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Presentation: Blockchain Governance – Arthur Breitman

  • We’re gonna talk a little bit about governance and blockchains.
  • For awhile, people thought they didn’t have anything to do with each other, but nowadays awareness of the connection is pretty mainstream.
  • What is governance? A set of rules that you follow when you have a resource that must be shared by multiple people and you don’t have a good way to divide it up. A simple case is property rights: if you own a piece of fruit and I own a rock, we do what we want with our things and no governance is needed.
  • But some things can’t be privatized so simply: think of an apartment. You can make holes in your own wall, but there is an elevator and a heating system and such that must be governed about as a building.
  • Looking at early blockchain projects like bitcoin, it seems like we don’t really need governance. It’s a matter of simple property rights: you have a coin, I have a coin.
  • But the security of the network is a shared resource that must be governed. Once all the coins are released, fees must pay for security and therefore the security of the network becomes a part of the commons, and therefore under threat of the Freerider problem.
  • Another example: Paying for the development of the chain is a shared resource, a commons as well. Some projects (like Zcash) have made developer rewards a part of the block rewards. This is governance.
  • Looking at alt coin designs 2012-2014, many alternative designs were floated: PoS, Private coins, smart contract capable chains… but fundamentally what was agreed was that the ledger is the core feature and the thought was that altcoin features that worked would be pulled into Bitcoin.
  • But this identifies a gap: you’ve identified a good idea, now how do you get the code moved into your protocol? What’s the process for merging these good ideas from other chains? How do you coordinate around what gets included? This is not trivial.
  • Theoretically these projects are open source and anyone can run their own version, so you don’t NEED governance. But cryptocurrencies are about the shared ledger, so the coins derive their value from network effects, and the winner will be the one that people use.
  • In a fork scenario, the one that people use will be the winner of a beauty contest, not strictly the “best”. This can make the winning chain determined by all sorts of not-so-democratic mechanisms, clout, loud minorities and the like. So clearly we need some form of governance here.
  • One form of governance (that is seen in the BTC world) is to say “we’re never gonna change anything.” But other approaches that are open to changes to their systems and codebases need a protocol of governance for how these changes are made.
  • A lot of the stability of currencies comes from the fact that they are embedded in a web of contracts. In the face of a complex web of contractual dependencies, you can’t have your currency ledgers forking and splitting. For a centralized currency like the US Dollar under no threat of forking, you still see this in practice: rent, food, everything in the US is denominated in Dollars and so people who live in the US are very unlikely to defect to use another currency.
  • We’re starting to see this stability-enforcing dynamic emerge on Ethereum, with USDC becoming really baked into the web of contracts in the ecosystem. The more USDC is baked into the contractual landscape of Ethereum, the more sway Circle (the company that runs USDC) has over which Ethereum fork “wins” in a fork scenario: the one that you can use your USDC on.
  • This is why having explicit governance mechanisms to make changes to your protocol are key to limit the implicit or unintended influence of other parties on shaping its path.

 

Questions:

What types of governance in crypto do you like? Not like?

  • “I don’t think there’s too many ways to do on-chain governance”

 

Thoughts on smart contract governance as opposed to on-chain governance?

  • Most of the time the governance token projects don’t need governance.
  • Governance of a smart contract is harder than a chain because the chain has the ultimate option to fork if need be.

 

Futarchy: will it be manipulated?

  • If people try to manipulate the market that’s great because you can make more money on them
  • “The pool of capital in the world is near infinite.”
  • A strength of a futarchy: There can be a lot of false positives but few false negatives. Yes, you can get a bad proposal through, but it’s hard for a good proposal to not get through. When you have an asymmetry between false negatives and false positives you can chain votes to increase good outcomes.

 

Governance with machines?

  • We could end up with a singleton if we have crazy AGI in which case it’s moot.
  • The question is what utility function are you optimizing for.

 

One way of controlling something is giving everyone votes, one way is oligarchy

  • Destroying the minority destroys the value of the platform, so the good will is gone
  • If you tie your governance tokens to income, causality matters: “it’s useful for a governance token to have an income stream” is true, while “let’s make this income stream a governance token” gets you in trouble.

Presentation: Digital Path! – Marc Stiegler

  • “The Digital Path” was invented by Mark Miller in this paper but Marc used the Path as a subplot in a series of science fiction novels, so was the first to implement the idea (at least as a thought experiment)
  • The Digital Path was inspired by “The Other Path”, wherein Hernando DeSoto set out to bring the assets of third world villages into the formal economy so they could be used as collateral for wealth-generating loans. In attmepting to do so, his efforts were constantly undercut by the corruption of local officials and governments.
  • Mark Miller took the idea further, proposing a mechanism for the locals of these countries to deal with more trustworthy foreign institutions by creating video evidence of contractual agreements and ownership rights and sending this evidence to these institutions that would track, manage, and financialize the property for investment and wealth creation.
  • Part of the proposal was to use smart contracts to automate the tracking and transfer of assets to reduce trusted humans in the loop as much as possible. At the time of the proposal, the main stumbling blocks for the development of smart contracts were security concerns.
  • When the Digital Path was being written, blockchains hadn’t yet been invented.
  • In the Brain Trust books, in an alternative future, the President of the United States expels all immigrant engineers from the country, who then create an off-shore floating citadel called the Brain Trust, where they build the smart contract and blockchain system that manages the world’s finances.
  • An example of a use of the system in the books: communities in Benin use a cell phone to create a video evidence of property rights and contracts, all tracked by the SmartCoin cryptocurrency.
  • When human input is needed to resolve disputes, it goes to a mediator on the BrainTrust offshore, though most disputes are enforced by social pressure and handled locally.
  • SmartCoin saves the world in book 5 by auto-balancing the monetary policy of the world to neutralize booms and busts.

Discussion

It’s illegal for Russian citizens to own bitcoin, but they are mining it… do you hold concerns around government ownership of cryptocurrencies?

  • Starlink is coming so people can access satellite internet without government control!

 

How do contracts work over interstellar distances?

  • Paraphrased: The telegram destroyed the British Empire by allowing distant governance by people who didn’t know what was going on locally
  • But! In an interstellar system, it’s not a government, it’s the owner of the property rights that are being upheld
  • But: in real world systems, social pressure includes authorization of physical force, which means to totally uphold local property rights will necessitate some way to exert local force.
  • In a fork scenario, the one that people use will be the winner of a beauty contest, not strictly the “best”. This can make the winning chain determined by all sorts of not-so-democratic mechanisms, clout, loud minorities and the like. So clearly we need some form of governance here.

 

What old stuff have the folks here done and forgotten?

  • AMIX: American Information Exchange
    • https://en.wikipedia.org/wiki/American_Information_Exchange
    • Key Insights from working it?
      • How to go about intermixing of the squishy human ambiguous bits with the hard edge mechanical machine verifiable bits that you can make be absolute.
      • Alongside this: a rich process for negotiation, back and forth between participants to agree on terms. Rigorous contracts are not that great at changing over time as context shifts, so the back and forth is key.
    • We fall back on human trust between folks all the time, because we need to
  • Xanadu discussion
    • transclusion
      • wish we had this for composing documents from content addressed info with provenance
    • bidirectional link
      • “This could fix our echo chamber problem!”
      • “Well, not really. People will still believe what they want.”
    • micropayments
      • Could this actually help by shifting incentives online? It’s clearly not needed to incentivize creation, people are creating so much. Maybe it could help by removing ad-dependence, and correct some amount of the attention economy snafu.
      • Maybe it should cost to create content, not access it!