Actually, in the previous two articles, I mentioned DAO and governance, and a key term kept coming up, which is "legitimacy" (正当性). In the crypto world, we often encounter this word. Let's first look at its basic interpretation.
In political science, legitimacy is the recognition given by the people to the law or regime as an authority. In moral philosophy, "legitimacy" is often positively interpreted as a normative status conferred upon rulers, related institutions, positions, and actions by the people. American political theorist Robert Dahl used the metaphor of a pond to explain legitimacy; as long as the water level is maintained at a certain level, political stability can be maintained. But if the water level falls below that level, political legitimacy is threatened. I personally like his metaphor quite a bit. It reminds me of the old saying by Wei Zheng, "Water can carry a boat, and it can also capsize it". The water level here is analogous to the degree of legitimacy. Obviously, this type of legitimacy differs from legality. This distinction is one of the common misconceptions we often make.
In the past internet era, we didn't frequently encounter this term. Typically, we evaluated a company based on its management efficiency, organizational values, and the personal IP of its founder to determine if it practiced "just management". But most of the time, because companies operate within traditional economic structures and are constrained by traditional legal and economic systems, the boundaries are relatively clear. First, companies must pass the "value threshold", providing real user value and achieving economic feedback balance, followed by the "value perception threshold", where the company needs to align with societal values on a larger industrial, economic, and societal scale to achieve widespread acceptance of its management legitimacy. We've seen many cases where, even if the company's management breaches certain societal boundaries, it doesn't affect the company's stability. That is, companies, as symbiotic entities of the traditional political-economic system, don't need to delve deeper into the term "legitimacy" and often inherit the legitimacy of higher-order systems like nation-states.
However, in the decentralized world, especially when faced with many decentralized infrastructures, protocols, and DAO organizations, the issue of legitimacy has been raised. First, the technical systems often transcend traditional companies or products, resembling state organizations or political parties more closely. Second, traditional laws, due to their lag, are clearly inadequate to regulate at the "foundation" level. Many of these foundations choose Switzerland or Singapore to minimize their regulation, using traditional public organization laws. Lastly, many innovations in decentralized technology pertain to public governance issues, and solutions to these problems inevitably lead to the emergence of public governance norms. These norms are typically the result of free competition from within the innovations, not predefined.
In the decentralized organization, it has effectively escaped the traditional corporate and legal-economic structure. Thus, the governance relationship between the natural organization and the technical system requires a new norm. This has prompted everyone to start discussing this type of legitimacy, such as the legitimacy of the foundation, or the legitimacy of DAO organizational governance, or the legitimacy of technical system governance. Where does it come from? We began to explore what this new form of legitimacy is, especially in the decentralized or Crypto context.
The stability of the water level is related to the stage of the pond's ecology and the boat itself. Legitimacy, more precisely, is whether the normative governance matches the decentralized economy or community in the current space-time context. That is, the legitimacy requirements for different stages of the decentralized system or organization are different, and it's challenging to find a single mathematical standard to evaluate this legitimacy.
In layman's terms, the relationship between legitimacy and the system phase is significant. In the early phase, economic positivity is an essential indicator of legitimacy. For example, many DAOs are dedicated to solving major public problems for humanity. One dimension to consider for the sustainability of a DAO is its economic positivity. During the middle phase, we raise our demands. Legitimacy no longer rests solely on the economic level but increasingly on the governance process. Whether a foundation's governance is too centralized becomes a topic of exploration. In the later phase, when the economic scale has grown significantly and governance norms have been established, the focus turns to the community's culture or what is colloquially referred to in Chinese as its "flavor". There's currently no unified standard to delineate the legitimacy requirements of these different phases.
Moreover, different protocol categories have different levels of legitimacy requirements due to the inherent nature of legitimacy. Base layer protocols typically require a higher level of legitimacy. That's why there's a push for base protocols to be more decentralized, indicating a hope that their governance possesses higher legitimacy so our assets are safer and more stable. On this point, debates about the Ethereum Foundation have been ongoing. They are actively exploring more legitimate governance schemes, trying to balance the foundation as a centralized organization with the decentralized system. The key contradiction may not be the system's degree of decentralization itself. The community generally accepts iterative decentralized systems. Still, the critical point is how centralized foundations govern the process in what standards.
To put it simply, the legitimacy of the decentralized base protocol is of more concern to our community currently. Upper layer protocols, as inheritors of this legitimacy, are granted a level of tolerance. However, if the legitimacy of the base protocol ceases to exist, the legitimacy of the upper layer protocols will be quickly threatened.
To delve deeper, it's clear that this kind of legitimacy can be understood at different levels. Clearly, there are several dimensions, including organizational entities, theoretical norms, technology, economics, governance, and community culture. The legitimacy of these different layers can indeed be understood differently.
For organizational entities, it's about which norms you follow to establish the entity, whether it's the traditional legal norms or the decentralized world's legal norms. As it appears now, the underlying protocols often choose a kind of neutrality minimizing traditional legal norms while giving more thought to the relationship between opposing systems when setting up organizational entities. On the theoretical system level, we sometimes focus on the principled agreements, or norms, of this organizational entity, which may be reflected in whitepapers or foundation governance processes, and often hints can be gathered from the daily outputs of initiators. Sometimes, this legitimacy comes from a balance, a balance between self-creative potential and public community norms. Unfortunately, at this moment, we don't have a more simplified thing in this dimension. With the reform of IP and the establishment of standards due to decentralized technology, there might be a breakthrough.
On the technology side, when discussing decentralized systems, so far, there's no single index that can fully measure this legitimacy. But decentralized systems themselves are a balance, constantly emerging systems. We have certain expectations in terms of security and stability, especially what we often encounter. Technologically, the deeper the level, the higher the safety factor we demand. The security and stability of this technological system is also a challenge for the current blockchain world. We're not just concerned about decentralization; we care if a decentralized system can match our scenarios and scale expansion in the long run. The degree of decentralization of the technical system is closely related to this legitimacy.
Economic balance is a very evident part of legitimacy. For the current decentralized organizations, whether they're foundations, DAOs, or even companies, the economic aspect is taken for granted. To put it simply, a system that cannot break through economically cannot grow. This might not be a hard requirement for all future organizations, but it certainly is in the current blockchain technological framework. Why? In a holistic decentralized technological system, this economic balance seems almost destined. Organizations and systems that cannot even achieve economic balance are at a severe disadvantage in certain competitive phases. So, a decentralized organization first needs to use current technology and token innovations to achieve this economic balance. This is also the most discussed part.
Real governance and cultural legitimacy are rarely explored, mostly by innovators focusing on this direction. Even today, we don't have a particularly clear governance framework and norms, even a simple one. Everyone seems to operate by a tacit agreement. Bitcoin's legitimacy is very minimal, but this minimalism is often very difficult for new decentralized organizations to learn from, a very high requirement. Especially at the governance level, even the emergence of some governance protocols or standards might have a significant impact on our paradigm in this dimension. Pure governance legitimacy goes beyond voting, beyond token and non-token methodologies. We need a systematic framework. Personally, I think the term "minimal governance model" might be explored more in the future. If we can objectively resolve major contradictions in the governance process while adhering to very simplified principles and models, that's what we need. The requirements for pure governance legitimacy are very high. Combining the theoretical and practical experience of both Eastern and Western systems, capitalist or socialist, can produce very paradigmatic governance norms. There's a good chance that we are still in the gestation period of this governance paradigm, without a truly "vibrant" governance model appearing.
Community culture is an interesting dimension. Legitimacy has seen many interesting cases. Because of the forkability of our underlying systems, the discussion on the legitimacy of community culture becomes more interesting. Whether it's a minority or majority cultural exploration is a matter of cultural depth or breadth. Our community has too much freedom in different cultural dimensions, making the real classification of this legitimacy more diverse in the future. From a depth perspective, various "root communities" might emerge, which means they gain deep recognition from a minority. Not all root community's legitimacy can enter the broader community, which is evident in the current NFT field. "Branch communities", which have more external cultural legitimacy, not only have consensus depth vertically but also have expansiveness. Many underlying protocols are like this; whether it's Eastern, Western, or Central, old or new community members can form a practical legitimacy from a more general and pragmatic perspective. This practical legitimacy might face some competition from the root community at this level, but its expansiveness is strong. Also, something like a "twig community" – when we often ask some very young post-00s playing in the NFT community, the key point is that they like it. Matching a certain phase of culture is crucial. The current Web3 culture is an early adopter culture similar to "college student culture", so this natural fit is more likely to gain cultural legitimacy.
Of course, there are certain legitimate characteristics that can penetrate through various layers. Essentially, it refers to the balance between creativity and commonality. What does it mean? It's like the tension between individual freedom and collective freedom, and how they are balanced. A word I particularly like is "naturalness," which might be able to penetrate into the various interpretations of legitimacy. By this, I mean that in the pursuit of individual control, there is also an allowance for a certain level of redundancy in the governance of each layer. This is true not only in the system design level but also in the system's interactive level. The advantage of this is that when the individual's creative intent is good, but it encounters negative feedback from the real public community or the larger system, such naturalness provides space for reflection and discussion, both for the governing body and the community. If we truly believe that the future is uncertain, and that technological systems have more uncertainty than certainty, as do governance and culture, then this naturalness becomes very interesting in any dimension. This naturalness clearly contains a degree of authenticity, because if most information is untrustworthy, then such naturalness obviously ceases to exist.
Of course, there's also the positive economic character that I mentioned earlier, which is indispensable over a long period of time. But we can add an aspect that interacts with this economic character, and that is the need for a certain level of "equality" on some layer. This equality can offset the early stages of legitimacy built on an overemphasis on economics, which can lead to concentrated conflicts when new communities join later, due to differences in consensus. Currently, this equality within legitimacy seems to be better implemented at the middle or lower protocol layers.
Certainly, a degree of sustainability and iterability is needed now. For us, "low trust" is a good summary of some characteristics of legitimacy. To some extent, no matter the layer, we generally prefer a non-disruptive type of legitimacy rather than one that's more flamboyant. Or more precisely, what we accept in the long run is a legitimacy where changes are limited in scope and degree. If you've ever had fish at home, as children, we often changed the water too frequently. The result usually went against our intentions.
We have every reason to expect that in the next ten years, there will be a paradigm shift in governance legitimacy. Especially in the interaction between DAO organizations and the traditional world, we have every reason to accept a more expansive definition of legitimacy to ensure that a new organization with a high degree of freedom has real significance.
It's like we're beside various ponds, waiting for the autumn rains, large or small. Watching the water rise and fall with the autumn leaves. But these ponds might one day be connected, flowing to a not-so-distant deep sea. We don't know whether it will be sharks or turtles that surface after the storm, nor do we know which battleship will sound the victory horn in the end. However, one morning while walking on the beach, I saw a very vigorous fish leap out from the shores that are usually filled with human voices. I couldn't help but think, that fish is really powerful. I wonder who will jump out of the sea in the next big wave?
The past cannot be grasped, the present cannot be held, and the future is unknowable.
With this sentence, I send my regards to my friends.