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The Vanguard Protocol

Austin Diamond
Co-Founder & CEO

The Vanguard Protocol

Vanguard has more parallels to crypto’s ethos than virtually any other company in the 20th century.

Jack Bogle, the founder of Vanguard, would have absolutely hated crypto.

Here’s a guy that told Nate Most, the brains behind the ETF, to get lost when he proposed developing the first-ever index ETFs with Vanguard. The stated reason: they’d encourage too much trading.

Imagine his reaction to 24-7 markets, trading in tokens inspired by dog memes, executed via protocols with magenta unicorn logos, with assets stored next to CryptoDickButt NFTs in browser wallets accessible via fox icons. I’d bet it would sound something like Buffet’s “rat poison squared” proclamation.

Here’s the thing - Bogle built a platform with more parallels to crypto’s ethos than virtually any other company in the 20th century.

Vanguard has saved investors billions in fees, enabled millions to retire comfortably, and most importantly championed an investing philosophy that’s actually about long-term growth. With their index fund offerings, Vanguard has made it simpler for more people to get involved in capital markets and own a portfolio with diversified market exposure.

The secret? Vanguard made investors in their funds the owners of Vanguard. With incentives aligned this way, the owners i.e the holders of Vanguard funds, would be extremely unlikely to raise fees on themselves. This dynamic made Vanguard the most well-loved brand in finance. A grassroots community of self-proclaimed ‘Bogleheads’ banded together to champion the Vanguard movement for millions of new investors, answering questions about Vanguard and personal finance broadly in a forum not unlike the Discord channels crypto protocol community members congregate in today.

This is exactly what crypto protocols are advocating for when extolling the virtues of decentralization and community governance. The promise of DeFi is to align incentives like Vanguard.

That magenta unicorn protocol I talked about earlier? Uniswap gave early users of their exchange tokens that granted them governance rights (worth over $12,000 at their peak) and their users (i.e owners) of Uniswap are now it’s owners and have the power to decide on matters like their fees and take rates.

If you believe more financial services should function like Vanguard (even Chair Gensler would agree with you), you’re advocating for an incentive design that is central to the ethos of crypto.

It took years for Bogle to come around to the idea that ETFs could be a good thing for regular investors. I think after a decade or so he may have come around to crypto too.

Buy the entire crypto market in a single token.