Crypto is a wild mix of culture, code, and capitalism. It’s brilliant and ugly. It’s unfinished. It’s barely begun. The rabbit hole is deep and full of surprises that seem to animate the surrounding chaos.

Crypto’s culture is young and vibrant. I’m reminded of the early days of the web, when sites were weird and creators built without constraint. Then as now, nobody quite knew which way the industry’s winds blew; they built anyway. Crypto is the center of a new design trend that hearkens back to Space Jam, bringing its aesthetics into a technotronic future. It’s home to new writing and criticism that feels like the work of whip-smart semiotics majors. Like the early web, there’s lofty rhetoric about crypto’s utopian potential. New social clubs seem as enthusiastic about throwing underground raves in Paris as they are with the market value of their tokens.

This exciting emerging culture comes with a giant asterisk. I think @pinboard said it best when he described crypto as “an unregulated casino with a hip bar scene”. He continued: “there’s nothing morally neutral about the criminality at the heart of the endeavor”. Every big-time speculator, punter, grifter, money launderer, and ransomware bandit in the world is hard at work in the casino. No matter how literate the bar scene, it’s the fruit of a poison tree.

Just inside the crypto rabbit hole, we find a genuinely new and expressive culture emerging from the grimy bits of unregulated capitalism run amok.

Code animates the crypto ecosystem; its more starry-eyed believers claim that code is all that matters. And, to be sure, there is very interesting code behind crypto. A dozen years ago, Bitcoin introduced the world to a new form of distributed consensus. Half a decade later, Ethereum proved the viability of smart contract programming. Since then, algorithmic advancements have led to low-cost high-throughput chains. Emerging financial protocols on top of blockchains — MakerDAO, which creates a dollar-stable asset through collateralization; Uniswap, an exchange without an order book; and Compound, a decentralized interest rate market — all have innovative technical and economic underpinnings.

The technical history of the Internet is, in part, the history of the birth, adoption, and stewardship of distributed protocols by its broader community. Blockchains follow in this tradition but also depart radically from it: they are the first protocols to arrive with an asset class attached. Protocols like SMTP and HTTP created immense value for the world but captured little for their inventors; blockchains and the protocols built on top of them upset this balance, allowing inventors to capture considerable value for themselves. Historically successful protocols typically see slow early adoption; crypto’s new protocols break this mold by nearly requiring substantial up-front speculation (or wise investment!) in order to achieve escape velocity. As a result, it’s alarmingly easy to launch systems that look indistinguishable from Ponzi schemes or multi-level marketing.

Midway down the crypto rabbit hole, we find a technically intriguing class of Internet protocols that upend the historical balance of value creation and capture, leading to surprising and problematic new dynamics.

Ultimately, healthy economies need productive ends. While speculation almost certainly drives crypto’s outsize market cap today, it’s hard to ignore the community’s rapid experimentation. Perhaps crypto will never uncover true sources of value creation; perhaps there are none to be found. Or perhaps the essential ingredients are already in the kitchen. At the heart of every crypto experiment lies the simple abstraction of tokens: marks on ledgers maintained by the network. Anyone can wave a “magic wand” and declare the existence of a new token that the world will honor merely by collective agreement. Of course, waving wands alone isn’t enough to create value. Yesterday, we experimented by attaching goofy images of punks and apes to our tokens. Today, we’re starting to staple metadata with complex structure. Tomorrow, perhaps, we’ll wrap our tokens with increasingly sophisticated code: code that grants permissions and access rights, code that defines and enforces behavior, and code that describes how to interact with crypto’s new payment rails. There’s an immense design space to explore; it seems too bearish to entirely dismiss its potential.

The collective agreement that makes crypto’s “magic wand” possible at all is, to me, a puzzle. By nature, digital content can be reproduced at zero marginal cost. Why is it that we’ve decided to recreate scarcity in the digital world? Yes, we’ve grappled with digital scarcity in limited domains before. Video games sell digital items; the appeal is easy to understand. Software phones home to check its license. Intellectual property itself is a form of manufactured digital scarcity. Yet crypto seems to throw these doors wide open. Perhaps this was inevitable. Perhaps the centuries we’ve spent building societies and economic systems around the unavoidable problem of physical scarcity makes digital scarcity feel natural to us even though it’s unnatural to information itself. Whatever the case, the deluge of capital that floods the crypto markets today practically guarantees that we’ll experiment with manufactured digital scarcity for quite some time to come.

Deep down the crypto rabbit hole, we see that while crypto might portend a revolution, at its heart is a simple reassertion of scarcity in the digital realm — an assertion that is by no means a foregone conclusion.

Where does crypto go from here? With so many cards — cultural, technical, economic, and regulatory — in the air, it’s impossible to predict its future trajectory. But the technology industry is immensely path dependent. Particularly when buckets of money appear, feedback loops can form whose outcomes seem all but inevitable. Speculators and venture capitalists alike have inundated crypto with cash. Blockchains may become the future only because their story was told, speculated on, invested in, and told some more. Whatever drives us, if society decides to wander further down this road, we should expect to see the same unequal outcomes we see today merely reproduced in the digital realm. Despite the utopian rhetoric, economic power always concentrates: crypto may mint new winners, but the tune will stay the same.