Society Protocol's Overview of Blockchain's Security Issues
Context
ChatGPT, as prompted by Michel Bauwens:
Society Protocol's argument should be understood as a design thesis rather than as an established result in computer science or economics.
Several of its individual observations are well-known security and governance problems: concentration of mining or staking power, sybil attacks, governance capture, bridge compromises and the dependence of blockchain systems on off-chain social consensus. But the stronger conclusion—that these problems are an irreparable architectural flaw in all current blockchains and that persistent identity plus sybil resistance provides the necessary solution—is Society Protocol's own theoretical position.
There is therefore a useful distinction between the empirical and theoretical parts of the argument:
Empirical observation: blockchain systems depend upon economic incentives, human organizations and off-chain social consensus.
Society Protocol's interpretation: these dependencies make conventional Web3 fundamentally incapable of achieving genuine decentralization.
Society Protocol's proposed solution: put persistent, sybil-resistant human Actors and their social relationships on-chain, creating a Web4 Synchronized State.
This distinction is important because it allows the critique to be evaluated independently of the Society Protocol solution. One can accept that blockchains have substantial social-layer dependencies without necessarily accepting that Society Protocol's particular model of Web4 is the only—or even the best—way to address them.
the distinction between distributed and decentralized, and the distinction between the technical state and the social state
Those are the conceptual hinges of the article. Society Protocol itself defines decentralization as requiring both the absence of a single point of failure and resistance to capture by a small group; it then argues that existing blockchains have achieved distribution without adequately solving the second problem.
Contextual Quote
"verything we've explored reveals a fundamental truth: in current blockchain architectures, all metrics of decentralization can be falsified. Asset valuations, security mechanisms, governance structures, and even the underlying social coordination—all exist at the consent of invisible cabals. This isn't merely an occasional risk of bad actors, but an irreparable systematic reality embedded in the architecture of these systems.
As blockchain ecosystems continue to develop and gain mainstream adoption, we face a sobering future. Cabals will increasingly consolidate their power, systematically outcompeting traditional centralized institutions through regulatory arbitrage and opacity of operations. These cabals—operating sophisticated, distributed organizations with global reach—will gradually displace legacy financial cartels, not by delivering true decentralization, but by offering a valuable alternative that still concentrates power and wealth among a select few. The masses will continue to participate, lured by promises of decentralization and financial inclusion, while unknowingly strengthening very similar power structures to the ones they sought to escape.
Society Protocol aims to accomplish a fundamental reimagining of our approach to digital coordination, which is the only way to disrupt this inevitable trajectory.
Society Protocol disrupts this trajectory by bringing the social layer on-chain, creating genuine transparency around the very elements that cabals exploit. By establishing persistent, verifiable identities with real reputational stakes and immutable history, we transform the fundamental architecture of digital coordination—not through incremental improvement, but through a paradigm shift that fulfills the original promise of decentralization Web3 can never achieve. This evolution from blockchains Web3 vision to Web4 with Society Protocol represents a transformative approach to human coordination: one that enables genuine decentralization through visible, sovereign digital citizens, each with persistent reputations and meaningful state. By implementing true sybil-resistance and modeling the natural laws of time and energy, we create systems where digital identities have consequence, actions require real energy, history is verifiable, and trust emerges without centralized control. The future of human coordination isn't in static assets controlled by invisible cabals—it's in living systems where the social layer itself becomes the foundation."
- Society Protocol [1]
Overview of the Blockchain's Security Issues
* Society Protocol's Critique of Blockchain Security: Fake Assets, Fake Security, Fake Governance and Fake State
Source URL : https://societyprotocol.io/articles/fake-everything
This is a summary from ChatGPT, prompted by Michel Bauwens:
Society Protocol's Fake Everything (Prelude)(https://societyprotocol.io/articles/fake-everything/) presents a systematic critique of the security and decentralization claims made for Web3 blockchains. Its central argument is that blockchains can make transactions and ownership records technically transparent while leaving the actual human ownership and coordination structure largely invisible.
The article uses the word "fake" in a particular sense. It does not mean that blockchain transactions are necessarily fraudulent or that the cryptography does not work. Rather, Society Protocol argues that many of the quantities that users interpret as evidence of decentralization—market value, transaction volume, validator numbers, voting power and network security—can give a misleading picture because the underlying identities and relationships between participants are not sufficiently visible.
The argument can be summarized as a progression through four problems:
Fake Assets → Fake Security → Fake Governance → Fake State
The common cause, according to Society Protocol, is the absence of reliable sybil resistance: the blockchain can distinguish accounts, but cannot necessarily determine how many real people or organizations those accounts represent, or whether apparently independent participants are actually controlled by the same group.
Fake Assets: the problem of valuation
Society Protocol begins with the claim that the value of an asset depends partly on who owns it. If an asset that appears to be widely distributed is actually controlled by a small group, its economic and political significance may be very different from what the public believes. The problem is that ordinary blockchain addresses do not necessarily reveal the real-world ownership structure behind them. A single person or organization can control many addresses, while many addresses can appear to represent many independent participants. Society Protocol therefore argues that blockchain market capitalization, ownership distribution and other measures of decentralization can be misleading when the underlying ownership set is unknown. In its terminology, this creates "fake assets": not necessarily fake tokens, but assets whose apparent valuation and decentralization may depend upon a misleading perception of who actually owns them.
Example — FTX/FTT: In 2022, the collapse of FTX exposed the importance of the relationship between FTX, Alameda Research and FTT. A large apparent market valuation did not adequately reveal the concentration and interdependence underlying the system. Society Protocol uses the episode to illustrate its broader point that users may not understand an asset's real risk without understanding its true ownership structure.
Fake Transactions: the problem of artificial activity
Society Protocol next argues that blockchain transaction counts and reported trading volumes can be extremely cheap to manufacture. Because creating additional blockchain accounts is inexpensive, an operator can generate large numbers of transactions between accounts that it controls. This can create the appearance of a large and active community, high transaction volume or extensive economic activity without there being an equivalent amount of independent human participation. The article contrasts this with traditional payment systems, where transaction fees and institutional controls can make large-scale artificial activity more expensive. Its point is not that every blockchain statistic is fabricated, but that transaction count alone is not reliable evidence of genuine economic activity or human participation.
Example — the article's "Famous Coin": Society Protocol constructs a hypothetical cryptocurrency whose apparent 100,000 users, 10,000 validators and enormous transaction volume are generated largely by bots and controlled accounts. The example is deliberately hypothetical: it illustrates the possibility rather than documenting a particular $10 trillion fraud.
Fake Security: Proof of Work
Society Protocol argues that Proof of Work (PoW) security ultimately depends on the economic value of the network and the amount of computing power protecting it. If a network's value falls sufficiently, mining power can migrate elsewhere or the cost of attacking the network can become comparatively low. The article also argues that mining power tends to become concentrated in relatively few pools, meaning that the apparent decentralization of thousands of miners may conceal a much smaller number of economically significant actors. Society Protocol's stronger claim is that users cannot properly assess the security of a PoW network without knowing the economic and ownership structure behind its mining power.
Example — Bitcoin SV (BSV): Society Protocol points to the 2021 51% attacks on BSV, in which attackers obtained majority hash power and carried out chain reorganizations and double-spending attacks. The episode is used to illustrate how a network with substantially lower economic value can become vulnerable when the cost of acquiring majority hash power falls relative to the value being protected.
Fake Security: Proof of Stake
The same basic criticism is applied to Proof of Stake (PoS). Here the security of the network is linked to the economic value of tokens staked to validate the chain. Society Protocol argues that if ownership of those tokens is concentrated, then the apparent number of validators or staking participants may overstate the number of independent actors actually controlling consensus. Several addresses or staking entities may ultimately belong to the same organization. Consequently, what appears to be a decentralized validator set may actually contain a much smaller number of economically coordinated actors. Society Protocol therefore sees PoS as solving the energy problem of PoW without necessarily solving the underlying problem of hidden concentration of power.
Example — EOS: Society Protocol cites the 2018 EOS controversy in which block producers froze accounts following intervention by the EOS Core Arbitration Forum, alongside allegations of concentrated voting power. The episode illustrates the distinction between having many blockchain participants and having many genuinely independent centers of political power.
Fake Security: Threshold Signatures and multisignature systems
Threshold Signature Schemes (TSS) and multisignature arrangements appear to solve the problem of centralized control by requiring several keys or accounts to authorize an action. Society Protocol's objection is that the blockchain can verify that several keys signed a transaction but may not be able to determine whether those keys are controlled by several genuinely independent people. A nominal 9-of-15 arrangement, for example, could theoretically be operated by one organization. Thus, the cryptographic threshold may be real while the social threshold is illusory. Society Protocol sees this as another manifestation of the same sybil-resistance problem: technical separation of accounts does not necessarily imply separation of human control.
Example — Multichain: The 2023 Multichain collapse involved a $126 million exploit and exposed the extent to which operational control was concentrated within the project's core organization despite its use of threshold signatures. Society Protocol uses the incident to illustrate the difference between cryptographic distribution and genuine organizational decentralization.
Society Protocol's central claim is that PoW, PoS and TSS appear to provide different forms of security, but all ultimately depend on assumptions about who controls the relevant resources. If apparently independent miners, validators, signers or token holders are actually controlled by a smaller group, then the effective security of the system is lower than its visible statistics suggest. Society Protocol calls such a group a "cabal." The term does not necessarily imply criminal behavior: the group may simply consist of economically aligned participants whose interests cause them to coordinate. The critical point is that users cannot reliably see the group's existence or extent.
The article consequently makes a broader game-theoretic argument: once a group has acquired substantial control, it has little incentive voluntarily to give that control away. It can either continue extracting value from the system while preserving it ("sheer"), or eventually exploit its control more aggressively ("skin"). Society Protocol argues that ordinary participants may not discover the extent of this dependency until the system experiences a crisis.
Fake Governance: the problem of one-person-one-vote
The governance problem follows directly from the same weakness. A conventional democratic system attempts to give each person a vote, but a blockchain account does not necessarily correspond to one person. If creating identities is cheap, one individual can create many accounts. Token-based voting avoids this particular problem by weighting votes according to token ownership, but it introduces another: the voting power may then be concentrated among owners whose real identities and relationships are difficult to establish. Society Protocol therefore argues that token-based DAOs cannot provide genuinely democratic governance unless they can establish a credible relationship between blockchain identities and real people.
Example — the UMA/Polymarket oracle dispute: Society Protocol points to a 2025 controversy concerning a Polymarket prediction market in which UMA governance determined the outcome of a real-world event. The example illustrates the importance of governance over an oracle: blockchain code cannot independently determine what happened in the external world, so a group of people must ultimately decide which interpretation becomes authoritative.
Fake Voting: the social layer can override the chain
Society Protocol goes further than criticizing token voting. It argues that the ultimate authority over a blockchain is not actually the code but the social group that decides which version of the code and ledger to recognize. When a sufficiently large and coordinated group chooses to abandon a chain, adopt a fork or support a different version, the social consensus can effectively redefine which state has economic meaning. The blockchain can enforce synchronization among computers, but it cannot force human beings to continue recognizing that particular synchronized state.
Example — the 2016 Ethereum DAO hard fork: Following the DAO exploit, Ethereum participants chose to fork the chain and effectively reverse the consequences of the theft, while a minority continued with Ethereum Classic. Society Protocol uses this episode to demonstrate that social consensus can override an otherwise immutable blockchain history.
Fake Identity: the problem of persistent human identity
Society Protocol also argues that conventional blockchain identity mechanisms do not fully solve the problem. KYC or proof-of-personhood may establish that an account was associated with a particular person at one point, but they do not necessarily establish that the same person controls the account permanently. An identity can potentially be transferred, sold, rented or compromised. Thus, verification at the moment of account creation does not necessarily establish persistent identity throughout the life of the network. Society Protocol sees this as another reason why simple proof-of-personhood schemes do not provide the kind of sybil resistance it seeks.
Example — a KYC account being sold: The article gives a deliberately simple hypothetical case in which a person establishes a verified account, accumulates reputation and credentials, and subsequently sells or lends access to it. The blockchain can see that the account remains valid, but cannot necessarily tell that its human controller has changed.
This is the deepest part of Society Protocol's argument. A blockchain provides a synchronized state machine, but the blockchain itself does not decide which social state people should recognize as legitimate. Developers, exchanges, stablecoin issuers, major asset holders, applications and other organized groups can influence which version of the system survives. Society Protocol therefore distinguishes the technical layer from the social layer. The technical layer synchronizes computers; the social layer determines which synchronized state people actually accept and continue using.
The problem becomes particularly visible during contentious forks. An application, exchange or financial institution may have to decide which chain to support. That decision can determine which chain retains economic legitimacy, even though the underlying blockchain software may permit both chains to continue operating. Society Protocol argues that these social coordination processes are largely invisible to ordinary users.
Example — Ethereum/Ethereum Classic: The DAO hard fork illustrates the problem again: both chains could continue technically, but different communities assigned legitimacy and value to different histories. The "real" state therefore became a matter of social coordination rather than cryptography alone.
The central thesis of Fake Everything
The four problems are therefore connected:
Fake Assets → We cannot reliably see who owns what.
Fake Security → We cannot reliably see who actually secures the network.
Fake Governance → We cannot reliably see who actually controls voting.
Fake State → We cannot reliably see who ultimately determines which state society recognizes.
Society Protocol's claim is that these are not four independent bugs. They arise from one architectural limitation: blockchains record assets and accounts much more effectively than they represent people and their social relationships.
Consequently, adding more cryptography or more validators does not necessarily solve the fundamental problem. The missing information is social rather than purely computational.
Discussion
Society Protocol's transition from Web3 to Web4
Society Protocol's proposed answer is not to abandon blockchain technology but to change what the blockchain represents.
In its view, Web3 primarily places assets on-chain. Society Protocol's proposed Web4 instead places the social layer on-chain. The fundamental unit is no longer merely the token or account but the persistent human Actor behind it.
This is presented as the transition from:
Web3: blockchain → assets → anonymous or pseudonymous accounts
to:
Web4: synchronized state → persistent Actors → people, relationships and assets
Society Protocol describes its Web4 system as having persistent identities, genuine sybil resistance and a history extending across an individual's life. Actors are intended to be born, accumulate history, participate in events, own assets and eventually die. Their identities therefore carry persistent consequences rather than being freely disposable blockchain addresses.
The proposed system would consequently bring identity, property, relationships, organizations, governance, laws, taxes and other social institutions into the synchronized state. In Society Protocol's terminology, its "Timeline" would record these interactions as a continuously synchronized history.
How Web4 is intended to solve the security problems
The proposed solution follows directly from the diagnosis.
First, it addresses fake assets by making the ownership set visible. If assets belong to persistent, sybil-resistant Actors rather than anonymous addresses, users can in principle determine whether an apparently decentralized ownership structure actually represents many independent people.
Second, it addresses fake security by making the human and organizational relationships behind validators and other security mechanisms visible. The important change is therefore not simply adding more validators, but making it harder for one actor to disguise itself as many independent participants.
Third, it addresses fake governance by making governance potentially based on persistent human Actors rather than freely created blockchain identities or token balances. The aim is to make something closer to "one person, one persistent identity" technically enforceable.
Fourth, it addresses fake state by explicitly putting the social layer into the synchronized state. Instead of pretending that consensus among computers is the whole of social consensus, Society Protocol attempts to model the people, organizations and relationships that actually determine whether a state is accepted.
The intended result is therefore a system in which the distinction between technical state and social state becomes much smaller. Society Protocol's Synchronized States article similarly describes the protocol as bringing the social layer on-chain and using sybil resistance to create a Synchronized State capable of performing functions normally associated with a state.
The deeper theoretical move
The most important conceptual move is therefore not "Web3 but more secure."
It is:
Web3: make the ledger decentralized.
Web4: make the participants decentralized and identifiable as persistent social actors.
Society Protocol believes that decentralizing the ledger while leaving the human layer opaque merely produces a distributed system that can still be controlled by a concentrated social group. Its proposed solution is to make the social actors themselves part of the state that the protocol synchronizes.
This also explains why Society Protocol places such emphasis on sybil resistance. In its model, sybil resistance is not merely an anti-spam mechanism. It is the foundation upon which meaningful decentralization, governance, valuation and security can be built.
The resulting conception of Web4 is consequently much more ambitious than a new blockchain architecture. It is an attempt to create a computational representation of society itself: persistent people, relationships, property, organizations, rules and history, all maintained as one synchronized state. Society Protocol explicitly describes this as a "reimagining of societal coordination from first principles."