Governments are behind, ladies and gentlemen, very much behind!

First it was AirBNB and Uber. Both started by challenging government regulations. Both were illegal in most jurisdictions but both prevailed, either through lobbying, citizen pushback, or, as some suggested, placing the right street workers in the right positions.

While they pioneered new business models, they also introduced a new concept — defying government regulations is fine. While law-abiding zombies are asleep in front of Netflix every evening, Silicon Valley innovators cook new get-rich-quick schemes by challenging status quo, often doing so in the San Francisco 1960s style, where freedom to live and create was above the government’s wish to control the masses.

While academics spend years studying Ubers of the world, sharing their wisdom about single companies changing industries, they miss a bigger point of the story — the government-defying innovation trend has only begun.

Consider the crypto world. What started as a toy is now worth trillions. This market challenged every law imaginable — securities laws, anti-money-laundering laws, regulations around knowing your customer, tax laws, and many more. Non-accredited investors can now invest along with multi-billion dollar pension funds and do so absolutely anonymously. You can store your money offshore without even knowing about it and not many care about reporting their crypto earnings in the world where no one can find out about them by design. New startups are popping up every day applying this anarchist software layer to everything from real estate to drug development, defying state and local laws, and making court orders impossible to follow.

The government is not used to this and has no idea what to do about it. This movement is too big for them to understand and they’ve been waiting too long to act. It took a decade for SEC to pay attention to bitcoin and bitcoin is already yesterday’s news. Until recently, no one at SEC understood crypto, so they followed their default modus operandi to sit and wait. This approach of hiding your head in the sand while showing your bottom to the world never produced great results, but that’s all they know. Now that the market is huge, it’s too late for them to do anything, as taking down a multi-trillion dollar baby will create a nuclear winter in the global financial market, making the past five recessions look cute.

The truth is simple — the government can’t take crypto down and it won’t.

First of all, it’s hard to shutdown a distributed network of thousands of servers that no one owns or controls. Because these servers are located in every country imaginable, it would take a 20 year effort to convince every government in the world to do it. If we are having hard times convincing just a handful of countries to reduce carbon emissions and fight climate change, how are we going to convince the entire world to shutdown every server they don’t control?

Secondly, addressing a crypto-scale challenge requires a competence level far beyond that of the government. One can write a book about it, but the foundation of the government is built on the wrong system of incentives, the inability to attract, lead, and empower great people, and a collection of bureaucratic processes. Fixing the foundation won’t do much though, as our system of checks and balances features a group of philosophers sitting in the ivory tower, worried about their next re-election campaign. This group has their own system of incentives that has zero alignment with public interest, and it’s uncertain if any of them even understands their own country and the implications of their decisions. Public statements they spit out on TV make one wonder how they got elected in the first place. When faced with challenges, they setup hearings, debate them to death, and eventually give government agencies half-ass-developed ten year goals. Agencies have no clue how to do address them, so they spend years to hire contractors who don’t know how to address these issues any better than their clients, except on paper. These contractors spend the next few years thinking about it, showing themselves in good light, spending money, and eventually complaining that their project wasn’t funded well enough to address the problem. By the time someone competent looks at the problem, this problem becomes yesterday’s news.

So now we are at a point where DeFi, or decentralized finance, is the new movement eating the world and it’s now taken a huge bite of the government as well. It’s still uncertain if the government truly understands what it means, but it has clearly taught us an important lesson — yes, you can launch efforts against the law and yes, they can prevail. Of course this makes one wonder why we need this big of a government, but that’s a conversation for another day.