Smart contract blockchains will become less cypherpunk, says VC boss

The original “cypherpunk” values that inspired the first smart contract platforms will likely phase out over the next ten years as institutional adoption forces them to become optimized for speed and compliance, says Jesse Walden, the managing partner of Variant Fund. 

In a Sept. 30 blog post, Walden explained how the first decade of blockchain development was inspired by Bitcoin’s original cypherpunk values: “censorship resistance, open source, permissionlessness, and a new glimmer of building a democratic [and] equitable internet on top of a shared world computer.”

Now, smart contract platforms are more heavily driven by the values of “performance, cost, profitability,” and legal compliance over the more noble ideals of the past.

Walden notes that many of the most popular use cases for smart contract platforms — stablecoins, real-world asset (RWA) tokenization, or decentralized physical infrastructure networks (DePIN) — no longer need to be decentralized or permissionless. 

Instead, they only need to utilize the decentralization of the underlying blockchain for “openness, interoperability, and settlement.”

The cypherpunk movement began in the 1980s as a response to concerns about government surveillance, censorship, and limitations of free speech on an emerging technology called the internet. 

Some consider Bitcoin (BTC) creator Satoshi Nakamoto to be a cypherpunk or, at the very least, strongly cypherpunk-aligned due to the uncensorable and permissionless design of the Bitcoin network.

Walden says that while it’s not the end of cypherpunk blockchains, it’s “probably the end of the beginning.”

Ultimately, Walden says that crypto is commercializing and explains that this comes with particular unavoidable compromises, such as slacking a little on strict decentralization to get crypto wallets and apps in users’ hands quicker.

Related: Vitalik Buterin wants to ‘make Ethereum cypherpunk again’

But this isn’t all bad news. 

Much in the same way that mainstream music eventually becomes “corny” and repackaged for commercial purposes, Walden points to the small handful of pioneering artists that make the right compromises between their hardcore principles and making something palatable to a mass market.

“That mix of determination and pragmatism was admirable, because it has the most reach, and thereby, the most impact in taking culture one step forward at the largest possible scale,” he said. 

“So if you’re feeling like the values that got you into crypto are getting diluted by the mainstream market — I hear that but try to see it in a different light — because in terms of impact, the commercialization of crypto likely means the real opportunity is just getting started.”

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