Jekyll2022-12-30T00:33:26+01:00https://pluranimity.org//PluranimityChristopher GoesTowards heterotopia - the prerequisite cultural and technological substrate for a return to a world of scale-free credit money2022-09-26T02:00:00+02:002022-09-26T02:00:00+02:00https://pluranimity.org/2022/09/26/towards-heterotopia<p><img src="/heterotopia-img.png" alt="" /></p>
<p>Recently, I’ve been reading some anthropology. The economic canon postulates a primitive economy of barter, where at some point money emerged to solve the problem of double-coincidence-of-wants. This assumption is taken for granted in many places (including, to some degree, in the <a href="https://anoma.net/vision-paper.pdf">original Anoma vision paper</a>), but when you consult the historical record, as <a href="https://www.goodreads.com/book/show/6617037-debt">David Graeber does</a>, it is clearly bunk. Early societies - and small societies today - didn’t swap cows for chickens, at least not most of the time, and they didn’t invent coins to solve double-coincidence-of-wants because they didn’t need to. Rather, they used credit. Credit solves double-coincidence-of-wants in a beautifully elegant way: by integrating over time. If I’m the butcher, and you’re the baker, I may not need bread right now, but I’ll definitely need some in the future. If we live in the same town, and I expect you to be around for awhile, we can simply keep track of who gave who what when, and settle accounts periodically - this requires, of course, likelihood of repeat interactions and sufficient trust, but in small communities these are both present. Still, comparing goods is often helpful, so such communities often picked a particular good to serve as the unit of account and measurement (but with the actual exchange taking place with specific goods in question). The “store of value” function of money, as it were, was mostly virtual, not physical: although some farmers may have had more cattle or grain than others, the most important asset held by residents was usually the trust of the community, with which they could obtain what they needed when they needed it and could more easily handle shocks to their own supplies. This trust is a form of credit, which anyone could issue whenever they wanted to - but if they started taking too much without providing in return, their neighbors may not want to accept their credit anymore. This kind of credit accounting is virtual, tracked not in exact precision with spreadsheets and central banks, but roughly through observation and gossip, and it is <em>scale-free</em>, in that anyone at any scale of operation - both individuals and institutions (such as the bakery) can issue credit - there is no monopoly on doing so.</p>
<p>Most of us don’t live in a world of scale-free credit money anymore, for a simple reason: in a world where money is physical, this kind of trust accounting doesn’t scale. When there are more people interacting in wide economic networks but still finite time, most interactions are with strangers who one never expects to see again. Correspondingly, and thus perhaps unsurprisingly, we now live in a world of fiat credit money (for the remainder of this post I will just say “fiat money”). In a world of fiat money, money is issued by only a few (hopefully) trustworthy institutions, such as governments and banks, and people in everyday interactions trade not personal credit but rather obligations to those institutions. This solves the trust accounting problem between strangers because strangers need merely trust the same institution and the accuracy of the accounting mechanism - they need not trust each other.</p>
<p>But fiat money, as a coordination mechanism, has two fatal flaws.</p>
<p>First, fiat money centralises trust and thus loses fault tolerance. Because of the network effects of unit of account, store of value, and medium of exchange, the difficulty of creating appropriate accounting mechanisms, and the tendency of warmongering states to create silly laws, the issuance of money is limited to a very small number of institutions, and control over those institutions becomes a central point subject to fierce competition. Even a small number of actors prioritising personal gain over the public good can seize control over the mechanisms of money supply and redirect parts of it for their own private ends. Even if they don’t succeed in doing so, the negative externalities to public sensemaking created by elites competing for control over the money supply can so pollute discursive spheres with “alternative facts” that regular mechanisms of social feedback and coordination no longer function at all. Only with the decentralisation of trust can fault-tolerance be achieved.</p>
<p>Second, fiat credit money relies on measurement in the present. In order for me to pay you using a debt instrument, when we don’t trust each other, we must agree on the trusted third party and the exact amount of payment such that we are both willing to walk away after the transaction and never expect recompense from each other again. If the primary benefit of the good paid for is easily estimable, limited to the party purchasing it, and itself in the present (such as a sandwich), this isn’t too bad an approximation to future value, but if the primary benefit of the good paid for accrues over time, also to other parties, and in the future (such as knowledge), this is an absolutely awful way to measure it.</p>
<p>Many of the dystopian elements in our world today can be traced to these two fatal flaws, I think. Wars, climate change, nuclear proliferation, lack of public education, pollution of the information commons, and similar phenomena source their causes in large part from awful decisions made by elites competing for government positions or propaganda so created (such as convincing their citizens to pay for nuclear weapons), a result of this centralisation. Failures of public-goods provisioning, in turn, are a result of financial measurement happening almost solely in the present.</p>
<p>By contrast, scale-free credit money decentralises trust and shifts measurement to the future. My credit is valuable to you if and only if you expect me to be able to pay you back in some form then, since I can offer nothing now. While parties who have exchanged debt can just walk away, parties who have exchanged (perhaps heterogeneous) credit have a mutual interest in each others’ future success. If I teach you something and you pay me in debt, I don’t care whether what I teach you is right or wrong, I just care about convincing you to pay me more money. If I teach you something and you pay me in credit, I want to teach you something right, and useful, so that your credit will be valuable to me in the future.</p>
<p>In our world today, the world of fiat credit money, trust and money are misaligned, so misaligned that they have inverted - at least personally, on average, I don’t trust people with more money or institutions which can issue money, more - I trust them less. To re-align them, we must re-align control over the issuance of money with trust, and return to a world of scale-free credit money. But, you might ask, why would this work now, when it hasn’t so far?</p>
<p>Now comes the point in the story where I offer you a pill - but, I promise, the pill is purely conceptual - a thought experiment: <em>what would a world of scale-free credit money look like?</em></p>
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<p>What would a world of scale-free credit money look like? In our world, the issuance of money is strictly controlled, generally only available to governments and specific entities to which they delegate the ability such as banks. If money is to be credit, re-aligned with trust, then these restrictions don’t make any sense, since trust is distributed, and credit is personal, so let’s change a few basic assumptions. Assume that everyone can print money, whenever they want, as much as they want (though they could voluntarily limit their ability to do this), and send it whomever they want. Assume that individuals and institutions everywhere, now and in the future, are constantly creating new denominations of money. Let’s also assume that denominations of money are content-addressed: money is defined by who (cryptographically) currently holds it, who (cryptographically) can issue it, and how much and under what conditions they can issue it (in case of self-limitation). Local name-systems and consensus algorithms handle human-readable mapping and continuity in time.</p>
<p>In this hypothetical world, so far, money isn’t actually useful for any sort of coordination, because everyone is using a different money. How could such heterogeneous instruments function as a store of value, a unit of account, or a medium of exchange? To be fair to economists, they <a href="https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-functions-of-money#:~:text=To%20summarize%2C%20money%20has%20taken,account%2C%20and%20medium%20of%20exchange.">aren’t always wrong</a> - those things are useful!</p>
<p>Let’s add an ingredient. The agents printing money aren’t just individuals - they may also be institutions which want to provide functions such as store of value, unit of account, and medium of exchange for their constituents in some area of space (be it digital or physical). But in this world of scale-free credit money, money is very competitive, since anyone can switch which money they use at any time, so institutions wishing to issue money which will get used must create an initial distribution and issuance schedule which its potential users consider to be fair (and thus select) - and <em>this problem, in essence, is none other than effective retroactive public-goods funding</em> (another <a href="https://astralcodexten.substack.com/p/lewis-carroll-invented-retroactive">entry to add to the list</a>). Money selected by a group in such an area, if the group can agree on a money, can serve as store of value, unit of account, and medium of exchange - but what if the institution starts sending the money somewhere people don’t like? Someone else can simply come along, and issue another money, copying (and perhaps altering) the distribution and changing the recipients.</p>
<p>You might reasonably object - switching costs are non-zero! Imagine having to re-price all goods in the supermarket or re-issue all coinage - these are expensive operations. In a world where money is primarily physical, switching costs are high, but in a world where money is primarily digital they are not. In a world where money is digital, store of value, unit of account, and medium of exchange can be easily disaggregated by automatic price conversion and exchange.</p>
<p>In this world of scale-free credit money, where new money is perpetually created, most of the potential money exists not in the present, but in the future. Competition for value in the present is based not on scarcity and measurement but instead on expected inclusion in potential future retroactive funding distributions. Expected inclusion in future retroactive funding distributions, since money is subject to competitive selection, is based on what value people and institutions in the future think contributors in the past (our present) ended up providing to the present (our future), since it is precisely this allocation which people in the future will consider most fair.</p>
<p>Now, you might ask, in this world, with infinite money, how do we track physical, scarce goods? Physical goods are costly to produce and (at least compared to digital goods) tend to offer most of their value to a private party in the near future. Current systems of payment accounting do a decent job of organizing the production of physical goods, so regular old payment at time of receipt seems like a reasonable solution to me. Individuals and organisations producing physical goods can keep operating in this world much as normal, simply accepting credit of parties they trust instead of sovereign debt.</p>
<p>Payments for physical goods also benefit from stability of the unit of account. In this world of scale-free credit money, the requisite stability can be provided by money options with self-imposed issuance controls. Institutions issuing money which they expect to be used by large numbers of individuals can self-impose limits on issuance rates such that issuance cannot exceed more than a few percent a year (comparable to existing targets of central banks), keeping the unit of account pretty stable.</p>
<p>Now, you might come back with a certain gotcha: what about interactions with untrusted parties? After all, these comprise most of our interactions today. Travel to, interactions in, and commerce with faraway places are pretty nice - in such a world, would we need to give these up? This problem, mind you, only comes up for payments in the present - future retroactive payments, by definition, are given only to those who one trusts, based on their work in the past!</p>
<p>Time for the mechanism wizardry to come in handy. Let’s assume some liquidity in credit markets, such that any issued money is freely exchangeable with any other whenever someone wants to create some liquidity. Now, if I want to pay you and we don’t trust each other, all I need to do is find a route in the liquidity graph between us. We need not use the same unit of account, store of value, or means of payment to interact with each other anymore - all we need is a connected path. Of course, not all paths are equal - if a lot of liquidity exists between us, I can pay you a lot without changing the price much, but if little liquidity exists, I can only pay you a little - but this reflects precisely the density (and directionality) of trust!</p>
<p>Retroactive public-goods funding for public benefits, measured in the future, and payments for private benefits, measured in the present - so far, so good, sounds pretty nice to me at least.</p>
<p>But the skeptics among you may have one final objection - I certainly would - this sure sounds like a whole lot of financialisation. Imagine that everyone’s credit was traded - wouldn’t we just compete in an endless game of self-marketing to win the war of usage? I think scale-free credit money substantially reduces the network effects of money compared to today, since it removes the need to come to consensus on what specific money to use in any given interaction, but some network effects will remain. Also, there are clearly a lot of new forms of money at the moment (just look at the list <a href="https://coinmarketcap.com/">here</a>), and they sure do seem to spend a lot of time, effort, and money (somewhere, somewhere here, there is a trap…) competing with each other, which all seems a bit zero-sum.</p>
<p>Here comes my final bit of mechanism wizardry: commitments to future <em>integral airdrops</em>. Airdrops are a common mechanism in blockchain circles already, and they are already usually used in the attempt to proliferate a new form of money, but as currently deployed they have one fatal flaw of their own: centralisation in <em>time</em>. Airdrops have historically targeted a snapshot of a particular token at a particular point in time, which creates a discontinuity in the incentive space: it is valuable to hold the token right before the airdrop snapshot date, then suddenly less valuable right after. I propose a slight alteration: instead of taking a snapshot in time, take a snapshot over time - an integral of who has held how much from the beginning of time (or, well, the token in question) to now.</p>
<p>Future retroactive funders, by doing integral airdrops, encourage parties who wish to receive such airdrops to purchase the relevant credits (and support the relevant party doing the real work) early on, so the integrated amount over time will be higher even if the prices fluctuate. Integral airdrops can be safely committed to ahead of time without creating odd discontinuities in incentive space, and they can even be performed repeatedly to continuously align incentives. In expectation, complexity is greatly simplified, because if you’re right about what will be valuable, the optimal strategy is just buy-and-hold.</p>
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<p>At the moment, in the world today, money and trust are anti-correlated, because control over the issuance of money is controlled by actors who almost nobody trusts. It took me a long time to come to the understanding presented in this blog post for this reason, I think, because I hated dealing with money so much that I was very hesitant to design any sort of system that used the abstraction of money at all (especially when it involved a lot of <a href="https://pluranimity.org/2022/01/25/against-decentralised-finance/">measurement</a>), and I initially tried to avoid it (bad idea, it turns out that this just leads to way more measurement complexity…). But once you align money and trust, even merely abstractly in the design of a sociotechnological system, dominoes magically start falling into place as if it were <a href="https://www.goodreads.com/de/book/show/42525002-a-spirit-of-trust">all pre-ordained</a>.</p>
<p>One common problem in cryptocurrency systems is that of <em>key recovery</em>. Cryptographic keys are weird things, strings made up out of nowhere, and most people forget them or lose pieces of paper (I certainly do). Designs of social key recovery systems propose that we mark specific combinations of friends who will be allowed to recover our keys, but, while better than no key recovery at all, this solution requires a lot of awkward manual interaction to specify and update this trust graph, and it’s difficult to know exactly how to choose the right people anyways, since whom one trusts changes over time.</p>
<p>Yet if we align keys, trust, and money, a solution naturally emerges. Key recovery requires trust, so we must choose someone - or someones - to trust. Who better to help me recover my keys than whoever holds my credit? Our incentives are very well-aligned - they want me to do well so that the credit which they hold is valuable in the future, and I’m more likely to do well if I can access my account (which holds many other credits, and allows me to issue more)! All we need is a threshold, and straight out of the distributed systems hat we can pull 2/3, which ensures both that the relevant parties can safely come to consensus on my new public key and that I can still recover my key if less than 1/3 are offline - which, in a dense network where key loss is uncorrelated, will almost certainly hold in practice.</p>
<p>Another sought-after pair of hypothetical protocols are those which would enable universal basic income and proof-of-humanity. I mention these as a pair because I think they are hung up on the same problem: what does it mean to be human? It is impossible to design a test that can distinguish a human from anything else, because there is no essence to humanity: I am human only insofar as you consider me to be. At various points in history, laws have classified certain groups of people as sub-human, even assigned them numerical fractions, which to us today seems abhorrent. I think, correspondingly, the animating idea of universal basic income is that of equality, and equality in the eye of the beholder requires two parties who both consent.</p>
<p>These desiderata are two sides to the same coin, because there is no test but equality, and equality on the basis of humanity must be decided by humans. We could each keep a list of other humans’ public keys and all pay each other equal amounts of our own scale-free credit money every second, but this requires too much interaction, doesn’t provide any future predictability (which is perhaps the primary benefit of UBI) and fails to make use of a property we <em>do</em> assume of humans: that they carry information, identity, and cryptographic keys forward in time.</p>
<p>Instead, I propose a slight modification, based on the twin bases of this bilateral test of humanity and continuance of humanity in the future: <em>heterogeneous UBI</em>. We only need one ingredient: trust (and some cryptographic signatures). You and I meet in person, decide that we trust each other, and both cryptographically sign over a commitment to the continuous creation of 1 of each of our respective credit tokens per unit time. These tokens could just be sent to each other, but I think there is a better solution that will immediately create some “trust liquidity” and allow for revocation in the future: deposit both tokens in a multi-signature account which in turns locks them to an automated market maker curve on <code class="language-plaintext highlighter-rouge">xy=k</code> (or similar) with a special value <code class="language-plaintext highlighter-rouge">k = 1</code>. This immediately allows others to trade through us, and allows our relationship of mutual humanity to balance out other inequities in the network.</p>
<p>Each party can unilaterally sign a message to the multisignature account which will cause it to withdraw the liquidity and burn both credit tokens, so should you decide in the future that you no longer wish to trust me, you can revoke that trust, but if others still trust me, I will still have “trust liquidity” with them.</p>
<p>Of course, anyone can create a non-human cryptographic identity, and start printing money with it, but unless they can convince someone else to trust it, they won’t get any extra liquidity, since all paths in the liquidity graph would have to go through them. No one would want to commit to exchanging their credits with that of a fake identity, since they have no reason to expect anyone else to want those! The attacker could bribe someone else to trust it, but they’d have to bribe enough to make the supply inflation (of the bribed party’s token) worth it, so they’d just end up paying UBI to the bribed party themselves.</p>
<p>From this currency network, we can a derive proof-of-humanity test for <em>any two parties</em> (since, of course, it is relative) by proving the existence of many different separate valid linked-list paths of bilateral signatures over these commitments (with no overlap in the member public keys apart from the beginning and the end), which would not exist for an isolated network subgraph (since, as explained above, they are expensive to create).</p>
<p>Scale-free credit money and heterogeneous UBI can be issued with existing protocol primitives roughly as follows: smart contract accounts for each issuer (since they might still want keys on multiple devices with different spending limits so key recovery is only invoked when absolutely necessary), smart contract accounts for the bilateral humanity test liquidity locking relationship, Uniswap-style AMMs to facilitate exchange, multi-hop swap routing to find paths through the credit liquidity graph (a la <a href="https://handbook.joincircles.net/docs/developers/whitepaper">Circles UBI</a>), a blockchain to order transactions and prevent double-spends, and recursive ZKPs for retroactive integral airdrops.</p>
<p>It’s worth noting that privacy is essential for scale-free credit money. If trust isn’t private, it’s possible to threaten someone for trusting someone else, but if trust is private, it isn’t anymore. To provide the requisite privacy, all of this must be implemented on a fully private substrate, likely with ZKPs for the individual accounts and some threshold FHE for batch swaps, liquidity provisioning, and trust-minimised private bridging.</p>
<p>While the details remain to be worked out, I don’t think anything here is too difficult to understand or implement. Scaling to a liquidity graph of 8 billion people will take some time, but it doesn’t have to all happen on one blockchain - only the ordering of spends from each individual account needs to be total (no double-spends), everything else can be partial - and ordering is expensive, better to only do it when necessary. Besides, one “megablockchain” would have to pick one security model and one currency which controls it - and that sure seems like a point of trust centralisation to me. We can all recursively verify state transition & consensus history anyways.</p>
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<p>To somewhat misappropriate <a href="https://web.mit.edu/allanmc/www/foucault1.pdf">Foucault</a>, let’s call this world of scale-free credit money <em>heterotopia</em>. To Foucault, a heterotopia is a place outside all places, a place which is real but a place where regular operations of society and culture are represented, contested, and inverted - cemeteries, zoos, and fairgrounds are all heterotopias. The sense of heterotopia I mean is not quite this one, which conceptually demarcates precisely those places which offer a temporary interstice from everyday cultural rules of place. Rather, my sense is of a heterotopia which is at once total and fragmentary. Consider Foucault, from the end:</p>
<blockquote>
<p>Brothels and colonies are two extreme types of heterotopia, and if we think, after all, that the boat is a floating piece of space, a place without a place, that exists by itself, that is closed in on itself and at the same time is given over to the infinity of the sea and that, from port to port, from tack to tack, from brothel to brothel, it goes as far as the colonies in search of the most precious treasures they conceal in their gardens, you will understand why the boat has not only been for our civilization, from the sixteenth century until the present, the great instrument of economic development (I have not been speaking of that today), but has been simultaneously the greatest reserve of the imagination. The ship is the heterotopia par excellence. In civilizations without boats, dreams dry up, espionage takes the place of adventure, and the police take the place of pirates.</p>
</blockquote>
<p>Modernity no longer possesses any boats - and not only because there are fewer treasures to plunder - those former “heterotopias par excellence” have been instrumentalised into costs per kilogram-kilometre and transport APIs, organised and regulated on the basis of the totalising dollar. The heterotopia I mean is a <em>heterotopia of value</em>, tracked and organised in a purely virtual space, itself fragmented into fractal Venn diagrams of partially overlapping sub-spaces. Foucault’s heterotopia implicates the existence of a dominant set of cultural practices and dominant set of spaces to which it is is semantically opposed, but a heterotopia of value presumes no particular ordering of spaces, merely a plurality of difference.</p>
<p>We don’t live in heterotopia right now - we live in a world trending towards dystopia. Heterotopia isn’t utopia - people will still disagree, accidents will still happen, broken hearts will still ache - but I think that it’s better compared to this world, because it correctly alters the cultural and technological substrates of money to match the interests of humans in the future and the corresponding shared interests of humans today. Heterotopia is not merely a matter of the mechanisms of money - money should be a small and insignificant component of the societies, activities, and traditions of a culture or a space - but as it is a marker of the failure of our current form of money that it is not, so I shall focus here on the mechanisms of monetary transition.</p>
<p>Some might worry about states, which in (only) recent history have tightly controlled the issuance of money, and may react violently to the possibility of heterotopia. While I share the fear of state violence, I think this worry is easily overblown. Although the monopoly of the state may appear to be physical, in truth it is purely conceptual: as soon as we stop believing in it, it will simply go away. Heterotopia shatters this monopoly to bits (with nothing but bytes). Who in the future would want money issued by an organisation which rounded up people crossing imaginary lines drawn on a map and sent them to camps, hired armies of consultants to propagandize its own supposed constituents, and kept the world under decades-long threat of nuclear holocaust? Not me, for sure. If they want to survive in heterotopia, states had better stop locking people up and start producing some public goods instead. Some governments may try to prevent heterotopia from ever arriving by exercising coercive force, but in heterotopia, money is merely information, and information is always a moving target, which no bureaucratic mechanism can ever keep up with - indeed, with content-addressed naming systems, no bureaucratic mechanism can even name it. You can fight the laws of physics, but only for so long.</p>
<p>I think that heterotopia is likely. Information systems tend towards more stable states, and our world today is not in a stable state at all, in no small part because money and trust are so misaligned. A state (but not the other sort) which better aligns them is likely to be far more stable. But that doesn’t mean that the transition won’t be turbulent. In particular, existing communications infrastructure, which lacks a sound cryptographic basis of identity and network of trust relationships, is very vulnerable to propaganda, and global sensemaking is deluged by <a href="https://consilienceproject.org/endgames-of-bad-communication/">bad-faith noise</a>. “AI” (fancy statistical models) may have excellent uses in artistic creation, but its use in propaganda generation (and, unbelievably, <a href="https://erikhoel.substack.com/p/ai-makes-animists-of-us-all">in tools</a>) is making this problem worse quickly.</p>
<p>So, take the rest of this post as contingent on the hypothesis of heterotopia - if it is coming anyways, what can institutions do to ease the turbulence of the transition?</p>
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<p>First and foremost, institutions must coordinate the creation of the requisite technological substrate - research, protocols, interface, open-source software and hardware - to make the realisation of this heterotopia vision of scale-free credit money possible. Existing blockchain / cryptocurrency protocol designers & organisations are well-equipped here (excellent candidate examples include <a href="https://aleo.org">Aleo</a>, <a href="https://anoma.net">Anoma</a>, <a href="https://celestia.org">Celestia</a>, <a href="https://cosmos.network">Cosmos</a>, <a href="https://ethereum.org">Ethereum</a>, <a href="https://osmosis.zone">Osmosis</a>, <a href="https://penumbra.zone">Penumbra</a>, and many others), but they need to coordinate with and help out the fine distributed-systems-but-not-blockchain folks working on end-to-end encrypted messaging, properly distributed social media, local-first application design, and generally self-sovereign & privacy-preserving applications (excellent candidate examples include <a href="https://www.inkandswitch.com/">Ink & Switch</a>, <a href="https://joinmastodon.org/">Mastodon</a>, <a href="https://scuttlebutt.nz/">Scuttlebutt</a>, <a href="https://signal.org">Signal</a>, <a href="https://urbit.org/">Urbit</a>, and many others). Open-source and verifiable hardware remains quite far away and could perhaps be accelerated by strategic acquisitions followed by application of free software principles similar to those <a href="https://www.gnu.org/philosophy/free-sw.html">articulated by the FSF</a> to the relevant hardware IP. Cryptocurrency foundations tend to have a lot of capital and should use it to do this instead of throwing money at Uniswap-clone-subsidy grants programs or sponsoring ads on Formula 1 cars. Of course, hardware companies could also pre-emptively do this themselves in hopes of future retroactive funding - which, contingent on the expectation of heterotopia, is an excellent strategy for them!</p>
<p>Second but equally important, institutions must provide stability. Even in the better possible worlds, the path from today to heterotopia will be marked by wildly fluctuating exchange rates, rapid changes in monetary policy, and attempts at the overreach of state power. Institutions can dampen the shocks to their constituents by hedging these risks: holding multiple currencies, committing to inversely adjusting salary payments to inflation rates or adjusting them for real costs-of-living, funding legal defense of individuals targeted by governments, and so forth. Institutions which successfully provide a buffer to these shocks can expect retroactive distributions to include them in the future, so there is reason for them to try. By and large, existing legal structures are already designed to allow institutions to assume risk (“limited liability”) and hold assets, so existing institutions should be able to assume this role easily.</p>
<p>Institutions which are able to can shift future expected value into the present by issuing credit money as outlined above, which can be sold for existing currencies (especially fiat) to fill their institutional coffers and increase the institution’s ability to buffer shocks. The difficulties of doing this within existing legal structures will vary, but institutions which are able to find a way, shift future expected value into the present, and use it correctly to support individuals can similarly expect to create more future value and receive future retroactive funding, so their incentives are well-aligned.</p>
<p>In order to coordinate towards heterotopia, institutions can establish bilateral relationships of trust with other institutions. It is important that these relationships of trust are publicly verifiable, as this allows parties operating within or otherwise aligned with those institutions to coordinate more efficiently (e.g. deduplicate work). This can function quite similarly to the proposal for heterogeneous UBI as above, but instead of setting <code class="language-plaintext highlighter-rouge">k = 1</code> (not a natural consensus in this case) and committing to redefining the future issuance schedule, institutions can just periodically agree to mint some of each other’s token and lock it in an <code class="language-plaintext highlighter-rouge">xy=k</code> curve at the current value of <code class="language-plaintext highlighter-rouge">k</code>, which correlates the value of the two institutions’ expected future retroactive funding and current credit, and can be publicly verified if they choose to make it so.</p>
<p>Institutions operating on the conceptual basis of heterotopia should also selectively extend trust (and money, in whatever forms applicable) to existing legacy institutions. Existing institutions have their conceptual frameworks and reputations embedded deeply in existing societies, and cooperating will likely dampen some of the turbulence of this transition. However, this trust (and money) should not be extended without conditions. Many existing institutions directly or indirectly fund weapons, propaganda, and coercion, and funding should only be extended to these institutions (such as, but not limited to, fiat governments) conditional on their agreement to immediately defund all such activities, adherence to which must be checked periodically. Existing institutions have issued a lot of money but lost a lot of trust, and that trust must be re-earned if they want their money to be valuable in the future. This is incentive-aligned, because scale-free credit money is win-win - it need only oppose those who would oppose others. Existing institutions which cooperate can expect future retroactive funding, and existing institutions who do not can expect none.</p>
<p>Certain existing institutions could easily retool themselves to rapidly accelerate this transition because their skill-sets and assets can act as an incentive shift force multiplier. Venture capitalists, hedge funds, and other private equity firms which retain direct decision-making power over their capital allocations need simply start optimising for provisioning public goods instead of private ones. Optionally, as above, they can issue their own money in expectation of future retroactive funding, but retroactive funding can also be issued to owners of existing stock, equities etc. through interfacing mechanisms, so this is not critical (and may be difficult for some capital allocators operating within existing legal structures).</p>
<p>For existing capital allocators, as soon as they expect heterotopia, this is incentive-compatible, because optimising for private value capture is a terrible strategy from the standpoint of capital efficiency in public-goods provisioning. Public goods, by definition, are non-rivalrous and non-excludable. Existing schemes for conversion of public value to privately capturable value are based around the imposition of an artificial mechanism of exclusion, such as paywalls, token-gating, or IP law. Such exclusion limits the amount of potential future value - and corresponding expected future retroactive funding - because fewer parties are able to access the good, benefit from it, and (potentially) be thankful for it in the future. This exclusion also imposes the requirement to measure each usage (signing into a website with a paywall, paying to view a movie, licensing a theater production) which has a cost of implementation that scales (to first order) linearly with the number of consumers of the good, since each use must be tracked - the more users of the good, the more potential future value, but the more expensive such measurement. Optimal capital efficiency in public-goods provisioning is much more likely to be achieved by measuring only infrequently, as much as is needed to sample demand and coordinate strategic direction of production, but not for each and every interaction. For this reason, in expectation, after the transition to heterotopia, capital allocators which changed their decision-making calculus earlier on can be expected to do better (in terms of retroactive funding) than those who did not, since they will have created more public value. Considering the social dynamics involved, one can expect a sort of preference cascade here (and in general).</p>
<hr />
<p>Enough for one blog post. Permit me the indulgence to end on a more poetic note. To quote Mao Zedong, who may have not been quite right at the time but said it more eloquently than I can,</p>
<blockquote>
<p>所谓革命高潮快要到来的“快要”二字作何解释,这点是许多同志的共同的问题。马克思主义者不是算命先生,未来的发展和变化,只应该也只能说出个大的方向,不应该也不可能机械地规定时日。但我所说的中国革命高潮快要到来,决不是如有些人所谓“有到来之可能”那样完全没有行动意义的、可望而不可即的一种空的东西。它是站在海岸遥望海中已经看得见桅杆尖头了的一只航船,它是立于高山之巅远看东方已见光芒四射喷薄欲出的一轮朝日,它是躁动于母腹中的快要成熟了的一个婴儿</p>
</blockquote>
<p>I won’t include a translation because it doesn’t do the text justice, but suffice it to say that rays of heterotopian light are already visible through the cracks in the facade of modernity. As soon as you start looking, you can see it everywhere you look, from calls for a <a href="https://medium.com/@memetic007/a-journey-to-gameb-4fb13772bcf3">“Game B”</a>, to elucidations of <a href="https://erikhoel.substack.com/p/the-gossip-trap">the social media dystopia likely without a cryptographic substrate</a>, to expositions of how a <a href="https://www.youtube.com/watch?v=Bluq7xvJRBs">category-theoretic treatment of economics</a> would discourage the conceit of “ceteris paribus” decision-making, to random conversations about dysfunctional speculation-fueled property markets overheard in a Mexican restaurant in Kreuzberg. You’ve already seen it. Maybe you’re already living it. I didn’t invent it, you did. I just gave it a name. And I <a href="https://www.suhrkamp.de/buch/helmut-willke-heterotopia-t-9783518292587">didn’t</a> <a href="https://adocs.de/de/buecher/monografie/searching-heterotopia">even</a> <a href="https://heterotopia.blog/home-english/">do</a> <a href="https://futurearchitectureplatform.org/projects/64f9e430-e761-41a5-8f5a-ca2ce2ae7157/">that</a>.</p>
<p>Heterotopia is inevitable the moment we decide to make it so.</p>
<hr />
<p>Now, for a little retroactive trust-funding of my own:</p>
<p>Thanks to Ding Yuanfang for the 103% inspiration without which even nothing wouldn’t have been possible. Thanks to Awa Sun Yin, Adrian Brink, Dev Ojha, and too many others to name for conversations and cooperation without which this post certainly wouldn’t have been. Thanks to Yuanfang Ding, Nicholas Campbell, and Dev Ojha for reviews of this post and helpful suggestions - all errors remaining are my own.</p>Christopher GoesAgainst decentralised finance2022-01-25T01:00:00+01:002022-01-25T01:00:00+01:00https://pluranimity.org/2022/01/25/against-decentralised-finance<p>Dashboards for decentralised finance, such as the <a href="https://defipulse.com/">first result on Google for “DeFi”</a>, display and rank protocols by a metric called “Total Value Locked”, which is measured as the amount of tokens locked in the smart contracts or blockchain of the protocol in question multiplied by the current exchange rate of the token against a fiat currency, most commonly USD. Protocols usually compete for TVL with some mix of printing tokens in return for locking other tokens in the protocol (increasing the multiplicand of locked token amount) and content marketing and memetic engineering (increasing demand and thus the multiplier of fiat price). Implicit in the metric of TVL (total <em>value</em> locked), the competition to maximise it, and the broad structure of the decentralised finance ecosystem alike is this assumption that <em>value</em> can be measured and homogenised by price. This assumption is false, and its deep permeation is evidence that the web3 ecosystem has been largely coopted by the very incentive structures which it was originally designed to oppose.</p>
<p>There are many bad arguments against decentralised finance. Cases of token shilling or thinly-veneered Ponzi schemes are plentiful, but their existence alone does not invalidate more serious projects. As long as profit incentives are in play, such substanceless copycatting arises in protocol engineering, SaaS startups, and techno clubs alike. Nor is all of DeFi, broadly defined, unhelpful — there has been some genuine innovation in protocol primitives (e.g. AMMs) which could fill useful roles in long-lived economic infrastructure with very low maintenance costs. But the central role of “decentralised finance” is as an organising concept: both as a template for brainstorming, as elements or products present in the traditional finance ecosystem are copied and transmogrified to operate in a distributed context, and a justificatory rationale, as if it were desirable to take whatever it is that “finance” does and “decentralise” it. As both a template for brainstorming and a justificatory rationale, the concept of “decentralised finance” is misguided, and in both cases for the same reason: it takes for granted the structures and practices of finance as existent and postulates that they should be in some sense decentralised, without asking whether these structures are the right ones, whether they serve society at large, or even what their purpose is in the first place. In the absence of deep theoretical and historical engagement, even well-intentioned efforts to “decentralise” are likely to be quickly coopted by existing incentive structures, bases of influence, and ideologies in the service of their own perpetuation, and this is exactly what has happened.</p>
<p>Modern financial systems are sprawling and complicated and extend into many aspects of life. Paying for a sandwich at the corner shop, taking on a loan to attend community college, and issuing shares in a partnership to each of the members all constitute interactions of some sort with a “financial system”, whose boundaries and extent are difficult to precisely ascertain. Financial systems mediate the provision, exchange, and transport of food which allow dense urban populations distant from farms to survive, and the abstractions of deep supply chains which render the purchase of an iPhone in California a means of support for continued oppression in Xinjiang. Financial systems provide loans for the construction of new housing, schools, and theatres, and facilitate competitive incentives whereby companies which reduce their costs by emitting more carbon outcompete ones which do not. Financial systems underpin both the magic of modernity whereby I can video call my parents across an ocean and the tragedy of modernity whereby the same cables over which the bits of my face travel also carry hateful vitriol selected for a social media timeline by a company maximising advertising revenue. To even enumerate the benefits and harms, let alone to disentangle which parts of the system are responsible for which, is a task the daunting scope of which can tempt one to throw up their hands in resignation, but the complexity does not justify pretension. Should one wish to craft an alternative system which shifts these equilibria, one must investigate the underlying legal, cultural, and economic patterns which have led to their emergence and sustenance, and brainstorm changes to fundamental legal, cultural, and economic systems and norms which might foster different equilibria. To act without conducting such an investigation is to throw metal darts in a dark room filled with shifting magnetic fields, nearly all of which vector away from the dartboard.</p>
<p>Interpreting charitably, the ethos of decentralised finance paired with some recognition of these complexities carries as implicit the hypothesis that the ills of modern finance are primarily a result of its being <em>centralised</em>, and that <em>decentralising</em> it will alleviate them. While there may be benefits in certain cases, it is not at all clear that this is the case in general, and in many cases decentralisation may exacerbate the harms. iPhone purchases supporting oppression, competition wrecking the environment, and surveillance capitalism fomenting hatred don’t have much to do with centralisation. Splitting Apple up wouldn’t change the abstraction of supply chains and cost-benefit calculus of legal arbitrage. More producers instead of fewer competing to produce widgets seems likely to make it harder to coordinate or legislate, not easier. More social media companies instead of fewer will just cause the attention bidding wars to escalate. Perhaps new companies would propose alternative platforms with different revenue models, which customers would then instead choose — but the cause of improvement here is then not solely the decentralisation of platforms, but rather such paired with a cultural norm which takes into account the harms of certain structures.</p>
<p>If anything can be said to unite these examples of harm perpetuated by the financial system, it is not centralisation or decentralisation but rather abstraction. Purchasers of iPhones are separated from the workers in Xinjiang whose exploitation they contribute to by many layers of cultural and communication barriers and intricate supply chains which make it difficult to reason about specific contributions to harm and facilitate legal arbitrage. Intermediate producers choosing their suppliers are separated from the impacts of their choices by the abstraction of price, which reduces differences in production practices and environmental sustainability to a single number in a competitive environment where consideration of externalities is selected against. Engineers of machine learning systems which power social media algorithms are separated from the communities they bear some responsibility for tearing apart by the abstractions and metrics of surveys, user statistics, time-on-site, and advertising revenue. If decentralising finance means adding layers of abstraction, quantifying value at each layer, and dialing up the knob of competitive pressure, this merely adds fuel to the fire. Reckoning with the complexities and impact of the financial system and conjecturing real alternatives must start with the recognition that these abstractions have diverged. Price is not value. Taking the blind abstractions of capital flow, decentralising them in some fashion, and optimising “total value locked” is not merely a step in the wrong direction. It is a step in the same direction, that of abstraction, metrification, and optimisation. It is not a change at all.</p>Christopher GoesDashboards for decentralised finance, such as the first result on Google for “DeFi”, display and rank protocols by a metric called “Total Value Locked”, which is measured as the amount of tokens locked in the smart contracts or blockchain of the protocol in question multiplied by the current exchange rate of the token against a fiat currency, most commonly USD. Protocols usually compete for TVL with some mix of printing tokens in return for locking other tokens in the protocol (increasing the multiplicand of locked token amount) and content marketing and memetic engineering (increasing demand and thus the multiplier of fiat price). Implicit in the metric of TVL (total value locked), the competition to maximise it, and the broad structure of the decentralised finance ecosystem alike is this assumption that value can be measured and homogenised by price. This assumption is false, and its deep permeation is evidence that the web3 ecosystem has been largely coopted by the very incentive structures which it was originally designed to oppose.Comparative Advantages of Distributed Ledgers2019-06-02T02:00:00+02:002019-06-02T02:00:00+02:00https://pluranimity.org/2019/06/02/comparative-advantages-distributed-ledgers<p>Why develop distributed ledgers<sup><a href="#1">1</a></sup>?</p>
<p>For the purposes of this analysis, let distributed ledgers be state transition functions executed in a consensus algorithm<sup><a href="#2">2</a></sup> by a distributed set of parties, with arbitrary state complexity<sup><a href="#3">3</a></sup>, unbounded transaction throughput<sup><a href="#4">4</a></sup>, censorship resistance<sup><a href="#5">5</a></sup>, bandwidth-inexpensive queryability<sup><a href="#6">6</a></sup>, oracle access to elapsed time<sup><a href="#7">7</a></sup>, and private data / public rule-set segmentation<sup><a href="#8">8</a></sup>. None of these properties are yet satisfactorily provided by existing implementations, but we have reason enough to expect they may be in time (see references). The present developmental efforts justifiably focus on satisfying these properties, in of itself a challenging and engrossing task — but should that effort succeed — what then?</p>
<p>In this post, I focus on <em>institution design</em>, where an <em>institution</em> is a set of rules, actors, and incentives intentionally designed to realise a particular high-level outcome and persist itself over time in the absence of a singular coordinating entity. I outline four broad areas of institution design where I think we have reason to believe that distributed ledgers may increase the available component set for mechanism designers and thereby enable the creation of radically different institutions from what we have today: public commons, polycentric law, threshold commitment, and contingent payments. For each area, I explain the institution or institutional component reference class, why we might benefit from such institutions or components, and in what way distributed ledgers may provide a significant advantage, then attempt to articulate & address the best arguments against desirability and feasibility.</p>
<h3 id="public-commons">Public commons</h3>
<h4 id="what">What</h4>
<p>What are public commons?</p>
<p><em>Public commons</em> are platforms which create economic surplus by connecting buyers and sellers & providing a medium through which they can transact, where the platform operator, if distinct from the userbase, is not manufacturing the product or providing the service. The US dollar (value), Airbnb (housing), Uber (transportation), Ebay (goods), Github (code, bug reports), Microsoft Windows (desktop applications), and search engines (information) are all public commons to varying degrees. Public commons tend to possess strong network effects, since the utility provided to any particular user is proportional to the number of other users, and thus they often result in natural monopolies, especially in the absence of prior open standards for product representation (present in the case of websites, for example, but not in the case of transportation or housing).</p>
<p>Perhaps the most successful (by both user count and economic utility) and most decentralised existing such commons is the English language, a medium for the exchange of information. Languages as commons have several convenient properties: the size of their state does not scale linearly with the number of users, approximate agreement on most of the present state is sufficient for usage (as any natural language contains many different possible encodings of the same semantics), and our mental facilities and social institutions are well-adapted to track their states and provide the high-throughput gossip required for loosely coordinated state changes.</p>
<h4 id="why">Why</h4>
<p>Why are public commons valuable, and what are their challenges?</p>
<ul>
<li>Public commons provide an enormous amount of utility. Seven of the ten largest global firms by market capitalisation operate commons of sorts<sup><a href="#9">9</a></sup>, and they capture but a small fraction (although perhaps a larger fraction than necessary) of the created utility. The English language provides far more utility than all of them combined, but — and partially because (imagine if the English vocabulary were owned by a company) — it captures none of it.</li>
<li>Control of commons by companies often tends to be sub-optimal, since the profit motive of the company (generally enshrined in law) is not necessarily aligned with the best interests of the commons’ userbase. Especially once they attain a dominant agglomeration effect, companies may find it more profitable to extract rent far in excess of their costs, deprive users of alternative interfaces and algorithms through the use of proprietary standards and siloed data, deplatform users instead of respecting a notion of minority rights, and optimise content & information for attention and behavioural surplus capture even when it is clearly against the best interest of their userbase<sup><a href="#10">10</a></sup>.</li>
<li>The immense possible utility seems to justify incentivizing the creation of commons by allowing a capture by the creators of some fraction of the future value, but preferably in a way where the creators can credibly commit to a particular rule-set which curtails their future power over the commons should the enterprise succeed. At the moment, the only way to incentivize creation is for firms to own the commons and control all of the rules, which frequently leads to incentive misalignment.</li>
</ul>
<h4 id="comparative-advantage">Comparative advantage</h4>
<p>Why might distributed ledger technology help, and what role would it serve?</p>
<ul>
<li>Distributed ledger technology can serve as the backend of a decentralised commons, enforcing the rule-set (accepting user input, matching counterparties, settling payment, operating rating algorithms, etc.) by encoding the actors, rules, and incentives in the state machine.</li>
<li>Creators of a decentralised commons can capture a portion of the future economic value by assigning themselves a fraction of future revenue or an apportionment of a network-associated token, but credibly commit not to extract rent or arbitrarily alter the rules against users’ interest once the platform becomes dominant (as noted by Tyler Cowen<sup><a href="#11">11</a></sup>).</li>
<li>Decentralised commons can facilitate scalable permissionless innovation and interoperation with other services and interfaces to a degree which privately operated commons cannot since interactions with the system are not bottlenecked by trusted organisational relationships.</li>
<li>Distributed ledgers, by construction, cannot own and control access to data in the same sense as Google or Facebook, so the cost of exit (were the decentralised commons to ramp up fees, say) and correspondingly the degree of possible rent extraction is lower.</li>
<li>Commons operated on distributed ledgers are likely to be more resilient to legal & geopolitical adversaries, since they must be constructed to function on open networks, build cryptographic authentication & Sybil resistance into their design, and do not require specialised hardware or expertise to operate.</li>
</ul>
<h4 id="objections">Objections</h4>
<p>Why might this approach not be desirable?</p>
<p>Scott Alexander has expressed concern<sup><a href="#12">12</a></sup> about the risks of too-resilient marketplaces:</p>
<blockquote>
<p>The latest development in the brave new post-Bitcoin world is crypto-equity. At this point I’ve gone from wanting to praise these inventors as bold libertarian heroes to wanting to drag them in front of a blackboard and making them write a hundred times “I WILL NOT CALL UP THAT WHICH I CANNOT PUT DOWN” (…) People are using the contingent stupidity of our current government to replace lots of human interaction with mechanisms that cannot be coordinated even in principle.</p>
</blockquote>
<p>I admit this possibility, but consider the dangers (comparatively) remote.</p>
<ul>
<li>Whether “unstoppable markets” which prevent censorship of funding for human trafficking or terrorism are realised hinges on whether the “hard libertarian” aspect of distributed ledgers is primarily endemic to the technology or primarily contingent on founder effects, and I think it is mostly the latter. Nothing about the decentralised nature of the infrastructure prevents vendor blacklists, legal enforcement, or even the incorporation of human oversight for dispute-resolution<sup><a href="#13">13</a></sup>.</li>
<li>It is not the case that decentralised commons cannot be coordinated. English language social norms around acceptable words and honorifics are shifting rapidly all the time. Existing distributed ledgers such as Bitcoin and Ethereum have seen frequent forks on occasions of political disagreement, and recent projects have integrated explicit governance mechanisms.</li>
<li>Platform (brand) reputation of decentralised ledgers is extremely important for wide-market adoption, and the costs of exit are low, so the threat of association with socially disapproved activity may motivate ledger stakeholders to construct preventative mechanisms — or at minimum, the reputational effects will select for the ledgers which do construct such mechanisms.</li>
</ul>
<p>Likely a far worse danger is governmental agencies or less scrupulous companies co-opting parts of the technology and branding around distributed ledgers to realise their own, often totalitarian, ends, while using their monopolies on the use of force or existing social graphs to raise the cost of exit. Attempts are already in progress<sup><a href="#14">14</a></sup>.</p>
<p>Why might this approach not be feasible?</p>
<blockquote>
<p>Many unsolved technical problems remain, particularly in the areas of scaling<sup><a href="#15">15</a></sup>, privacy<sup><a href="#16">16</a></sup>, and genuine decentralisation<sup><a href="#17">17</a></sup>.</p>
</blockquote>
<p>The rate of progress is rapid (on a human timescale, perhaps not on the cryptocurrency-market-timescale), and large incentives exist for solutions, so I think we can expect continued rapid progress. No functionality postulated in this analysis has theoretical impossibility results.</p>
<blockquote>
<p>Distributed ledgers will simply switch out the controlling oligarchy for a new one. Google famously committed to “do no evil”, and has not succeeded — how are blockchains different? Will not the stakeholders or consensus operators merely fill the same role?</p>
</blockquote>
<p>Distributed ledgers enable a kind of credible, binding commitment to future rule-sets & restrictions that for-profit companies simply cannot make, and since ledgers do not maintain a monopoly on data, the cost of exit is far lower, so consensus participants and stakeholders have far less power than shareholders (or executives) of current technology companies with data monopolies.</p>
<blockquote>
<p>“Smart contracts” and the rule-sets of distributed ledgers more generally are too rigid, and will fail to supplant meatspace systems requiring flexibility and human judgement in adjudication.</p>
</blockquote>
<p>Many present “flexible” meatspace institutions — such as the IRS<sup><a href="#18">18</a></sup>, the Pentagon<sup><a href="#19">19</a></sup>, and Facebook<sup><a href="#20">20</a></sup> — seem like they might benefit from a little more rigidity and a little less flexibility in enforcement. In cases where case-by-case human judgement is necessary, distributed ledgers need not and will not replace it, but can instead serve as an immutable, auditable record of the human decision-making process.</p>
<p><br /></p>
<h3 id="polycentric-law">Polycentric law</h3>
<h4 id="what-1">What</h4>
<p>What is polycentric law?</p>
<p>I borrow the term from a 1999 essay<sup><a href="#21">21</a></sup> by Tom Bell, although I use it somewhat differently.</p>
<p>Bell defines <em>polycentric law</em> as</p>
<blockquote>
<p>law arising from a variety of customs and private processes rather than law coercively imposed by a single state authority.</p>
</blockquote>
<p>His essay cites three examples: alternative dispute resolution, private communities, and online adjudicators which have arisen on the internet (the article is a bit dated; a modern take would more likely focus on the differing rule-sets of social networks). I am interested in this essential concept, but with a broader scope and a few additional properties.</p>
<p><em>Polycentric law</em> is the realisation of overlapping, voluntary, and specialised private legal systems, in a manner capable enough to supplant a substantial fraction of the existing domestic & international regulatory regime. In the context of distributed ledger institutional design, enforcement is either <em>ex ante</em> inherent in the medium of contract description or effected <em>ex post</em> through control over economic incentive levers.</p>
<p>I have found surprisingly little analytical exploration of this concept in the literature. One detailed, albeit fictional, depiction of how a polycentric legal system might function and evolve at global scale can be found in Ada Palmer’s Terra Ignota series<sup><a href="#22">22</a></sup>.</p>
<h4 id="why-1">Why</h4>
<p>Why might polycentric law be useful, and what challenges are involved?</p>
<ul>
<li>
<p>Present legal systems are spatially monopolised: one legislative body & governance process determines the rule-set for an area of physical space. To so determine boundaries of legal systems makes sense only to the degree by which geographical proximity indicates a preference or necessity for shared law — such a shared preference is plausible in theory or at least necessary in practice for physically-mediating legal domains such as the right to bear arms, but seems far less sensible for others like online privacy protections.</p>
</li>
<li>
<p>An extraordinary amount of effort is directed to the effecting of control over the processes which govern changes in our existing legal monopolies. This effort could perhaps better be directed towards realising alternative sets of laws which individuals could voluntarily select from. Unfortunately, there is no unclaimed land (except perhaps extra-terrestrially<sup><a href="#23">23</a></sup>) upon which a consenting group of individuals can voluntarily establish a sovereign nation — but this restriction does not exist in the digital realm.</p>
</li>
<li>
<p>The closest analogue may be existing internet communities such as social networks, sub-Reddits, private chat groups, and blogs, but these communities are limited in the kinds of rule-sets — primarily content moderation and ranking — which they can implement, and limited to enforcement by reputation-based positive & negative incentive levers — primarily social capital<sup><a href="#24">24</a></sup> and shaming/deplatforming. Furthermore, their content ranking algorithms and incentive levers are warped by opaque for-profit control, and rarely reflect anything like a Rawlsian veil.</p>
</li>
</ul>
<h4 id="comparative-advantage-1">Comparative advantage</h4>
<p>Why might distributed ledger technology help, and what role would it serve?</p>
<ul>
<li>
<p>Distributed ledgers can enforce contracts in two distinct ways: <em>ex ante</em>, by embedding the logic directly into the ledger,
or <em>ex post</em>, through economic incentives or penalties for attributable behaviours<sup><a href="#25">25</a></sup>.
<em>Ex ante</em> enforcement is rarely possible to construct with the tool-kits of existing meatspace institutions, and <em>ex post</em>
enforcement tends to have substantial implementation costs which distort accuracy and limit precision.</p>
</li>
<li>
<p>Explicit codification of legal systems will facilitate interoperation where laws are shared,
through the use of common standards, representations, and semantics. Transactions costs of treaty
negotiation limit diversification — Nebraska cannot negotiate an alternative trade agreement with the
United Kingdom — and thus confer out-sized advantages on larger political blocs even though the
policies chosen may be subpar for the smaller constituencies.</p>
</li>
<li>
<p>Distributed ledgers, through inclusion and control of algorithmically scarce assets which acquire market value,
obtain a programmable incentive lever with which to encourage or discourage particular actions in the real world,
insofar as the results of those actions (such as behaviour in a consensus protocol) can later be reflected back to
the state of the ledger. This capability is unique and new — the internet protocol, for example, has no such ability
to alter the behaviour of its implementers through incentivization, and must content itself with a topology determined
primarily by the economics of implementing firms (such as ISPs). This incentive lever is far more constrained
than the modern state’s monopoly on the legal use of force, but it is comparable to the subsidies and fines imposed
through regulation and by civil courts, and distributed ledgers can thus plausibly contend to supplant significant parts of
that body of law.</p>
</li>
</ul>
<h4 id="objections-1">Objections</h4>
<p>Why might this approach not be desirable?</p>
<blockquote>
<p><em>Ex ante</em> contract enforcement by distributed ledger is dangerous because it fails to preserve the nuance and “learned lessons” of meatspace arbitration systems, as is evident in “smart contract” flaws causing hundreds of millions of dollars in losses.</p>
</blockquote>
<p>The state of “smart contract” (an unfortunate misnomer) programming is indeed far from the level of reliability which will be required for high-volume commerce and enforcement of more critical parts of law such as checking a passport at a border gate,
but that problem will be solved in time. Contemporary type theories<sup><a href="#26">26</a></sup> can prove arbitrary properties about the behaviour of programs, and research on translating these theories into formally verifiable contract languages is ongoing<sup><a href="#27">27</a></sup>.
Where necessary, fallback arbitration systems<sup><a href="#13">13</a></sup> can also be used.</p>
<blockquote>
<p>Governance mechanisms of distributed ledgers, whether formal or informal, will be capturable just as present governance mechanisms are.</p>
</blockquote>
<p>At present, distributed ledger governance mechanisms are probably far more captured, in the sense of being controlled by a small number of entities, than even the most corrupt democratic institutions today.
However, the value of capturing such a system and thus the amount of extractable rent is far lower. Unlike countries, which maintain a monopoly over the use of force, distributed ledgers have control over no such
fundamentally scarce physical resource, not even data. The potency of the positive or negative levers available to a ledger depends directly on public perception of that ledger’s value — constraining the behaviour of
rational stakeholders — and should the stakeholders take action to which the users are opposed, the ledger can be forked.</p>
<p>Why might this approach not be feasible?</p>
<blockquote>
<p>Computing the intersections between rule-sets necessary to determine how subscribers to different legal systems can interact will be impossible or infeasible, due to complexity or due to the inability of distributed ledgers with separate consensus algorithms to interoperate.</p>
</blockquote>
<p>By the nature of distributed ledgers (which must be verified by many parties), the rule-sets being verified must be public & codified, so computing intersections of compatibility should be possible and need consist solely of code (so are free to copy). Cross-consensus-algorithm interoperation protocols are under development<sup><a href="#28">28</a>, <a href="#29">29</a></sup>.</p>
<blockquote>
<p>Agglomerative political coalitions & supranational bodies emerge because of economies of scale in geopolitics between military alliances and economic blocs, which will persist whether or not distributed ledgers are used as a medium of legal enforcement. The threat of physical coercion will prevent voluntary, ledger-based legal systems from supplanting a substantial portion of the role of existing institutions.</p>
</blockquote>
<p>Appearances notwithstanding, the threat of force is indeed a salient feature of modern geopolitics<sup><a href="#30">30</a></sup>, and the economies of scale on trade agreements for physical goods will not fade anytime soon. But force as applied by the state is a blunt and expensive instrument,
too imprecise to prevent the spread of information and too inefficient to enforce minutia of commercial & civil law. Should ledger-based financial & commercial systems be realised at global scale, would-be autocratic states will be forced to choose between market access and tight informational control,
as they already are with the internet.</p>
<p><br /></p>
<h3 id="threshold-commitment">Threshold commitment</h3>
<h4 id="what-2">What</h4>
<p>What is threshold commitment?</p>
<p><em>Threshold commitment</em> is the ability to commit to a particular action contingent on other parties committing to particular actions, possibly themselves contingent on your commitment. A set of threshold commitments can together realise an atomic transition from one state to another which could not be unilaterally effected by any of the participating parties individually<sup><a href="#31">31</a></sup>.</p>
<p>Threshold commitment may prove particularly useful since it can be used to jump between Nash equilibria in incentive space: players in a game can commit to change their strategies (restricting their own future actions) contingent on other players agreeing to do likewise, and the underlying ledger can realise this transition atomically such that no individual player can defect.</p>
<p>In very limited form today, threshold commitments are realised by crowdfunding platforms such as Kickstarter, where producers commit to produce a product or service and consumers commit to pay a certain amount given sufficient aggregate demand to provide the necessary capital for production costs. Kickstarter is a very limited threshold commitment platform, however — the information provided to participants is minimal, the conditionals which can be committed to are limited to small-scale consumer goods manufacturing, and contract enforcement requires trust in a corporate intermediary (and is thus limited to low-stakes games: Kickstarter cannot fund public infrastructure or enforce multiparty nuclear deproliferation).</p>
<h4 id="why-2">Why</h4>
<p>Why might threshold commitment be useful, and what are the challenges involved?</p>
<p>Scott Alexander puts the essential coordination problem best, as a parable of fishermen<sup><a href="#32">32</a></sup>:</p>
<blockquote>
<p>As a thought experiment, let’s consider aquaculture (fish farming) in a lake. Imagine a lake with a thousand identical fish farms owned by a thousand competing companies. Each fish farm earns a profit of $1000/month. For a while, all is well.</p>
</blockquote>
<blockquote>
<p>But each fish farm produces waste, which fouls the water in the lake. Let’s say each fish farm produces enough pollution to lower productivity in the lake by $1/month. A thousand fish farms produce enough waste to lower productivity by $1000/month, meaning none of the fish farms are making any money. Capitalism to the rescue: someone invents a complex filtering system that removes waste products. It costs $300/month to operate. All fish farms voluntarily install it, the pollution ends, and the fish farms are now making a profit of $700/month – still a respectable sum.</p>
</blockquote>
<blockquote>
<p>But one farmer (let’s call him Steve) gets tired of spending the money to operate his filter. Now one fish farm worth of waste is polluting the lake, lowering productivity by $1. Steve earns $999 profit, and everyone else earns $699 profit. Everyone else sees Steve is much more profitable than they are, because he’s not spending the maintenance costs on his filter. They disconnect their filters too. Once four hundred people disconnect their filters, Steve is earning $600/month – less than he would be if he and everyone else had kept their filters on! And the poor virtuous filter users are only making $300. Steve goes around to everyone, saying “Wait! We all need to make a voluntary pact to use filters! Otherwise, everyone’s productivity goes down.”</p>
</blockquote>
<blockquote>
<p>Everyone agrees with him, and they all sign the Filter Pact, except one person who is sort of a jerk. Let’s call him Mike. Now everyone is back using filters again, except Mike. Mike earns $999/month, and everyone else earns $699/month. Slowly, people start thinking they too should be getting big bucks like Mike, and disconnect their filter for $300 extra profit… A self-interested person never has any incentive to use a filter. A self-interested person has some incentive to sign a pact to make everyone use a filter, but in many cases has a stronger incentive to wait for everyone else to sign such a pact but opt out himself. This can lead to an undesirable equilibrium in which no one will sign such a pact.</p>
</blockquote>
<blockquote>
<p>The most profitable solution to this problem is for Steve to declare himself King of the Lake and threaten to initiate force against anyone who doesn’t use a filter. This regulatory solution leads to greater total productivity for the thousand fish farms than a free market could.</p>
</blockquote>
<p>The term “tragedy of the commons” was first introduced to describe this general game theoretic predicament by William Lloyd in 1833<sup><a href="#33">33</a></sup>, and later popularised by Garrett Hardin in 1968<sup><a href="#34">34</a></sup> — although both were primarily concerned about exponential population growth in combination with linear food supply growth, which appears to be less of an issue than originally thought<sup><a href="#35">35</a></sup>.</p>
<p>Commons coordination problems under free market competition & selection fall prey to particularly pernicious pathologies. Consider a set of energy suppliers, who individually have the option to substantially reduce their carbon footprint at the expense of slightly higher prices. If energy consumers simply select by price, the suppliers which voluntarily reduce their carbon footprints will be out-competed by the suppliers which do not (and can thus charge slightly lower prices). Over time, the more ethical suppliers which attempt to price in some of their externalities will die off because they did not optimise for the most proximate goal, leading to an outcome where everyone is eventually worse off.</p>
<p>At a given level, this seems soluble if the consumers voluntarily elect to pay higher prices for cleaner energy, but the incentive problems compound: if one shoe manufacturer elects to pay higher energy prices voluntarily, another which does not will be able to sell slightly cheaper shoes, repeat <em>ad infinitum</em>. The transactions costs of detailed research into global supply chains quickly become insurmountable — a comprehensive analysis of the environmental impact of one product produced by a single shoe manufacturer took three graduate students most of a year<sup><a href="#36">36</a></sup> — so end consumers could not in practice price in externalities even if they wanted to.</p>
<p>Similar challenges apply even at the meta-level of governance design: wherever lobbying the state, on the margin, becomes more profitable than providing better goods or services, a cyclical degeneration into cronyism can occur, as the companies which elect not to lobby the state will be “outcompeted” by those which do<sup><a href="#37">37</a></sup>.</p>
<h4 id="comparative-advantage-2">Comparative advantage</h4>
<p>Why might distributed ledger technology help, and what role would it serve?</p>
<ul>
<li>
<p>In the world of the parable, a threshold commitment would allow this filter-installation pact
to be conditionalized on every fisherman’s participation — it’s in all the fishermen’s best interest
to sign a pact that commits them to installing a filter if and only if everyone signs the same pact.
Such a “threshold contract” could in theory be enforced by a state, but the transactions costs of
legal services may render that route expensive, and imprecise enforcement may dilute the incentive alignment.
If the fishermen settle their payments through a programmable ledger and can notarise proofs
of filter installation in a way that is difficult to forge (or in a way such that it is cheaper
to be honest than dishonest in expectation, perhaps with on-chain adjudication and slashing for misbehaviour),
they can digitally sign and use the ledger to enforce such a threshold commitment.</p>
</li>
<li>
<p>The state machine of a distributed ledger can realise atomic execution of
threshold commitments through the involved users delegating control of their
assets or operations to logic on the ledger (a “smart contract”), which can
wait for the agreed-upon threshold before executing all agreed-upon actions
atomically at once (or never, should the threshold never be reached), and can
programmably reroute or burn funds to alter incentives as the commitment designates.</p>
</li>
<li>
<p>The representations of binding commitments necessary to settle on a ledger
as transactions can be collected and stored as a space of possible
contingent actions (a sort of generalised decentralised exchange orderbook).
Since the cost of generating and storing contingent commitments represented
as digitally signed succinct pieces of data is effectively zero, large
numbers of commitments can be indexed and a wide incentive space searched through.</p>
</li>
<li>
<p>Threshold commitment need not constrain itself to operations expressed on a single
ledger. With appropriate interblockchain communication protocols, users (or contracts) could
in fact threshold-commit to switch <em>ledgers</em> (by moving their assets, or delegating
control to another ledger) contingent on a modicum of support and perhaps the passage
(or lack thereof) of particular alterations by an on-chain governance mechanism.</p>
</li>
</ul>
<h4 id="objections-2">Objections</h4>
<p>Why might this approach not be desirable?</p>
<blockquote>
<p>In the shoe manufacturer example, do consumers really want the carbon impacts priced in? Why don’t shoe manufacturers label their shoes with “carbon rating” tags?</p>
</blockquote>
<p>Such signals do occur in limited areas, particularly food — “organic” and “non-GMO” labels can command higher prices — although unfortunately
the information ecosystem behind those labels tends not to be robust. The provenance of food production, as compared to shoe manufacturing, is
likely much easier to track (except in the case of complex processed foods), and the kind of public health scares that prompt
food chain auditing don’t have a clear parallel for most goods.</p>
<p>Were consumer goods manufacturers to start to label their products with “carbon output” tags,
it probably would help, but instead allowing the manufacturers to collectively coordinate may be a simpler
solution to implement — and is in any case complementary.</p>
<p>Why might this approach not be feasible?</p>
<blockquote>
<p>Threshold commitments between thousands (or millions) of participants will never fit into a single blockchain transaction, so it won’t be possible to settle them atomically.</p>
</blockquote>
<p>Computational efficiency can be expected to scale much faster than the number of actors involved in most threshold-commitment systems. One particularly promising technology here may be zero-knowledge proofs, instantiations of which such as SNARKS<sup><a href="#38">38</a></sup> or STARKS<sup><a href="#39">39</a></sup> come with “succinct” proof sizes which are generally sublinear or even constant relative to the size of the input. Such constructions can be used for transaction compression by proving the correctness and cumulative effect of many individual transactions in zero-knowledge and submitting the proof to a verifier running on the ledger.</p>
<p>Ledgers themselves can also, more simply, retain intermediate computational states and only “trigger” once a threshold has been met, using the same basic mechanism as the sort of stateful multi-signature account common on Ethereum<sup><a href="#40">40</a></sup>.</p>
<blockquote>
<p>The relevant data (on, say, filter usage) cannot be easily or securely verified. Distributed ledgers can notarise data but have no way to verify its authenticity<sup><a href="#41">41</a></sup>.</p>
</blockquote>
<p>There are no magical data oracles, but none are necessary: it need not be impossible to forge the data, merely more costly in expectation to cheat than to play honestly. Distributed ledgers
can implement multiparty games (such as Foam Protocol<sup><a href="#42">42</a></sup> for location data), Schelling-point coordination schemes (as used in Truthcoin<sup><a href="#43">43</a></sup>),
oracle appeal systems (as in Kleros<sup><a href="#13">13</a></sup>), staking & slashing (planned for Numerai Erasure<sup><a href="#44">44</a></sup>),
and undoubtedly more to-be-developed techniques in order to construct the right incentives for accurate data collection.</p>
<p><br /></p>
<h3 id="contingent-payments">Contingent payments</h3>
<h4 id="what-3">What</h4>
<p>What are contingent payments?</p>
<p><em>Contingent payments</em> are the purchase of an expected difference in a probability distribution over future world states such that the expected price paid can vary depending on the eventual accuracy of the prediction.</p>
<p>These can be implemented in a few ways. The first, simplest way is for the buyer to escrow part or all of the purchase price with a contract executor who will release it or not in the future to the seller contingent on the future state,
which the executor must be able to measure. If the timescale is long, this has the disadvantage of not immediately releasing funds, but the right of future payment could be tokenized by the seller and resold on a secondary market to investors or third parties.
The buyer can then conditionalize their payment in arbitrary ways according to which future states they assign which utilities.</p>
<p>The second way is to instantiate a sort of localised futarchy. When considering purchasing and consuming a good (e.g. medicine), the buyer creates two prediction markets: one for the future probability distribution (e.g. of their health)
contingent on consuming the good, and one for the future probability distribution contingent on abstaining from the good. Assuming the markets are efficient, the difference between the two is the expected difference in the future
probability distribution, which can be used by the buyer to determine what price they should be willing to pay. No funds need to be locked, though the two prediction markets will need to be settled in the future depending on the data.</p>
<h4 id="why-3">Why</h4>
<p>Why might contingent payments be useful, and what are the challenges involved?</p>
<p>When purchasing medicine (setting aside some signalling value<sup><a href="#45">45</a></sup>), we are intending to buy a positive difference in the future probability distribution of our health, and we ought to be willing to pay a price calculated as some increasing function of the magnitude and nature of the difference. At present, this difference can neither be efficiently measured nor easily written into contract law, so we must content ourselves with choosing to either buy or pass on a particular pharmaceutical or treatment at the market price, and rely instead on an costly, inscrutable, and generally inefficient set of institutions to implement studies, review boards, and legislation which theoretically enforces some correlation between the future health impact and the price tag. Contingent payments, predicated on the ability to cheaply track individual health outcomes, would have us instead purchase the expected future impact directly, precommiting to pay if and only if it were realised or using localised futarchy to select an accurate price.</p>
<p>More generally, there are many cases in which we primarily wish to purchase a difference in a future probability distribution which is in principle measurable:
education (future wealth or happiness, to some degree), exercise classes, air travel (a distribution on the landing time of the plane). There are also many cases where we primarily wish to purchase
a good for immediate consumption but would like to ensure that the long-term side effects are not deleterious: fast food,
physiologically- or psychologically-altering substances, or perhaps informational content (social media, in its future effect on our mental health), to name a few.
Contingent payments would allow part of the payment to be conditionalized on the future outcome or localised futarchy to be used to select an accurate price.</p>
<h4 id="comparative-advantage-3">Comparative advantage</h4>
<p>Why might distributed ledger technology help, and what role would it serve?</p>
<ul>
<li>
<p>Distributed ledgers can play the role of contract executor, for both programatically escrowed
payments and localised futarchy, at low cost and with high assurance. Codified contracts can
be automatically negotiated between buyers & sellers, drastically reducing the transactions costs
of contracting compared to bespoke contracts negotiated between insurance firms and consumers.</p>
</li>
<li>
<p>Distributed ledgers can separate the measurement of data (future world states) and the execution of particular
contracts into separate protocols, which can interface with each other through the ledger (or across ledgers<sup><a href="#28">28</a></sup>).
This can potentially scale more effectively than a system where the liquidity providers have separate systems for
tracking data (e.g. insurance companies each providing health-tracking apps).</p>
</li>
<li>
<p>In the latter method of local futarchy, the prediction markets must be subsidised: a substantial portion of the
purchase price must be used to encourage liquidity in the two markets and thus an accurate price
determinable from their difference. Distributed ledgers can programmatically realise this, allowing the
consumer to choose what amount to spend on accurate information about the expected effects of their action.</p>
</li>
</ul>
<h4 id="objections-3">Objections</h4>
<p>Why might this approach not be desirable?</p>
<blockquote>
<p>Overindividualized contingent payments for goods like healthcare would diverge from “fair” treatment, by discriminating on the basis of pre-existing conditions, personal history, etc.</p>
</blockquote>
<p>The consequentialist moral-theoretic case for personal-history-blind treatment is not clear (compared to the relatively clear expected-QALY case for using limited resources most effectively in triage).
If some level of healthcare redistribution is a societal good, post hoc subsidies could be implemented on the ledger in accordance with chosen rules. Accurate information as to the
effects of treatments on individuals would still be quite beneficial.</p>
<p>Why might this approach not be feasible?</p>
<blockquote>
<p>Contingent payments are still too complex to contract and will not be efficient at scale.</p>
</blockquote>
<p>Contingent payment contracts written for distributed ledgers can be codified, redistributed,
and altered just like open-source-software such as Linux is today (consider the diaspora of Linux
distributions<sup><a href="#46">46</a></sup>). The costs of developing languages and tooling can be amortised
across many contracts and ledgers.</p>
<blockquote>
<p>The transaction costs of operating prediction markets will be too high, and the markets will be too illiquid to generate correct prices.</p>
</blockquote>
<p>The prediction markets will need to be subsidised, but rational consumers will be willing to do so to
gain more accurate information. If codified in common interfaces and subsidised, liquidity providers
specialising in particular sorts of predictions should emerge, a bit similar to insurance firms today,
but far easier to algorithmically automate.</p>
<blockquote>
<p>The relevant data on future states will be hard to obtain and verify.</p>
</blockquote>
<p>The same challenges and solutions apply here as in threshold commitments above. Protocols will need to be constructed
to create incentives for accurately reporting data. Few have been stress-tested at scale yet, but some early results
are positive<sup><a href="#47">47</a></sup>.</p>
<hr />
<p>This analysis omits many more mundane use cases for which DLT may be able to accomplish roughly the same functionality at a lower cost or with higher efficacy than existing solutions, including cross-border remittances, internet payments, derivative settlement, data notarisation, and censorship-resistant communication, not for lack of potential comparative advantage but rather because I am primarily interested in investigating institutions which present technology cannot realise at all.</p>
<p>Thanks to Tomáš Zemanovic & Zhanna Sharipova for reviews of this post.</p>
<p><em>Working draft — <a href="/contact">feedback welcome</a></em>.</p>
<hr />
<p><em>Footnotes</em></p>
<p><span id="1">1</span>: I prefer the term “distributed ledger” to “blockchain” — the salience is in the replication mechanism, that the blocks are kept in a linked list is an implementation detail.<br />
<span id="2">2</span>: Fulfilling <em>agreement</em> and <em>termination</em> in roughly their usual BFT senses, possibly the combined view of separate parallel consensus processes, but necessarily such that the cost of breaking safety or progress is high.<br />
<span id="3">3</span>: Or rather than storage capacity could grow faster than storage usage, as is the case with cloud-provisioned storage now.<br />
<span id="4">4</span>: Or rather that transaction throughput capacity is not a bottleneck on demand, as is the case with EMV (card) payments now.<br />
<span id="5">5</span>: Such that the subset of parties responsible for executing <code class="highlight language-haskell" data-lang="haskell"><span class="kt">F</span></code> cannot indefinitely censor any subset of transactions, as might be provided by (threshold decryption).<br />
<span id="6">6</span>: Such that bandwidth and compute required is proportional only in the size of the query, not the size of state, and that the querying client cannot be fooled. (current examples: TM lite client proofs).<br />
<span id="7">7</span>: As might be provided by a <a href="https://eprint.iacr.org/2018/601.pdf">verifiable-delay function</a> with difficulty adjustment.<br />
<span id="8">8</span>: Meaning that specific transaction details (sender, amount, code) can be private to a user while ruleset verification (supply conservation, invariant fulfilment) is performed on the ledger, as likely will be provided by zero-knowledge proof constructions (e.g. <a href="http://zerocash-project.org/media/pdf/zerocash-extended-20140518.pdf">Zerocash</a>, <a href="https://eprint.iacr.org/2018/962.pdf">ZEXE</a>).<br />
<span id="9">9</span>: <a href="https://en.wikipedia.org/wiki/List_of_public_corporations_by_market_capitalization">List of top ten firms by market capitalization</a>. I count Microsoft, Apple, Amazon, Alphabet, Facebook, Alibaba Group, and Tencent as operating commons.<br />
<span id="10">10</span>: <a href="https://www.goodreads.com/book/show/26195941-the-age-of-surveillance-capitalism">The Age of Surveillance Capitalism</a>, Shoshana Zuboff — the Marxist ontological frame obscures the argument, but this is still the best detailed expose I’ve found.<br />
<span id="11">11</span>: <a href="https://marginalrevolution.com/marginalrevolution/2018/06/blockchains-opportunity-commons.html">Blockchains and the Opportunity of the Commons</a>, Tyler Cowen.<br />
<span id="12">12</span>: <a href="https://slatestarcodex.com/2014/07/30/meditations-on-moloch/">Meditations on Moloch</a>, Scott Alexander.<br />
<span id="13">13</span>: <a href="https://kleros.io/assets/whitepaper.pdf">Kleros - The Blockchain Dispute Resolution Layer</a>, Federico Ast & Clément Lesaege.<br />
<span id="14">14</span>: <a href="https://www.theguardian.com/technology/2019/may/24/facebook-plans-to-launch-globalcoin-cryptocurrency-in-2020">Facebook plans to launch ‘GlobalCoin’ cryptocurrency in 2020</a>, The Guardian.<br />
<span id="15">15</span>: <a href="https://medium.com/nearprotocol/unsolved-problems-in-blockchain-sharding-2327d6517f43">Unsolved Problems in Blockchain Sharding</a>, Alexander Skidanov.<br />
<span id="16">16</span>: There is even <a href="https://www.chainalysis.com/">a company</a> dedicated to tracing user activity on blockchains.<br />
<span id="17">17</span>: Although few major distributed ledgers are controlled by a single entity, the state of affairs in proof-of-work land is <a href="https://arewedecentralizedyet.com/">pretty absymal</a>. Unfortunately I have not yet found a similar resource for the newest crop of proof-of-stake blockchains.<br />
<span id="18">18</span>: See this 2017 IRS report: <a href="https://www.treasury.gov/tigta/auditreports/2017reports/201730073fr.pdf">Declining Resources Have Contributed to Unfavourable Trends in Several Key Criminal Investigation Business Results</a>, Treasury Inspector General for Tax Administration.<br />
<span id="19">19</span>: <a href="https://www.reuters.com/article/us-usa-pentagon-audit/pentagon-fails-its-first-ever-audit-official-says-idUSKCN1NK2MC">Pentagon fails its first-ever audit</a>, Reuters, 2018.<br />
<span id="20">20</span>: <a href="https://www.nationalreview.com/2019/05/the-first-rule-of-social-media-censorship-is-that-there-are-no-rules/">This article</a> on Facebook deplatforming illuminates the problem, though I see little reason to expect companies to adopt the proposed solution voluntarily.<br />
<span id="21">21</span>: <a href="https://www.cis.org.au/app/uploads/2015/04/images/stories/policy-magazine/1999-autumn/1999-15-1-tom-bell.pdf">Polycentric Law in a New Century</a>, Tom Bell.<br />
<span id="22">22</span>: <a href="https://en.wikipedia.org/wiki/Terra_Ignota">Terra Ignota (series)</a>, Ada Palmer.<br />
<span id="23">23</span>: <a href="https://www.ogier.com/news/the-luxembourg-space-law">The Luxembourg Space Law</a>, Ogier Law.<br />
<span id="24">24</span>: <a href="https://www.eugenewei.com/blog/2019/2/19/status-as-a-service">Status as a Service</a>, Eugene Wei.<br />
<span id="25">25</span>: <a href="https://github.com/tendermint/tendermint/issues/3244">Counterfactual slashing</a>, Tendermint/Cosmos.<br />
<span id="26">26</span>: <a href="https://ncatlab.org/nlab/show/Martin-L%C3%B6f+dependent+type+theory">Martin-Löf dependent type theory</a>, nLab.<br />
<span id="27">27</span>: <a href="https://github.com/moonad/formality">Formality</a>, Victor Maia.<br />
<span id="28">28</span>: <a href="https://github.com/cosmos/ics/tree/master/ibc">The Interblockchain Communication Protocol</a>, Tendermint/Cosmos.<br />
<span id="29">29</span>: <a href="https://wiki.polkadot.network/en/latest/polkadot/learn/interchain/">Interchain Message Passing</a>, Polkadot / Web3 Foundation.<br />
<span id="30">30</span>: For an amusing illustration of the realpolitik involved, read Pentagon press releases, like <a href="https://www.navy.mil/submit/display.asp?story_id=107669">this one</a> complaining about a Russian SU-27 flying past an American EP-3 in the Black Sea. The Black Sea is on the Russian coast — for comparison, imagine a Russian or Chinese carrier parked off California. Ape chest-banging incarnate.<br />
<span id="31">31</span>: For those familiar with existing ledgers such as Bitcoin or Ethereum, this may be difficult to conceptualise since most present ledgers do not natively provide transaction introspection, but the limitation is not theoretical (e.g. the <a href="https://wyvernprotocol.com/docs">Wyvern DEX protocol</a>).<br />
<span id="32">32</span>: <a href="https://slatestarcodex.com/2017/02/22/repost-the-non-libertarian-faq/">The Non-Libertarian FAQ</a>, Scott Alexander.<br />
<span id="33">33</span>: <a href="https://archive.org/details/twolecturesonch00lloygoog/page/n1">Two Lectures on the Checks to Population</a>, William Lloyd.<br />
<span id="34">34</span>: <a href="https://science.sciencemag.org/content/sci/162/3859/1243.full.pdf">The Tragedy of the Commons</a>, Garrett Hardin.<br />
<span id="35">35</span>: <a href="https://population.un.org/wpp/Graphs/Probabilistic/POP/TOT/">World Population Prospects</a>, United Nations DESA / Population Division.<br />
<span id="36">36</span>: <a href="http://www.bren.ucsb.edu/research/documents/SimpleShoesFinalReport.pdf">Analyzing the Environmental Impacts of Simple Shoes</a>, Kyle Albers, Peter Canepa, Jennifer Miller, University of California Santa Barbera.<br />
<span id="37">37</span>: <a href="https://www.econtalk.org/michael-munger-on-crony-capitalism/">Micheal Munger on Crony Capitalism</a>, EconTalk / Russ Roberts.<br />
<span id="38">38</span>: <a href="https://eprint.iacr.org/2016/260.pdf">On the Size of Pairing-based Non-interactive Arguments</a>, Jens Groth.<br />
<span id="39">39</span>: <a href="https://eprint.iacr.org/2018/046.pdf">Scalable, transparent, and post-quantum-secure computational integrity</a>, Eli Ben-Sasson.<br />
<span id="40">40</span>: <a href="https://github.com/gnosis/MultiSigWallet">Ethereum Multisignature Wallet</a>, Gnosis.<br />
<span id="41">41</span>: An amusing illustration: this <a href="https://twitter.com/mbrennanchina/status/1128201958962032641">phone cradle</a> boosts step counts to reduce insurance premiums.<br />
<span id="42">42</span>: <a href="https://www.foam.space/publicAssets/FOAM_Whitepaper.pdf">FOAM: The Consensus-Driven Map of the World</a>, Foamspace Corp.<br />
<span id="43">43</span>: <a href="http://www.truthcoin.info/papers/truthcoin-whitepaper.pdf">Truthcoin</a>, Paul Sztorc.<br />
<span id="44">44</span>: <a href="https://medium.com/numerai/numerai-reveals-erasure-unstoppable-peer-to-peer-data-feeds-4fbb8d92820a">Introducing Erasure</a>, Richard Craib.<br />
<span id="45">45</span>: <a href="https://www.cato-unbound.org/2007/09/10/robin-hanson/cut-medicine-half">Cut Medicine in Half</a>, Robin Hanson.<br />
<span id="46">46</span>: <a href="https://distrowatch.com/dwres.php?resource=major">DistroWatch</a>, Atea Ataroa Limited.<br />
<span id="47">47</span>: <a href="https://exploreaugur.com/">Explore Augur</a>.<br />
<span id="48">48</span>: <a href="/allegro">Allegro?</a>.</br /></p>Christopher GoesWhy develop distributed ledgers1?