There is increasing evidence that the world is on the cusp of (or maybe the beginning of) another transformative revolution. In the way that the industrial revolution inexorably altered the day to day lives of most humans, the rise of increasingly powerful and generalized computing systems and AI could forever change the baseline condition of humanity. But this change for the better is not assured and there are many potential pitfalls that could prevent humanity from reaching the heights that seem tantalizingly close.
There is a non-zero chance that humanity is entering a phase of hyperbolic growth and productivity, and if we can get there, the assumptions of wealth in today’s world will become almost meaningless in this new world. As a comparison, the average American is considerably wealthier and more capable of fulfilling our basic needs than most kings from 400 years ago. To that king, the average person’s life from now would be impossible to imagine as that average person’s wealth comes from entirely different places.
For more on this idea, I recommend this video:
Or for a more in depth look, an essay that the video draws many ideas from:
The Most Important Century - EA Forum
So what does this mean for investing and charitable giving? A school of thought called Effective Altruism has arisen with an answer to this question.
Effective altruism is a philosophy and community focused on maximizing the good you can do through your career, projects, and donations.
If we believe that technological advancement has the potential to increase overall human wealth by orders of magnitude over the next century then the best thing we can do is to spend money on things that will bring about this future and solve problems that may prevent it from coming into being (aka prevent existential risks).
Effective altruism is a philosophy that has been embraces by many high net worth (HNW) individuals, especially in the technology sector. Many have made pledges to spend the wealth that they have earned over their lifetimes and have started building vehicles to do so. Open Philanthropy is an example of this, created by Dustin Moskovitz, a cofounder of Facebook and Asana, and his wife Cari Tuna. They have committed to spending their fortune on projects to make the world better and Open Philanthropy project is a vehicle to do so.
So far, effective altruism has been dominated by HNW individuals as they have the most to give (SBF is a big proponent of Effective Altruism), but this doesn’t mean that this philosophy can’t also apply to everyday investors, and specifically cryptocurrency investors.
Even if the world does go through a sea-change moment in which our current ways of living are improved by orders of magnitude, we do not know when this will happen or how much work it will take to get there. Some predictions (watch the video above for more info) propose that, if trends hold, by around the middle of the century we as a civilization will have enough computational power to simulate general intelligence.
Now, of course these are just predictions and reality could end up being totally different, but if we run with these assumptions then the next 30-40 years could be momentously important for humanity. Conveniently, this timeframe also coincides with the optimistic views of cryptocurrency investing. While many find their way to crypto in the hopes of getting rich quickly, there is a strong undercurrent of patience that underlies many investors’ mindsets.
Those of us who believe in the vision of Ethereum and expect its value to the world to increase significantly in the next 10 to 20 years are also betting on the increased value of it’s native asset ETH. While the value proposition may be different for Bitcoin, the same underlying principles are present in the investment thesis of Bitcoin investors. This is epitomized in the “hodl” meme.
The medium to long term value proposition that many cryptocurrency investors believe in is aligned with the timeframe for hyperbolic growth. If we expect significant increases in the value of these assets over the next 20 years then the value added from productive investment is dwarfed by the value add from simply holding them (perhaps combined with periodic rebalancing to take advantage of the seemingly regular market cycles). This newly created wealth can then be recycled back into achieving hyperbolic growth.
Compound interest is a hugely powerful force in the world. But it operates most effectively on longer timescales. 3% interest, compounding monthly, yields a ~12% return over 4 years but an ~80% return over 20 years. Over 100 years it yields a ~2000% return. Compared to 20 years, that is a 25x value increase in only 5x the time. But if we expect the price of ETH to increase from ~$1500 now to ~$10,000 in 4 years then the return on interest is marginal compared to the appreciation (12% vs 666%).
You may raise the objection that if you invest the ETH you get both the interest and the appreciation value together. That is true, but this is where we bring in the giving angle. One hard part about trying to maximize your impact to give the most money is the question of when you should donate your money. Because money tends to grow, you can generally always give more if you wait longer. But the longer you wait, the more opportunity cost is missed and the less that can be done with that money now to compound progress.
Yes, progress compounds just like money. This is the key mechanism that theories of hyperbolic growth are built on. Generalized AI would be able to significantly increase the rate at which progress can be achieved by significantly increasing overall productivity. Money is just a proxy for productivity, so the sooner you can start significantly increasing productivity, the better our chance for reaching hyperbolic growth and making our current wealth insignificant (a good thing).
So how do we decide when to invest in charitable giving and causes that will accelerate progress? The simple answer is “right now” and the simplest way is to invest the assets and donate the interest. While this amount may start out as insignificant, if our thesis about the value of Ethereum and other cryptocurrencies is correct then the amount that it will earn will increase over time. Those investors who have already been giving their interest will be primed to give more readily when their investment has increased in value significantly. But this is a problem that the mainstream effective altruism and charity space is already working on (how to get people with lots of dollars to donate).
I want to get people who aren’t rich (yet) and are making big bets on crypto to start thinking about these issues, and to start giving without having to compromise on their directional bets. In the last few years, much of the infrastructure to do so has already been built. We just need to put it all together.
A streamlined set of interfaces and smart contracts that allow long term cryptocurrency investors to deposit funds and direct the yield to real world charities and initiatives for long-termism.
There are many different options for where to donate, how to do so, and also how to generate yield on the principal investments. One vision for Yield for Good would be a maximally flexible design where the yield source, yield splitting protocol, and charity choices are all adjustable. This may be a worthwhile goal, but to keep things manageable I would like to focus on figuring out one particular workflow and process and expanding from there.
I have chosen Yearn vaults for the MVP because I have experience with using them at YAM, they offer most of the functionality we need. Element.fi is an easy choice once using Yearn since they use Yearn as their yield source for their fixed rate products. Endaoment seems to offer exactly the service that this product needs on top of a wide variety of charity options.
The heavy lifting of the interfacing between depositors and charities could be done by Endaoment as they are a purpose built organization for this. Their contracts accept most major Ethereum based cryptocurrencies and will internally swap them for USDC. They allow funds to be donated directly to charities or via a donor advised fund.
Further research into what the most effective way to interface between Endaoment and the yearn and element smart contracts is required to make informed architectural decisions about this interface. Do we want to use direct donations, community funds, or donor advised funds?
This would not be a strictly YAM-built project, so the PIO could also reach out to other organizations for grants, like Yearn or Element. Arrangements with those DAOs and other grant giving organizations would be managed by the PIO.
There are significant opportunities to cross market this product offering.
<aside> ❗ This is highly speculative
</aside>
I have a very talented friend who is very interested in creating a post-apocalyptic, NFT based, world-building art project. This will be an ambitious project and in order to do it justice, he will most likely be looking for funding to work on it.
There are potential synergies between this project at Yield for Good on a marketing level.
I bring this up to highlight opportunities to build on top of this idea, not to imply that it will happen or that he will want to collaborate in this way.