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 question of how territorial sovereignty operates in the interconnected yet diffuse, virtual yet material, and novel yet ubiquitous realm of cyberspace has proved enormously contentious. State practice in cyberspace presents a confusing array of behavior and justifications for conduct that runs along the enduring legal fault lines of territorial sovereignty. This article examines the legal history of sovereignty, emerging State cyber practice, and early legal views taken with respect to the application of sovereignty to cyberspace.
We concede contextual variations and exceptions to the integrity of territorial sovereignty have evolved for specialized domains such as the seas. However, we identify in territorial sovereignty a baseline rule of conduct and a corresponding duty on the part of States to refrain from interference with the integrity of conditions in other States’ territory. We argue that based on historical origins, legal evolution, international litigation, and recent State expressions concerning applicability of international law to cyberspace, the baseline rules of territorial sovereignty should be currently understood as a rule of conduct that generally prohibits States’ nonconsensual interference with the integrity of cyber infrastructure on the territory of other States.
We acknowledge that States may soon adapt sovereignty to operate differently in cyberspace, as they have in other contexts of international relations. However, in the absence of a lex specialis of cyber sovereignty and until States resort to deliberate international lawmaking, the baseline guarantee of territorial integrity provides a principled and normatively desirable understanding of sovereignty and how it relates to cyberspace. We urge States to act quickly to reaffirm their commitment to baseline Westphalian norms of territorial sovereignty in cyberspace while crafting, through accepted means of international legal development, a nuanced and effective doctrine of territorial sovereignty in cyberspace. A sound approach will acknowledge the binding legal character of territorial sovereignty as a limit on foreign interference but offer an emerging cyber-specific understanding much like that developed for other domains that have challenged national security and peaceful interactions between States.
Keywords: Cyberspace, Cyber, Sovereignty, Public International Law, State Responsibility, Computer, Violation of Sovereignty, Network
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.
Decentralization vs Incoordination – Tadge Dryja (MIT DCI)BPASE ’17, January 26th 2017, Stanford UniversityStanford Cyber Initiative
The conference will explore the use of formal methods, empirical analysis, and risk modeling to better understand security and systemic risk in blockchain protocols. The conference aims to foster multidisciplinary collaboration among practitioners and researchers in blockchain protocols, distributed systems, cryptography, computer security, and risk management.
The 2017 paper A Cross-Sectional Overview of Cryptoasset Governance and Implications for Investors is a master’s thesis covering governance structures in the industry. It has a useful survey of the top 50 circulating cryptoassets by network value (as of July 29, 2017) with detailed analysis of the governance models on display. The paper is aimed at educating investors about the relative lack of shareholder (tokenholder) rights in the industry. It also discusses a few of the functioning models of cryptoasset governance.
We have been conducting a longitudinal study of the state of cryptocurrency networks, including Bitcoin and Ethereum. We have just made public our results from our study spanning 2015 to 2017, in a peer-reviewed paper about to be presented at the upcoming Financial Cryptography and Data Security conference in February .Here are some highlights from our findings.
P2P Models is a large research project to build Blockchain-powered organizations which are decentralized, democratic and distribute their profits, in order to boost a new type of Collaborative Economy. The project has three legs:Infrastructure: Provide a software framework to build decentralized infrastructure for Collaborative Economy organizations that do not depend on central authorities.Governance: Enable democratic-by-design models of governance for communities, whose rules are, at least partially, encoded in the software to ensure higher levels of equality.Economy: Enable value distribution models which are interoperable across organizations, improving the economic sustainability of both contributors and organizations.
Experiments in Algorithmic GovernanceThe following is an excerpt of an academic article [PDF] I wrote detailing why The DAO failed, and why other DAOs and blockchain technologies might also fail. In a nutshell, lack of an appropriate governance structure and plan, and insufficient recognition of the challenges of building new social models doomed The DAO. When building new blockchain platforms, one ought to plan for these eventualities.