Cores and Seams - by Drew Schorno
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Cores and Seams<br>Crypto, AI, and the Firm
Drew Schorno<br>Jun 17, 2026
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“Crypto is decentralizing, AI is centralizing. Or, if you want to frame it more ideologically, crypto is libertarian and AI is communist.”<br>- Peter Thiel
Enter Ronald Coase
In 1932, a 21 year old kid with commie leanings took tours of Ford and GM plants on a travelling scholarship to America, and was struck with a question nobody had apparently thought to ask before: if the miraculous price mechanism of the market allocates resources better than central planners, then why does so much of the market consist of these little command economies inside of large companies? And, on the flip side, if hierarchy works so well, why isn’t the whole economy one giant firm?
The conclusion that he came to was that while the market is efficient, actually using the market isn’t free. Every transaction with a contractor outside of the company has costs that aren’t included in the price tag: figuring out who to hire in the first place, negotiating with them, monitoring performance, and enforcing agreements when things go wrong. These external transaction costs add up.<br>Firms exist because it’s usually cheaper to hire someone on an ongoing basis and just order them around instead. But the costs involved in maintaining that hierarchy, internal coordination costs, add up too.<br>Coase figured out that the size of the firm will grow until the internal coordination costs reach an equilibrium with the external transaction costs. If adding just one more person to your bloated company costs more than outsourcing it to the market, then it only makes sense to stop hiring.<br>From there it follows that if you reduce the cost of interacting with the market, the average size of firms will shrink, but if you reduce the cost of maintaining a bureaucracy, the average size of firms will grow.<br>Soldering Jell-O
A little over a week ago IC3 — a who’s who of researchers on the academic side of crypto, studded with high-level insiders — released a report called Crypto x AI, AI x Crypto: A Survey. It was pointedly restrained: staking the claim that industry hype has gotten far ahead of any actual tech, but still managing to outline a plausible path for AI and crypto to act as middleware for one another.<br>“Combining the two naively can be like soldering Jell-O. Combined well, though, crypto can channel AI’s fluid power into secure and reliable systems.”<br>- Ari Juels
A few days later Dario Amodei released an essay called Policy on the AI Exponential, which casually drops cryptocurrency as an example of a “much more mundane technology” that AI has historically been mistaken for: a drive-by pot shot far, far away from the equal billing of the IC3 paper.<br>It’s true that on their own these are not symmetrically important: crypto is mostly an efficiency story, whereas AI can generate new value that compounds on itself over time. Crypto needs AI, but its unclear if AI needs crypto.<br>It basically all boils down to one question: is the future full of billions of independent agents transacting over trust boundaries, or will everything consolidate into one big happy borg?<br>One pill makes you larger…
Crypto is a set of technologies that allow people who don’t trust each other to coordinate. Bitcoin itself can be described as a solution to the Byzantine generals problem: How can a group of generals coordinate an attack when a subset of them are traitors? Ethereum expands this out to general purpose smart contracts that immediately execute once their conditions are met. They work with the same logic as a vending machine: the money goes in, the Twix bar plops out. No quibbling over the results, no takesies backsies.<br>The whole value proposition of crypto is aimed squarely at reducing Coase’s external transaction costs: it unidirectionally acts as a force towards shrinking the size of businesses, allowing them to unbundle themselves into a kaleidoscope of independent microservices.<br>(What did you think decentralization meant? Vibes? Essays?)<br>AI on the other hand cuts both ways: it lowers external transaction costs by allowing solo operators to act as full fledged procurement departments, but it also attacks the internal coordination costs of bureaucracy, acting as an infinitely scalable middle manager and making it cheaper and more feasible to grow a large organization.<br>When the costs that define if you’re big or small both plummet at the same time, what actually happens?<br>Complicating things further, AI allows firms to slash their headcount while maintaining or growing their operational complexity, enabling the possibility of a “large firm” that consists of one (or even zero) employees.<br>The relative size of fully autonomous agents also follows the same Coasean logic. Do they choose to grow themselves by spawning a subagent to complete a task, or do they stay lean and punt it out to an external service?<br>Drawing the...