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crypto constitutions and the political implications of cryptocurrencies

Originally published July 17, 2018.

Crypto Governance

Governance is one of the most hotly debated topics around blockchain, but the deliberations are still in their early stages. Balancing the different needs and requests of users, developers, and investors will be much more challenging than overcoming the range of technical challenges that have hindered adoption of Bitcoin and Ethereum.

Technical issues with scalability, design, and documentation have led to a weaker user experience than we’ve come to expect from centralized tech companies. These issues will be addressed by a combination of clever hacking and the perpetual march of exponentially growing computation.

The web 3.0 stack for dApps will slowly but surely metastasize from the chaos; the internet simply abhors a central authority. Centralization runs counter to the core functionality of the telecommunication protocols that preceded the world wide web (Telex, ARAPNET, CYCLADES, ACARS).

But at this point in our hypothetical future we’ll still be confronted with the problem of governance. This should be expected, governance is not simply a technical challenge. It is a communicative, sociological, and distinctly human challenge.

One of the most favored solutions to improve scalability involves eliminating the most profitable subgroup entirely. This is clearly a poor incentive structure for the miners. They would be forced to either adopt a suicidal policy or manipulate the governance process through bad faith. Some might even say this is already happening.

Crypto Representatives

Let’s imagine for the sake of our gedankenexperiment that we do eventually arrive at a governance protocol with checks and balances that have widespread consensus. The US Constitution can be thought of as a kind of proto-decentralized-autonomous-organization. DAOs are crypto-economic inventive structures that provide representation much like a democratic republic but through cryptography.

Citizens are empowered to participate in the construction of their society’s legislation, but this must be weighed against the dangers of mob rule. There is also the issue of the logistic complexity of functions of government such as collecting taxes and recording the census. Does the average citizen have the knowledge and skill set required to evaluate different policy proposals?

Stakeholders of cryptocurrencies should have a form of representation. But first we must decide what issues even require representation and how much influence over our representatives we will have. The explosion of interest in cryptocurrencies has led to significantly more non-technical users.

Users lacking a strong conceptual and technical model of cryptocurrency are severely hindered from participating in their development, and are vulnerable to exploitation. Despite the perceived complexity of the topic, it is possible to gain a high-level understanding of crypto technologies. There was a time when no one had explicated a theory of electricity, and now it is a permanent fixture in the lives of billions.

Crypto Civics

Everyone is at a different stage falling down the crypto rabbit hole. I think it would be safe to say that the majority of users are not well versed in homomorphic encryption, group signatures, computational complexity theory, game theory, and the other dozen or so subtopics in computer science and mathematics that dominate the work of core developers.

These fields supply foundational elements of the developing discipline of crypto-economics. They are the culmination of decades of intense academic research and government funding. Crypto governance is impossible without first having crypto civics.

In school many of us learned (at least in a general sense) how our government works. It involves creating, debating, selecting, implementing, and enforcing legislature. Citizens inform their representative when they want to change something about their society.

When a critical mass of people alert their representatives to the same issue the representatives get together and draft a bill to hopefully combat the issue. The bill is voted on and either struck down or passed into law. If passed, this law is enforced by the court as the will of the people.

One BTC, One Vote

How could this transfer to a blockchain? An extremely simplistic case would be a 1 to 1 correspondence between tokens and votes. 1 bitcoin would authorize 1 vote on any given proposed update to the source code. You probably see the problem here. Imagine you are able to cast only a single vote in a presidential election while the Winklevoss twins cast 17,000.

We could try to fix this with a type of progressive tax on the voting quantity of large holders. This would provide a closer analog to the distribution of voting power in modern democracies. This is one of the core disputes running throughout the entirety of American history, so it will be difficult to reach a consensus on this issue.

How do we escape the catch-22 of needing effective governance mechanisms to decide on effective governance mechanisms? What the hell would people even vote on? Would your friends read and carefully consider a ballot measure on the merits of changing bitcoin’s block size to 2mb, 8mb, or leaving it at 1mb?

Democratic Operating System

But what if we do manage to solve this? What if modern day cryptoanarchic versions of Franklin, Payne, Hamilton, and Jefferson get together and solve the puzzle and build a system that functions as intended? This can be a difficult thought experiment for Americans in 2018, since the current political climate is hardly a ringing endorsement for our system of government.

But the modern luxuries we enjoy today like penicillin and toilets were created by the operating system of democratic societies and the prosperity they generated over the last 200 years. We should not let the late 2010s zeitgeist blind us to the power of distributed collective action.

Yuval Noah Harari argues that human society developed through our ability to transmit meaning through narratives. Narratives provide an operating system of societal protocols of empires, states, religions, courts and markets. Citizens have a shared understanding of these protocols and their ability to influence them.

This allows them to coordinate and share a common identity even though they are spread across vast geographic regions. This doesn’t work if the citizens don’t understand the protocols. If you don’t know the laws of the land you will struggle to sell your goods and you will be subjected to seemingly arbitrary penalties beyond your control.

Decentralized Government

Achieving our ideal hypothetical blockchain would require an optimal design in the follow areas:

  • Secure protocol layer
  • Aligned cryptoeconomic incentives
  • Fair governance

If by some miracle we succeed in creating this system it could result in a single interconnected network encompasses decentralized versions of the following:

  • World computer more secure, scalable, and accessible than the Internet (Ethereum, EOS, Cardano, Golem, IPFS)
  • Currency more stable and transferable than the US dollar (Tether, Maker)
  • Market economy more competitive than Wall Street (0x, OmiseGo)
  • Social networks more personalizable than Facebook (Steemit, Minds)
  • Nation states cooperating more effectively than modern first world countries (Tezos, Aragon, Colony)

Skin in the Trust Machine

This idealized blockchain would allow e-citizens to remain entirely in control of their privacy and personal data. Their political actions and economic contributions would no longer be subjected to pervasive surveillance. This would become a trust machine that incentivize citizens to increase their skin in the game.

With aligned incentives more people would increase their skin in the game until it reaches a tipping point. The system would have access to data more comprehensive than any state or corporation. If you don’t think people would trust a massive faceless computer network with their data, compare it to the two current options.

  1. We must trust the government with a database containing our legal history, medical biometric data, and every purchase ever made in our lives. The value of this database incentivizes hackers to continuously strive to compromise said database much like we've seen with compromises of US cyber weapons.
  2. The other option is Silicon Valley’s business model of using big data enabled surveillance capitalism for large scale behavioral manipulation.

Privacy preserving machine learning would be able to draw insights from the cumulative data without making any of it accessible to third party researchers or marketers. This would empower e-citizen activism to an unprecedented degree while also generating unprecedented wealth. Anyone who studies the protocol enough will be compelled to put more skin in the game.

Crypto Founders

Numerai, OpenMined, Ocean, and others are already hard at work trying to forge this cryptological utopia.

Monopolize intelligence. Monopolize data. Monopolize money.

Decentralize the monopoly

Richard Craib, Numerai

I think that it’s a big enough idea to power a new kind of internet and a new level of expectation of consumers from the products that they want to be able to receive…The biggest hurdle is not technology, it’s actually convincing consumers to do it, to change their ways, to aggregate their data into one spot, and train a model.”

Andrew Trask, OpenMined

1. Decentralized and shared control encourages data sharing which leads to more data, and therefore better models which leads to qualitatively new data, and therefore qualitatively new models which allows for shared control of AI training data & models.

2. Immutability and audit trails lead to provenance on training/testing data and models to improve the trustworthiness of the data and models. Data wants reputation too.

3. Native assets and exchanges leads to training/testing data and models as intellectual property (IP) assets, which leads to decentralized data and model exchanges. It also gives better control for upstream usage of your data.

Trent McConaghy, Ocean

Conclusion

Many of these ideas have been extensively discussed in the cypherpunk community for over 30 years. But these ideas are starting to spread far beyond that small group of idealistic programmers. This is an inevitable consequence of digital technological eating the world. A clear understanding of Moore’s Law and its implications allowed the cypherpunks to envision a future that we are inexorable stumbling towards at an accelerating pace.

Regular people are becoming paranoid about the collection, analysis, and manipulation of their personal data by governments and corporations because THEY SHOULD BE. If you’re not paranoid you don’t understand how data collection works yet. This can’t last forever. If you own a smart phone you will eventually have to understand how data collection works.

We are left with no recourse except to persevere into the unknown and seize control of our future, lest the future seize control of us. 22 years ago, John Perry Barlow provided cyberspace its Declaration of Independence; now we must provide its Constitution.

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