with the character and ability to survive the punishing journey to higher ground.”
The War on Excellence, Eric Weinstein, Edge.org, 2013
The adaptive valley is relevant to Web3, as all blockchain-based solutions - whether DeFi, P2E gaming, or Music3 - all represent transformational versions of their Web2 counterparts, and require a willingness to endure Weinstein’s ‘the punishing journey to higher ground’.
The expression ‘long-term’ is important in the paper, and of course, refers to an emphasis on the future.
A perpetual underdog, caught in between Japan, China, and Russia, and unable to rely on scale, Koreans have a cultural predisposition towards transformational innovation and the grueling journey through the valley that it entails.
Samsung's early days
“Samsung was originally a company that sold rice,” Yoo says, “And this was obviously important after the war. But the owner did not believe this would always be the case, and went to Japan to find out what would be next. That’s how Samsung got into electronics.”
Since then, Samsung has maintained its future-oriented strategy, entering semiconductors, electronics, construction, and more recently biotech. “All companies believe that if you stay where you are, your business will soon collapse.”
In the Korean mindset, however, “long-term” extends both forwards and backwards.
Yoo speaks with gratitude of her parents on both sides of the family, “My Mom always encouraged me in my career and said, ‘Marriage is not your life’. I always thought she would have been a great marketer if she had been born a generation later.”
She also recalls how her husband’s father was self-taught in many disciplines, and but for the Korean War could probably have become an accomplished scholar. Behind these recollections, there is a sense of obligation to carry out the hopes of the previous generation.
When talking specifically about innovation - which is her focus as a researcher - Yoo states, “New things come from old ideas. There is nothing totally new.”
I feel the need to probe Yoo on the topic of ‘co-prosperity’. The paper claims that the success of any cryptocurrency rests on its holders forgoing the opportunity for short-term profit. As the brief history of cryptocurrency shows, this is far from guaranteed and has been the downfall of many a token.
She is somewhat taken aback by my question, and responds, “I would never think about it any other way. I have to think about the long-term, what’s going to happen. It’s just my responsibility”.
In the 1960s, when Korea was emerging from the wreckage of the Korean war, the fate of the country hinged upon the success of its early industries (Hyundai, Samsung, and Posco).
There is a story of a factory in which the workers refused to leave after the end of their shift. The owner of the factory had to disconnect the power in order to force them to stop working. Asked why they continued to work without overtime pay, the workers responded they were working for the next generation.
Looking around the prosperous capital of South Korea today, it is fair to say that their diligence has paid off, and their descendants are benefiting from their long hours.
A more recent, and well-documented, example is the reaction of Koreans to the Asian Financial Crisis. When the bankruptcy of Daewoo led to massive unemployment and forced the country to apply for IMF support, ordinary people sold gold and family heirlooms to donate to the government in order to pay back the loan.
While these are only anecdotes, it is an interesting comparison to the more individual-based cultures of the West.
Let’s take the UK, my own culture. In the same decade that Korean workers were toiling voluntarily for 16 hours per day to build the country’s first shipyard, shipyard workers in the UK were striking for increases in pay. And in a sense both were successful.
The UK shipyard workers did manage to increase their short-term pay, but at the expense of the industry as a whole, which collapsed, leaving whole communities dealing with unemployment that still continues. By contrast, one in three ships today are made in Korea, and the children of the original shipyard workers can work reasonable hours for reasonable pay.
For the Korean mindset, the expressions ‘long-term’ and ‘co-prosperity’ are inseparable, as a community that does not prosper together self-evidently offers no future to the individuals that make it up.
In Korea, the pursuit of co-prosperity as the fundamental aim and duty of human existence is hard-wired into the cultural DNA. This goes back to the country’s founding philosophy of Hongik Ingan.
Western civilization is younger than Korean civilization, and is believed by some (in fact, many in the crypto community) to be losing its global supremacy. The hyper-evolutionary environment of Web3 may well shine a light on the cultures and systems that are truly sustainable.
The role of government and corporations
As the 20th century showed us, getting rid of age-old traditions and replacing them with naive-optimistic structures based on theory can lead to tyranny and mass graves.
Is there a middle way? Here again, Korea may provide a hopeful example.
Yoo offers the case study of KakaoTalk, the Korean Whatsapp. Of the three major telecommunication companies in Korea, two of them - KT and SK - successfully blocked the introduction of Kakao, in an attempt to preserve their SMS revenues.
The founder, however, managed to persuade the third telco LGU + to partner with him, arguing that the new product would be popular and help strengthen its market position. When LGU + accepted, the other two incumbents had no choice but to follow, and now Kakao is larger than Naver (the Korean Google, which itself became larger than Samsung in 2012).
This case study tells us that inertia, which is accurately described as one of the strongest forces in the universe, is actually fragile in certain circumstances. In a future-oriented culture, where both the suppliers and the consumers are always looking for the next big thing, centralized bureaucracies are ultimately powerless to halt change.
One can see similar dynamics in the Korean government, with the latest presidential winner making cryptocurrency reform a non-trivial part of his leadership platform.
In a time of chaos, the role of academics is to bring order by creating frameworks. “We have to build up the law, and to do that, we need to make guidelines, which are based on specific cases.” Integrating cryptocurrency into the legal system is the next key step in integrating crypto into civilization.
Where from here?
Professor Yoo’s days are, as one would expect, busy. Beginning at 7.30 am, with working group Zoom calls often going late into the night, she has only one day off per week. “The government starts so many open projects, and I keep getting more requests,” she says, “I get paid to study, and the money is tax-free as it comes from the government. How great is that!”
Apart from the financial motivation, there is, as one would also expect, an eye to the future of Korea. “Students today will be living in a different world in 10-15 years’ time. If I gain knowledge, I can hand it to the next generation.”
There is a growing understanding, led by forward-thinkers such as Yoo, that Korea needs to position itself at the forefront of the blockchain revolution. “In 5 years’ time, if you don’t have a cryptocurrency account, you won’t be able to do business.”
Yoo’s paper posits the idea that cryptocurrency requires a voluntary sense of collective responsibility for the long term in order to be sustainable.
To take another one of Balaji’s insights: there are no new ideas, only new technologies. More specifically, an idea can be around for centuries before the technology appears to make it globally dominant.
But if we flip this idea on its head, we could also say that the concept of voluntary collective responsibility has been waiting for blockchain technology to unleash its global potential. The cultural analysis suggests that it is most likely to take root in a country like Korea.
Thanks to art, cinema, music and literature, cultural code is open source, and requires only continued exposure to attain proficiency. The Korean Wave has for some years now been spreading across the globe, and this is why – in future – it’s possible that the most successful Web3 communities will be based on Korean code.