random cryptocurrency / cryptoeconomics thoughts #6 - Kauri
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POSTED 20 May 2019 02:01

random cryptocurrency / cryptoeconomics thoughts #6

cryptocurrency
ethereum
cryptoeconomics
blockchain
bitcoin
AUTHOR
blacque64

The below is ungroomed, thinking out loud, a collection of thought bubbles written as a messy tangle and has not been processed for concision/to make it easier to read. Patience and indulgence is required. There is not a sequential flow, paragraphs are ordered randomly. No effort was made to format for easier reading/viewing.

Perhaps the most significant advancement that Satoshi gave us is/was Nakamoto Consensus. Prior, we had only Classical Consensus (Lamport-Liskov). We now also are on the cusp of getting a third main type of consensus: a leaderless Byzantine fault tolerance, called Avalanche/Snowball/Snowflake/Slush (care of Team Rocket/Ermin Gun Sirer) . Avalanche is gossip-y and DAG-y, so perhaps Hashgraph, Iota and Nano are [arguably] in this third class as well.
All three are designs for consensus: how to agree something is true when some portion of the participants are assumed to be Byzantine (pernicious, faulty, offline).
Trump attacks the press by yelling “Fake News!” often enough that his adherents come to believe him. Trump is getting us to undermine our own (natural) sense of what we believe is true/agreed was true. Trump (knowingly or unknowingly) hacks his adherents’ minds by getting each person them self to subvert their prior sense of what ‘true’ was — Trump thus nudges us to change our previous mind, to rewrite ‘the truth’ —and we do it to ourselves!
In crypto/due to crypto, there now seems to be an implied linkage between consensus and truth. Truth is whatever Trump says it is — fiat truth . Truth is whatever Nakamoto confirms/says it is — PoW truth, blockchain truth .
Truth in the 21st century blockchain world thus now comes to be redefined as being whatever a Nakamoto blockchain/DLT/crypto consesnus scheme tells you was the agreed-to truth by a sufficient quorum of mining/staking/delegated participants (blockchain depth, immutability, finality, chosen fork). Truth is no longer independently true, socially true, philosophically derived truth: truth is redefined now as what the ledger-forming process says was ‘agreed to’ (as valid/canonical by a quorum of peers) as being true. Philosophers may suggest that there is no independent truth, all truth is socially constructed and/or truth as a concept is relative, not absolute.
Future cryptocurrency coin projects may all become successive attempts at better capturing the choices of participants into quorums that we then record on a DLT as being the canonical truth — truth thus becomes just what the ledger and protocol agreed to was true then/at that block height = socially agree-to truth. [At least we’ll have an unalterable record of it.]
Humans need truth as a fundamental given, but more so when it comes to ordering our financial world — no one trusts anyone else when it comes to money and fiscal transactions; hence blockchain. The central notion of cryptocurrencies is that we can use crypto maths and DLT’s and Nakamoto consensus to immutably record a socially-agreed-to truth (a blockchain, a DAG, a DLT, etc.) that does not depend on humans telling the truth (many of whom are motivated to lie and thus profit), but rather the maths and codebase tells the truth, inviolably. Truth shifts from being a socially-agreed record to instead being a mining-verified (validator-verified, staker verified, DAG-verified) record. Humans won’t consult a newspaper, grandma, library or document database when they need to access a system-of-record so as to access/query a socially accepted ‘truth sink’ (a database of recorded truths): humans will shift their mental calculus instead to only accept blockchain-derived (crypto maths) canonical chains as being reliable systems-of-record. Truth as a concept inside the human mind will shift to be only what the longest verified chain reveals as being the past accepted truth statement. Who do you trust? Human minds in the past used to accept several sources as being reliable oracles/witnesses of ‘the truth’: in blockchain future, truth is only that which is DLT-consensus verifiable. This is a new basis for the human brain to have to use and work within. In George Orwell’s seminal novel, 1984, there were only three global entities (superstates): EastAsia, Eurasia, and Oceania (but really, there was just a single power/entity, Big Brother). Today, we have similar mega-groupings: say, The West, China, Russia, Islamic bloc (maybe India will one day become such). Inside The West, you have the EU as a megagrouping entity and perhaps the U.S. or G7 as another one.
A hundred years ago, you had the rise of nation states. Thousands/hundreds of years before that, you had only provinces and city states. You have to go back (tens of) thousands of years to where you had just tribes and villages. The trend as time goes by seems to be towards larger mega groupings = single global village, New World Order.
Blockchain is the death of that trend — we will most likely evolve away from mega entity groupings (megastates, nations, provinces, single global village) and instead become a planet of seven+ billion individual person-states (joke: schizophrenics will be more than a single person-state, they will be poly-state). Individual people will no longer recognise/allow for supra-entity states/nations as social grouping constructs: instead, each person will develop their own set of rules for their individual sovereign person-state, and their preferences will be encoded into an individual’s smart contracts/AI’s that will negotiate with other individuals’ personal smart contract/s as and when needed for social interchange. The pendulum swings from: power being an additive phenomenon (340 million Americans add together their individual portion of power into this summed grouping concept called the U.S.A.) to groupings being an emergent phenomenon that only exist if the individual expressions of preferences (as embodied in constantly-updating smart contracts/AIs that each individual maintains for them self) happen to align on a given day — a continually-shifting phenomena. If 100 million of us wake up tomorrow and tell our smart contract that we no longer wish to spend money on a defence force’s latest ‘star wars’ program, then those votes/coins/stakes/proxies add together at that moment and cave our tribe’s/group’s defence budget for that item — the defence force’s arms and units thus exist ‘on demand’, as/when and only if we want them to. Supra-individual groupings only arise as voluntary, fleeting over time, emergent quora, you no longer are assumed to be willing (forced) to be a lifelong citizen of a given nation state, instead your willingness to join a grouping is voluntary, shifting, and such groupings are emergent, not assumable. The notion is that social groupings are emergent, permissioned-only, not pre-determinable/fixed/top down. All social groupings become emergent and voluntary, not coerced or mandated. Satoshi and crypto have given planet earth the idea/mechanism where even when a system has Byzantine actors, we can still achieve a reliable consensus (a canonical truth record). We now thus have a system that is robust against malicious actors. We can have safety -a reliable blockchain, a canonical record of the truth, a socially agreed-to ledger that we can trust as being an accurate record of past agreements - even when we cannot trust the participants. By applying Nakamoto (and other variants) consensus algorithmic thinking, we can filter out the Byzantine signal/actors and yet still be assured we have arrived at a reliable truth record, that is socially applicable. Signal despite the noise.
Human history’s prior way of constructing ‘shared truth ledgers’ is via institutions/entities, examples of which include: nation states, their constitutional charters and their willingness to police these via defence forces, wars, supranational bodies (IMF, WTO, Bretton Woods, Marshall Plan, etc).
Whereas, in the past, nation fought nation in order to protect a ‘shared truth view’, in future dispute will be only via forking the codebase — don’t agree and you fork off and start your own alternate social grouping, mediated via your forked chain. Human social boundary-marking will only be possible via forking, traditional military war-making will be selected out (in the Darwinian sense) as suboptimal. The art of fighting a war will become like an extreme sport (pay per view) rather than remain as a last-recourse action betwixt nation states and their ray-beam missiles.
Blockchain consensus maths is thus completely re-making the art of how humans resolve disputes and divide up our resources; but more than that, it is also re-wiring the human mind’s thought tropes as to how to seek resolution to disputed assertions. In a tail-wags-dog way, blockchain consensus maths will cause human minds to re-compute what it means to disagree with our neighbours. Instead of wanting to fight them with a gun, we will instead view forking our codebase as our primary way of fucking with a social group with whom we disagree. Crypto-tribalism will be dominant. Will upset many: crypto = the tail will come to wag the dog.
Ordinarily, the study of economics is the study of how agents/people express their preferences (“the relationship between ends and scarce means which have alternative uses”). The notion is that we express ourselves socially by being willing to swap our money (that we earnt somehow) for those things we would rather have than the money, amongst a set of choices. Economics is thus a social study/science, a study of how humans express their social preferences to each other — the person decides, then acts; the person’s decision is sovereign, the person has the power to decide.
Crypto is going to hack/is already hacking this relationship/flipping the script, in the sense that instead of people deciding what they are willing to give up their own hard-earned money for, crypto instead will ‘dictate’ to us (reverse-dictate, tail wags dog) what is ‘allowable’ as far as social expression of preferences; this reverse-dictating will be surreptitious, but nonetheless apparent. The ‘EOS constitution’ is a prototypic effort by Daniel Larimer/Block.One et al at hard-coding this ‘flip the script’ aspect of how crypto will dictate to us what the possible valid social tropes are (tail wagging dog). Rather than allow humans to serendipitously arrive at economic rules by the everyday/accidental natural discovery process we currently tolerate (the invisible hand, the free market), instead our cryptocoinz will attempt to hard-encode such rules and then reverse-force them onto us as we naively use the coinz, whilst we are asleep at this wheel. The tool backwards-infects its user. Homo economicus will shift from being: humans who each make choices for themseves in a classic economics sense, to a DLT-only domain that programmatically allows a defined range of consensus-driven choices that we willingly subject ourselves to (the alternative being a return to fiat dollars and fractional reserve banking — yikes!). In the same way that email now displaces snailmail (we could all go back to snailmail but we haven’t, by preference), DLT-only humanity will replace classic economics/ homo economicus . This is a fundamental redefinition of classic economics/ homo economicus where assumptions about ‘rational actors’ get upended and made anew. The ever-growing family of putative stablecoinz — Tether, TrueUSD, bitUSD, DAI, et al — are a (likely failing) attempt to ‘tame’ what is viewed by some as the inherently volatile value of individual cryptocurrencies, relative to ‘real’ money i.e. USD. Some commentators seem to feel that cryptocurrency won’t become widely accepted until it ‘settles down’ and is more easily predictable — i.e. its price-relative-to-USD.
Volatility in the BTC>USD is a feature not a bug. Attempting to fix a fiat currency’s price to some stable value level invites and leads to many perversions and cruel actions, mostly by central banks/and those behind them. Politicians too cannot resist temptation to do strange and antisocial things to protect their currency’s value — e.g. The Roosevelt Gold Confiscation Order Of April 3 1933, Presidential Executive Order 6102.
Attempting to fix or stabilise the price of BTC>USD is tantamount to attempting to ex ante fix society’s predictions for the future course of a society’s affairs. Fixing the value of your currency is tantamount to saying “one hour of labour should - and will -always be used as the definition of one shekel.” Fixing the value of a crypto to a fiat (USD) is tantamount to saying “one BTC is always worth a quarter of a year’s salary for an average employee.” Essentially, you are attempting to predict the future as being a predictable extension of today — a dollar is always to be viewed as being the worth of a certain fixed amount of labour, of goods, of a service, etc. Fixing the value of a crypto or a fiat is tantamount to locking down what the value of one good or service is — and will always — be worth to its users over time — in other words, an attempt to ‘lock down’ or fix the future course of society’s existence and its views on its own affairs. It’s an attempt to freeze a society in an unchanging definitional time warp. A bounded prison.
A BTC or an ETH should always be worth whatever we as a society need it to be worth = a moving feast. If I mow your lawn for 1/10th of an ETH today, maybe I will want 1/5th of an ETH to do the same task next week — why should someone besides me be allowed to ‘fix’ (hold stable) what an ETH is worth to me ?
Society (and individuals) should be free to change its mind over time how many ETH need to be paid for an hour of labour, a kilo of goods, a bag on patents, for one share of Apple’s stock. It is not naturally productive to artificially handcuff society by fixing what an ETH is to be ‘worth’ forever. It is also an attempt to predict the future — a forlorn effort.
Of all social groups, crypto lovers should be the group that least thinks a stablecoin is desirable or practically useful. From: https://medium.com/l4-media/making-sense-of-cryptoeconomics-5edea77e4e8d

“As Nick Szabo rightly points out, ultimately we are speculating about people’s future mental states and making assumptions about how they react to certain incentives. A cryptoeconomic system’s security guarantee depends in part on the strength of its assumptions about how people react to economic incentives.”

Cryptocurrency works because we allow ourselves to assume some high degree of predictability/certainty as to how humans do and will respond to certain incentives/disincentives, payoffs, constraints and penalties. Economics itself is a social study/science, “Economics is the study of choice: how people and groups of people respond to incentives.” (ibid.) As Abu Ghraib and waterboarding show, humans behave predictably in typical domains, but when extreme pressure is applied, then new behaviours are forcibly created/extracted from the participant/subject > ones that you had not previously seen in your sample space. Humans behave in economically predictable ways under typical domains, but expect strange new behaviours to be exhibited when the pressure exceeds your previous assumptions. Desperate/hyper-pressured people will not behave in a classical “economics predicts….” fashion. Hyperinflationary episodes are possible examples of this (e.g. perhaps Weimar German).
As TPTB (the powers that be) twist and contort themselves into justifying extreme new anti-crypto measures to staunch the crypto momentum, TPTB will likely enact hyper-fierce and hyper-extreme measures so as to force the outcome. Participants (you and me) will thus be forced into adaptive countermeasures that may invalidate the sanguine predictions that crypto/economists had made prior, and that crypto programmers had assumed as they formulated our crypto codebases (mechanism design, game theory, as modelled inside crypto consensus algorithms). The encoded consensus mechanisms will break or strain as those prior assumptions get tested by these ‘extreme new times’. Crypto codebases made assumptions about how participants will act under the incentive/consensus model coded into the coin: will those assumptions still be valid/robust if a government throws superior tech/weight of numbers at the codebase’s assumptions? If they start locking up well-known crypto HODLers, will mining/Nakamoto Consensus still work as per usual?
Crypto works because decentralised trust exists ephemerally, by social consensus. It is thus fragile and soft-bodied: Attila The Hun might invalidate it easily. Disclaimers: just my ideas about possible scenarios for near-term future. This is not investment advice. I’m ego-driven, clueless and biased, so do your own thinking. I’m not qualified, I have no special privileged position to drive my insight, I’m a nobody, is what you should assume about me and what I say here.

AUTHOR
blacque64