The biggest takeaway from all of this is that mining is for big players. The more money you spend, the more of an advantage you have, and there’s not an easy way to change that equation. At least with traditional Nakamoto style consensus, a large entity that produces and controls most of the hashrate seems to be more or less the outcome, and at the very best you get into a situation where there are 2 or 3 major players that are all on similar footing. But I don’t think at any point in the next few decades will we see a situation where many manufacturing companies are all producing relatively competitive miners. Manufacturing just inherently leads to centralization, and it happens across many different vectors.
The aim of this supplement is to explore and critique this ‘blockchain ecosystem’, the politics it tries to hide, and the legal and regulatory ramifications it inaugurates. The following essays do not portray blockchain as providing all, if any, of the answers to the world’s problems. Instead, the challenge is in part to understand the tensions faced by law and regulation in defining blockchain within the ongoing networking, digitalisation, and datafication of the social. Success in this regard will be measured in the coming months and years by the grip that regulatory authorities and governments are able to maintain on the various strands of blockchain research, development, application, implementation, and conduct—a grip, moreover, that is able to be maintained alongside the regulatory conundrums that continue to plague the wider field of network technologies which are themselves still evolving, mutating, impacting, but not necessarily benefiting community or public interest ahead of private, commercial power. Understanding the extent to which law and regulation will play a role in securing democratic accountability of these powerful and far-reaching technologies is or ought to be a key concern for blockchain scholars and practitioners of all stripes.
They were even more surprised when they asked the F.S.B. agent why the Russians were devoting such resources to the blockchain standards.
“Look, the internet belongs to the Americans — but blockchain will belong to us,” he said, according to one delegate who was there. The Russian added that two other members of his country’s four-person delegation to the conference also worked for the F.S.B.
Another Kind of Radical Market
The book as a whole tends to focus on centralized reforms that could be implemented on an economy from the top down, even if their intended long-term effect is to push more decision-making power to individuals. The proposals involve large-scale restructurings of how property rights work, how voting works, how immigration and antitrust law works, and how individuals see their relationship with property, money, prices and society. But there is also the potential to use economics and game theory to come up with decentralized economic institutions that could be adopted by smaller groups of people at a time.
Perhaps the most famous examples of decentralized institutions from game theory and economics land are (i) assurance contracts, and (ii) prediction markets. An assurance contract is a system where some public good is funded by giving anyone the opportunity to pledge money, and only collecting the pledges if the total amount pledged exceeds some threshold. This ensures that people can donate money knowing that either they will get their money back or there actually will be enough to achieve some objective. A possible extension of this concept is Alex Tabarrok’s dominant assurance contracts, where an entrepreneur offers to refund participants more than 100% of their deposits if a given assurance contract does not raise enough money.
Prediction markets allow people to bet on the probability that events will happen, potentially even conditional on some action being taken (“I bet $20 that unemployment will go down if candidate X wins the election”); there are techniques for people interested in the information to subsidize the markets. Any attempt to manipulate the probability that a prediction market shows simply creates an opportunity for people to earn free money (yes I know, risk aversion and capital efficiency etc etc; still close to free) by betting against the manipulator.
Posner and Weyl do give one example of what I would call a decentralized institution: a game for choosing who gets an asset in the event of a divorce or a company splitting in half, where both sides provide their own valuation, the person with the higher valuation gets the item, but they must then give an amount equal to half the average of the two valuations to the loser. There’s some economic reasoning by which this solution, while not perfect, is still close to mathematically optimal.
One particular category of decentralized institutions I’ve been interested in is improving incentivization for content posting and content curation in social media. Some ideas that I have had include:
- Proof of stake conditional hashcash(when you send someone an email, you give them the opportunity to burn $0.5 of your money if they think it’s spam)
- Prediction markets for content curation(use prediction markets to predict the results of a moderation vote on content, thereby encouraging a market of fast content pre-moderators while penalizing manipulative pre-moderation)
- Conditional payments for paywalled content (after you pay for a piece of downloadable content and view it, you can decide after the fact if payments should go to the author or to proportionately refund previous readers)
And ideas I have had in other contexts:
Twitter scammers: can prediction markets incentivize an autonomous swarm of human and AI-driven moderators to flag these posts and warn users not to send them ether within a few seconds of the post being made? And could such a system be generalized to the entire internet, where these is no single centralized moderator that can easily take posts down?Some ideas others have had for decentralized institutions in general include:
- TrustDavis (adding skin-in-the-game to e-commerce reputations by making e-commerce ratings be offers to insure others against the receiver of the rating committing fraud)
- Circles (decentralized basic income through locally fungible coin issuance)
- Markets for CAPTCHA services
- Digitized peer to peer rotating savings and credit associations
- Token curated registries
- Crowdsourced smart contract truth oracles
- Using blockchain-based smart contracts to coordinate unions
I would be interested in hearing Posner and Weyl’s opinion on these kinds of “radical markets”, that groups of people can spin up and start using by themselves without requiring potentially contentious society-wide changes to political and property rights. Could decentralized institutions like these be used to solve the key defining challenges of the twenty first century: promoting beneficial scientific progress, developing informational public goods, reducing global wealth inequality, and the big meta-problem behind fake news, government-driven and corporate-driven social media censorship, and regulation of cryptocurrency products: how do we do quality assurance in an open society?
All in all, I highly recommend Radical Markets(and by the way I also recommend Eliezer Yudkowsky’s Inadequate Equilibria) to anyone interested in these kinds of issues, and look forward to seeing the discussion that the book generates.
We hard forked once, for the larger DAO hack that was even more of a mess, but we cannot let this become a practice. How many times must Parity mess up for them to own up and move on?
Instead of a hard fork, its users should look into all legal options.
This paper discusses the intersection of environmentalism and cryptoanarchism, in the form of Gridcoin, a cryptocurrency which aims to mitigate the environmental impact of cryptocurrency mining, through the implementation of two methods: a Proof-of-Research scheme and a Proof-of-Stake protocol. This raises questions about the need for an environment-friendly consideration of the costs of cryptocurrency mining.
The fact that Bitcoin was designed to confound human decision-making is a feature, not a flaw. The core protocol is tasked with enforcing the single rule most crucial to the cryptocurrency’s value: no counterfeit spending. By contrast, the U.S. dollar is burdened with effecting monetary policy, enforcing sanctions, fighting crime and much more. The more functions a currency has, the more things there are to argue over, and the more likely the community will be to fracture. Bitcoin’s uncompromising focus allows it to serve a broader user base.In blockchains, anarchy is the worst form of governance except for all the others. That said, it’s still possible that Bitcoin didn’t get things right the first time around. As more people get involved, coordinating decisions will become even more difficult, and Bitcoin’s inflexibility may prove too limiting. 1 Even Ethereum, which once executed a $55 million loss recovery on three days’ notice, is finding it difficult to repeat the procedure 18 months later. Any decentralized cryptocurrency has a limited window in which to coordinate decisions. So let the creative experiments begin.
The European Union is ready to regulate cyptocurrencies if risks from the sector are not tackled at the global level.The global investment craze over bitcoin and other cryptocurrencies over the past year have seen wild gyrations in their valuations.G20 finance ministers will meet in March, with cryptocurrencies slated to be on the agenda.
Unchain, a large bitcoin and blockchain convention based in Hamburg, seems to have a potential answer. Along with speakers from blockchain startups, cryptocurrency exchanges and a company that purports to offer “privately managed cities as a business”, the conference programme also features Alice Weidel, listed on the site as an “economist and bitcoin entrepreneur”.In fact, Weidel is the co-leader of Alternative für Deutschland, which recently became the third largest party in Germany’s Bundestag. Weidel’s election campaign in 2017 was the party’s breakthrough moment, and what many have seen as a watershed in German politics – the return of far-right, populist ethno-nationalism to the federal parliament.
We are a group of radical economists, finance theorists, software architects, game designers, artists, lawyers, peer production experts and decentralized application engineers – exactly what is needed to reimagine what economy can be.