When designed properly, decentralized, open source, tokenized cryptoasset networks solve the problem of incentive alignment between network creators and network participants. When the software is public, and the organizing body is a nonprofit rather than a for-profit, the Extraction Imperative is eliminated — because there are literally no longer shareholders with a claim on cash flows. The value is held in the network itself, represented by token ownership. Everyone who participates in the activity of the network, using and accruing tokens in the process, is effectively a network “owner.” Because there is no division between owners and participants, there is no point at which their incentives diverge.
If a miner controls an economy of scale (i.e. PoW hardware manufacturing), they ultimately control the liquidity/velocity flow of the State/Federal level cryptos that are derived from those root chains, given a lack of market competition. Therefore, direct influence over said monopolistic entities are then tightly-coupled to future tokenized cities/states, which means that entire political-monetary interfaces, globally, if adopted and built upon, could be centralizing governance in ways many might not immediately realize — until it’s too late.
The potential opened by distributed ledger technologies for peer-to-peer exchange enabling users and developers to co-own their platforms, organize their own communities and share the value generated according to their own rules has led many to believe in the ‘sharing economy’ as a way to foster cooperation between individuals on large scale, leading to a new, socially pacified post-capitalism era. In spite of any such utopian expectation, however, this paper argues that capitalism has simply strengthened, not only through the growing centralization of peer-to-peer digital services on proprietary platforms, but also through highly speculative practices embedded in decentralized architectural protocols. We tackle the new challenges raised by the engineering of human interactions through algorithmic governance, stressing the necessity to carefully evaluate sharing economy and platform cooperativism as complex phenomena with risks, benefits and unintended consequences inevitably intertwined in the fabric of human existence.
The following discussion of computational capital takes the electronic database, an infrastructure for storing in-formation, as vantage point. Following a brief look into how database systems serve in-formation desires, the notion of ‘database as discourse’ by Mark Poster is explored and further developed. Database as discourse establishes a machinic agency, directed towards the individual in a specific mode of hailing. This mode of hailing in turn leads to a scattered form of subjectivity, that is identified with Manuela Ott and Gerald Raunig as dividual. How does dividualization emerge from database infrastructure? What is the specific quality of data, that is produced by and being harvested from in/dividuals into databases, and what are the consequences of such a shifted view?
Blockchains are unique because they 1) allow thousands of governance systems and monetary policies to be tried at the speed of software with 2) in some cases, much lower consequences of failure. As a result, there will be a Cambrian explosion of economic and governance designs where many approaches will be tried in parallel at hyperspeed. To be clear, I am including economic design and monetary policy (said another way, incentive structure) in governance because, like other aspects of the system, they can be modified as time passes.
But on-chain governance is dangerous, and I worry it will lead to disastrous outcomes. Blockchains should not be democracies, and the reasons why are subtle and counterintuitive.
Unless there are governance processes that get Sybil-resistant input from node operators, on-chain governance therefore has always has the potential to disenfranchise node operators (and users) of the blockchain. If you are a blockchain node operator (or user), or if you care about blockchain node operators (or users), then I hope you will learn to regard on-chain governance proposals with extreme apprehension.
Governance is hard, especially for decentralized protocols. Allowing a community to govern a protocol does not make it any easier. On the contrary, it makes it exponentially harder and far more dangerous. The challenge is amplified when teams decide that the 1 token = 1 vote model is the best way to distribute power, and that all forms of hierarchies should be eliminated.One of the most important things to realize when creating governance models for decentralized protocols is that the model must be designed for the user, not for the token holder. This is where I believe a lot of broken models originate, when designing something that token holders will like, and not something that protects the actual users of a protocol. It is evident that there are a lot of projects who do not consider this, the opt-out model which some protocols implement are a clear indicator of this.1 token = 1 vote systems create terrible plutocracies, especially when considering who holds tokens.
Coin holder voting, both for governance of technical features, and for more extensive use cases like deciding who runs validator nodes and who receives money from development bounty funds, is unfortunately continuing to be popular, and so it seems worthwhile for me to write another post explaining why I (and Vlad Zamfir and others) do not consider it wise for Ethereum (or really, any base-layer blockchain) to start adopting these kinds of mechanisms in a tightly coupled form in any significant way.I wrote about the issues with tightly coupled voting in a blog post last year, that focused on theoretical issues as well as focusing on some practical issues experienced by voting systems over the previous two years. Now, the latest scandal in DPOS land seems to be substantially worse. Because the delegate rewards in EOS are now so high (5% annual inflation, about $400m per year), the competition on who gets to run nodes has essentially become yet another frontier of US-China geopolitical economic warfare.