Scapegoat

René Girard, famed critic and cultural theorist, defines mimesis as the process by which people imitate models who endow objects with value. Girard suggests that ultimately, none of us know what we truly want, and that our desires are open-ended and malleable. As such, we learn what to desire by learning what others desire. 

Inevitably, this leads to conflict, as people end up desiring the same things and are therefore in direct competition.

“Two desires converging on the same object are bound to clash.” - Rene Girard

The solution to Girard's anthropological theory is what he calls the scapegoat mechanism. Just as desires tend to converge on the same object, violence tends to converge on the same victim. The violence of all against all gives way to the violence of all against one. When the crowd vents its violence on a common scapegoat, unity is restored. 

Sacrificial rites the world over are rooted in this mimetic/scapegoating mechanism, and the collective crypto corpus is no different. Each successive cycle the crypto community rallies around a villain in a predictable way. This is a direct reflection of Girard’s theory.

Each crypto cycle starts the same - As outside capital moves into the market and bids up prices, a bull run begins. Times are good for anyone long crypto. In this environment, everyone wins, though some win more than others. 

In the 2021 cycle, Do Kwon and Su Zhu were clear winners. 

Kwon was the stable coin king, who built a decentralized algorithmic stable coin that printed money and made his rabid community, Lunatics, wealthy. 

Zhu was the alpha trader. Former derivatives trader turned crypto degen - part-time philosopher, part-time VC investor, Zhu amassed a position of more than $10B to express his supercycle view.

Through the mimetic mechanism, every trader, investor, and thinker in the space aspired to one or more of these states. Both of these individuals had realized obscene wealth and status in crypto. 

Unfortunately, the good times would not last. As with every cycle, the collective market enthusiasm far outpaced reality, and as prices stalled and begin to descend, violence ensued. As the market shifted from WAGMI (“We’re all going to make it”) to PVP (player-vs-player) trading, the crypto masses turned on one another. With less new money entering, and all players driving toward the same “wealth/status goal”, people become increasingly antagonistic on crypto Twitter.

In order to restore peace, violence of the many against the many had to converge on violence of the many against one. The many needed a scapegoat and a collective bloodletting - an outlet for the violence. 

The first axe to fall was on Do Kwon, who was an easy person to villainize. His messianic complex and bellicose nature on Twitter had already turned many against him, with the notable exception of the Lunatics, who had crowned him as their savior. But when the UST peg was attacked and the Luna devaluation mechanism kicked in, these Lunatics were left holding the bag, and one by one turned on him and aligned with the masses in collective hate. The violence of all against all gave way to the violence of all against one.

The crowd vented its violence against the common scapegoat, but the blood letting was far from over. 

Su Zhu, who was left battered after the Luna collapse, continued to lever up on borrowed money, even as the market fell. After failing to meet margin calls from multiple counterparties, and no one else to borrow from, the gig was up. As the truth came out through the liquidation proceedings, the crypto community learned the extent of Three Arrows Capital degeneracy. The fund had borrowed from multiple counterparties with no collateral, or against the same collateral. And with each new discovery, the community rallied against the founders, massacring them in the Twitter town square.

“See that. Mission accomplished. Like a bunch of fourth graders. Sometimes what brings the kids together is hating the lunch lady. Although that'll change, because by the end of the fourth grade the lunch lady was actually the person I hung out with the most.” -Michael Scott

The sacrificial rite of Do Kwon and Su Zhu were biblical, but were not unique. Similar scapegoating process happened in previous cycles. 

As Cobie notes, it’s never good to be the main character. As the main character, you could end up the scapegoat. But even though the position of scapegoat is painful, it serves a greater purpose, as it allows the community to unite in retaliation, and ultimately heal as a stronger, more cohesive tribe.