Can the Blockchain provide governance?

Author's Note: This is a brief explanation of how blockchain technology could provide services previously allocated to governments, originally written for the BitNation whitepaper in September 2014 but later excised and completed with some review by Chris DeRose and David Duccini. It explains in brief how the blockchain may have the ability to provide consensus that only governments had previously been capable of, thereby enabling the technology the ability to serve as a general verifier and issuer of identification and transactional information that is permanent, trusted and universally recognized.

This is written from the perspective of a political scientist, rather than a technologist, and describes what a transition in information verification between old state institutions and blockchain technologies might look like.

Why Do Governments Provide Services?

Governments are problem-solving institutions: having a monopoly on violence afforded governments the ability to coerce consensus out of a population in order to solve problems and answer questions in a society, such as establishing identity and land ownership, providing a system for dispute resolution, and much more.

Historically, everyone recognized that a certain framework of rules that were decided upon by majority vote would be followed. This created predictability, because people who followed the rules needed to know that other people would follow those rules as well. Governments created rules and established guidelines and penalties to ensure those rules were followed. All of this work came with costs, so governments also raised taxes in order to diffuse the cost of services among the population that benefited from them.

So traditionally, someone offering what we call “governance services” needed to meet certain conditions within the polity before their service can be considered reliable and legitimate:

1.            They must be able to ensure that services can be proportionally distributed

2.            They must be able to ensure that services will be universally recognized

3.            They must be able to ensure that services will be worth the price

4.            They must ensure that there is a process for changing the rules and services as needed

At a glance, there doesn’t seem to be an inherent property that would keep a private sector organization from being able to offer governance services, and many services in the U.S. have been increasingly outsourced to private contractors since the 1980’s. Perhaps the biggest challenge is universality. Governments can ensure through coercion that their services are universally recognized. The dollar’s value, for example, is enforced  by American guns, as is its legal system, identification system, etc. Without universal recognition of your marriage or birth certificate, so the convention goes, you have a mess when it comes to leveraging those documents to procure other resources.

But is universality really critical? We know from historical experience that different forms of money, for example, can function in a competitive market without a government mandate. We also know that universality isn’t really global: when you travel abroad, a foreign country doesn’t usually ask to see your birth certificate and social security card. They use your passport, a method of identification from an entirely different identity verification system they are not intimately familiar with. They trust it because they trust that the institution that has certified your identity has a rigorous identification process and a system by which your reputation can be discerned.

Governments have historically been the trusted verifier and issuer of identification and transaction information simply because they were the best positioned to offer those services to the public. Private companies have their own verification systems, but companies come and go. When companies do offer some identification or reputation service, such as a credit bureau, it is usually to a specific market for a specific reason. They don’t offer the broad range of services the government are able to with redistributed tax dollars. If a competitor is to offer such services, they must be permanently reliable: i.e., they can’t just go bankrupt and lose your birth certificate or marriage record. They have to be able to maintain accessibility to the records regardless of market volatility. They also must have a universally recognized and widely trusted process for determining your identity and they must be around as long as the document is guaranteed to be valid (in the case of licenses) or forever (in the case of birth records) to vouch for you.

The blockchain protocol may be the first technology that checks all of the boxes required of a governance system. Once the information is online, it exists forever on the network. It has a rigorous verification process that is virtually impossible to crack once the network reaches a certain critical mass. It can record births, marriages, deaths, property ownership, business contracts and a variety of other records traditionally created and held by governments. The identities of individuals on the network can be established definitively through their unique “signatures”, and in turn, those individuals can sign and verify transactions (say, the attending physician at your birth, or the priest officiating your wedding). Instead of a government official acting as notary or other trusted third party verifier, the consensus of a blockchain’s “miners” or other verifiers takes on that role.

Governance Services

Using the blockchain technology as a platform, companies, non-profits and other non-state actors can offer their own competitive governance services. Theoretically, there is no limit to the services that can be offered, and the distribution and availability of services will be governed by market forces. This concept has already been proven in part with “colored coins,” multi-signature transactions and smart contracts that currently exist on the Bitcoin blockchain.

In a sense, the world is already a web of competing legal and governance systems, just tied to geographic territories. The question then is this: is there a value in creating a virtual governance system that is not tied to coincidental geographical boundaries? Is it even possible to offer such a thing without coercion?

According to attorney Pamela Morgan of empoweredlaw.com,  one way to prove provenance while circumventing coercion may lie in the presence of the “timestamp” in the blockchain protocol. One of the reasons government has been expected to provide identification and property ownership services is it considered sufficiently impartial that it would not lie or cheat to favor one citizen’s interests over another with respect to provenance for land rights, for example. The timestamp removes the need for this level of trust in a person or organization. The transaction’s date and time cannot be tampered with, and thus can serve as the final arbiter in the event of a duplicated or fraudulent transaction, even across different blockchains. On a technical level, there is still the possibility that a bidding war could erupt between filers wishing to process a transaction faster and thus claim provenance, but it seems unlikely this would be a problem for most transactions.

The blockchain protocol also has some advantages over traditional government services, including very high transparency, low overhead/transaction costs, and a high degree of accessibility. The system is also highly stable with just enough flexibility to ensure systemic changes can be made if they are very necessary. Unlike a nation state government, it doesn’t require an army of bureaucrats to maintain. It cannot be bribed or blackmailed and it will never make you wait hours in line or slap you with arbitrary fees and fines in order to boost revenue. This makes it a great alternative to traditional services.

What if many blockchains exist simultaneously? Couldn’t there be conflicting information for the same identity? Yes. However, it won’t likely matter much. First of all, without a barrier to entry, any user can join any blockchain just by downloading freeware so he or she can check identities wherever they exist. Second, if there is conflicting reputational or transactional information, users will eventually even out the differences through regular activity across networks, with larger, more utilized networks, having higher value, predominating.

Think of blockchains as competing information marketplaces. Like with prices in exchanges in a competitive marketplace, the information that is freely available to all will tend to even out over time, making arbitrage more difficult. So the reputational arbitrage that scammers may attempt on various blockchains will get increasingly difficult as the system matures. Furthermore, layers of meta-systems will eventually be constructed on bitcoin and other blockchains that will enable users to more easily navigate information between them.

The net result is a competing set of reputational systems, with some overlap and redundancy that exists permanently in cyberspace, with identities verified by the users themselves. Universality through force will become superseded by universality through competition, and consensus is something that will be achieved by the “votes” of miners or other system custodians, rather than by political votes.

Reputation Systems

The effectiveness of a simple user-driven reputation system was proven long ago by eBay, Amazon and Yelp and taken a step further by Pirate Bay and the Silk Road. Divorced entirely from any sort of legal system, the Silk Road’s various iterations has managed to thrive as a totally anarchic marketplace with entirely user-designated reputations until being taken down by authorities. Despite conflicts with existing law, the system itself remained internally sound, and “dark web” marketplaces succeeded despite lacking access to a formal legal accountability system. Blockchain 3.0 is the next level, creating an autonomous “economic layer” for the internet without authorities, and the ability to experiment almost without limit.

In the words of Melanie Swan of the Institute for Ethics & Emerging Technologies:

“Decentralized models have the potential to reorganize all manner of human activity, and quickly, because they are trustless, the friction of the search and trust-establishment process in previous models of human interaction is eliminated. This could mean greatly accelerated rates and levels of activity on a much greater humanity-level scale. The blockchain (decentralized network coordination technology) could emerge as a fundamental infrastructure element in the model to scale humanity to its next levels of orders-of-magnitude-larger progress.”

Potential applications

Key to establishing a reliable form of alternative governance services is the ability to establish identity, rights and reputation.

Establishing identity: Birth, marriage, death certification, next-of-kin, power-of-attorney, parent/legal guardian, account holder, contractor, property owner, creditor, proof of insurance, student, proof of profession, proof of native American tribe membership, club membership, press pass, proof of payment, and school identification, among possible others. Early applications would probably be geared more toward experimentation than essential legal services, and may include moving some existing identification systems to a blockchain-type system. “We probably need to see this used online extensively, before we start to see these applications,” noted Bitcoin expert Chris DeRose. “So, possible examples of online identity would include facebook-esque logins, comment attribution, and credit mechanisms (think airbnb tenant-evaluations, uber rider evaluations, darknet identity services, etc).”

Establishing rights: Blockchain transactions can help with property disputes by showing (even among different blockchains) that a transaction happened at a certain time, indicating reliably whether a “double spend” problem has occurred. The establishment of provenance over property is crucial to the system’s integrity and usefulness, and how this will work remains to be seen.

Establishing reputation:  David Duccini of ID Coin believes that blockchain reputation systems can be far more dynamic than the simplistic, static systems employed by retailers like eBay and Amazon. Signaling not only a positive/negative transaction but indicating the strength of the relationship via signaling mechanisms, as well as the ability to challenge a reputational event and influence one’s own reputation are potential characteristics of blockchain tech, according to Duccini. For further elaboration, check out this interview.

Proofs of identity could replace flawed methods of password retrieval such as mother’s maiden name, having to produce multiple documents or answer questions, provide fingerprints, etc.

The blockchain can replace a single human authority anywhere such is required simply to recognize that an event has taken place. So for example, a doctor can verify your birth on the blockchain rather than signing a piece of paper which is then sent to a governing authority for record keeping. His public key verifies his own identity, and other doctors (or the AMA) and his patients can verify both his identity and reputation as satisfied or dissatisfied patients.

For the time being, governments are likely to reject blockchain transactions that attempt to supplant privileges that they have claimed the right to deny others (such as registering your car on a blockchain instead of the DMV). However, for transactions that do not result in possible revocation of certain rights or privileges granted broadly to citizens in good standing (such as signing a contract or establishing ownership of property), a blockchain transaction can be counted as “digital evidence” in court and is likely to be increasingly accepted as understanding of the technology increases in the legal community. Adoption may also be stronger in markets where reliable governance services are usually scarce. As Chris DeRose noted: “I think decentralized identity is wonderful, but it will need to gain traction in underserved markets for a long time, before it gains traction in well-served markets.”

As time marches on and the technology gains wider acceptance by the legal system, business community and the public at large, usage is likely to increase. The blockchain technology offers an extremely unique approach to transaction and identity verification that has never before existed in human history. If these projects are successful in proving the concept and converge in a way that its convenient and reliable for the average user,  the changes wrought to the way people interact could be explosive.

The Espionage Act and the "Golden Key" to Stop the State

[Published today at the Center for a Stateless Society]

The recent release of the documentary Citizenfour has refocused media attention on Edward Snowden, who last week restated his willingness to return to the U.S. to face the music if permitted a fair and impartial trial.

Of course, this isn’t something he will receive; the state has repeatedly claimed that Snowden has egregiously wounded national security, but cannot say exactly what has been damaged because of … well … national security. They would likely make this claim whether it was the case or not, largely because the real reason they won’t give Snowden a fair trial is that he struck a serious blow to their institutional legitimacy.

As Critical Art Ensemble pointed out in their 1996 classic Electronic Civil Disobedience and Other Unpopular Ideas, “The key indicators of power value [to a government] are the extent to which a location or commodity is defended, and the extent to which trespassers are punished.” In other words, an activist can tell how effective their activism is by how the state reacts to the injury.

There is little that matters more to a state institution than public confidence; as former intelligence director Michael Hayden noted, the “great harm of Snowden’s efforts to date is the erosion of confidence in the ability of the United States to do anything discreetly or keep anything secret … Snowden shows that we have fallen short and that the issue may be more systemic rather than isolated.” No matter the value of the leaks themselves, cracks in the facade must be swiftly and severely punished.

Such is the case with the Department of Justice’s intent to prosecute Snowden under the draconian Espionage Act of 1917. The Act remains a remarkable souvenir of nationalist paranoia during the First World War that managed to hang on into the current century, with apparently little chance of reform. President Woodrow Wilson’s choice of words is indicative of the almost comically authoritarian mindset he was in when he called for the legislation in 1915 to “crush” potential traitors to the state.

He said, “I urge you to enact such laws at the earliest possible moment and feel that in doing so I am urging you to do nothing less than save the honor and self-respect of the nation. Such creatures of passion, disloyalty, and anarchy must be crushed out. They are not many, but they are infinitely malignant, and the hand of our power should close over them at once.”

Those “infinitely malignant creatures” prosecuted under the Act included anti-interventionist newspaperman Victor L. Berger in 1919 and Nixon-era whistleblower and renowned journalist Daniel Ellsberg in the 1970’s. Wilson’s nationalism-fueled hysterics also included hostility toward Irish, German and Italian-Americans, declaring “any man who carries a hyphen around with him carries a dagger that he is ready to plunge into the vitals of the republic.”

A law born from this sort of paranoid mentality will be ripe for abuse by hysterical bureaucrats in any era. Perhaps the most insidious feature of the Act is that it doesn’t just punish leaks that are damaging to national security. Indeed, it prevents anyone from mounting any defense that might delineate different qualities or categories of leaked information, or claims that some leaked info is not relevant to security interests and might therefore qualify for a lesser charge. It demands that courts treat all leakers with the same fire-spewing nationalist venom that Wilson birthed the Act with.

The fact that the state imposes such massively inflexible punishment for information leaks is a strong indicator that it considers revealing privileged information of any sort to be a far greater threat to its legitimacy than think tanks, newspapers, grassroots advocacy, or the largely symbolic oversight of legislators and secret courts. Such a secretive and vigorously defended beast can only be wounded from within.

And thus a new kind of protester is born: the Electronic Civil Disobedient.

Snowden’s heroism indicates that the leaker-hacktivist is an inversion of the “golden key” that the NSA has aggressively sought from cybersecurity vendors to invade privacy indiscriminately: a failsafe security flaw to be utilized in the event of a serious threat from the state against the civil liberties of the individual.

Regardless of the actual threat posed by a leaker to the public good, the state will fiercely defend the worst of its blatantly unjust and unnecessary bludgeons like the Espionage Act. But its own ferocity could work against it: future Edward Snowdens are beginning to realize they may in fact be tools of today’s Woodrow Wilsons.

Why Cab Companies Should Just Burn Now

Long story short, I went to New Orleans on Thursday, March 12 for a bachelor party and before I returned home on Saturday evening I was convinced that taxi companies are a blight on the Earth and must be eradicated as soon as possible.

So when I stepped outside the airport to the lower level I was introduced to the reason that Hayek’s spontaneous order is magnificent and bureaucratic planning is hellishly inefficient. There was a massive line, probably an hour long, of people who wanted a cab. I went to the booth where you are supposed to put in your order and naturally there was no one in it. Just then a taxi driver I had spoken to moments earlier sauntered up and in a hushed tone said “if you don’t want to wait in line… just go upstairs.”

Holy shit. What a fucking brilliant idea I had never thought of. I went upstairs to departures and within ten minutes I was in a taxi. The driver gave me his card and told me to call the taxi company directly when I needed to go back to the airport… apparently hotels have a little racket set up where if you call a taxi through them, they charge the cab ten bucks as a “finders fee.”

When it came time to get a taxi into town the following evening (there is no Uber service in New Orleans because of state corruption), I called the first number on the business card. Busy signal. Called the second number. Busy signal. After 8 attempts I got a person who assured me a cab would be along in “five to fifteen minutes.” After 20 minutes, we just flagged a passing taxi.

On Saturday afternoon it was time to head back to the airport. If I was permitted Uber, I could have just opened the app, clicked a button and a car would have been on its way in a few minutes. I would know exactly where the car was, how fast it was coming and could have planned accordingly, secure in the fact that I would get to the airport on time. If there was a lesser supply of drivers and a higher demand, prices would have gone up to encourage more drivers to enter the market, and I happily would have paid the extra fare to get to the airport on time.

But no, I had to deal with taxi companies that refuse to use phone apps, reputation systems, and even fucking GPS location. I tried again unsuccessfully five or six times to get through the busy signals and eventually just asked the hotel manager to call a taxi for me.

This taxi driver said he’d prefer cash to credit. “Those credit card swipe machine companies, they rip us off!” So began a 20 minute rant about the taxi business. He told me that a card swipe will cost them as much as 20% of a fare, so to calm him I told him I’d tip in cash. He also claimed that the local government will take a pre-tax fee of as much as 3.5% (managing a racket is of course expensive). He complained about Louisiana corruption vociferously, even claiming he was a victim of Eminent Domain abuse. When I asked him what he thought of Uber, he was emphatic that it was unfair competition that was putting honest taxi drivers out of business. He also didn’t seem to understand how the reputation system worked.

My final taxi driver drove me from BWI to my home in Baltimore. When I asked him if he’d consider being an Uber driver, he too complained that Uber was unfair competition whose drivers didn’t have to pay business taxes or suffer regulations and background checks. “It’s not fair. Everything should be the same,” he said confidently, indicating he believed the government’s, tight regulation, flat fare and queued up taxicab patrons was the right way to do business. I suggested it might be better for business if the government regulated taxis less, not Uber more, a point which seemed to mystify him, although he was more supportive of taxis using an app-based reputation system like Uber.

What I took from all this is the weird combination of Stockholm Syndrome, entitlement and bunker mentality that taxi drivers seem to have when you bring up Uber.They seem aware they work for an outdated, inefficient, and vaguely extortionist government racket and encourage riders to find little loopholes around it, but in the end the bunker wins the day. But like Eleanor Roosevelt and other luddites 1930’s petitioning against automated factory work 80 years ago, they are fighting a losing battle against progress. It's a battle they need to lose sooner, rather than later.

Tools of Injustice

The Atlantic is on point with its journalism these days. If you haven't read its absolutely stellar piece on the Islamic State, by all means be enlightened. Its long but you'll never wonder what the fuck is up with ISIS again.

Today, their piece on the Ferguson DOJ report has been popping up in my newsfeed. There's a few things in it that I think are worth noting, beyond the obviously stunning display of blatant racism regularly practiced by the Ferguson PD.

Ferguson, MO, it turns out, is a great case study on all the little ways that the state manages to slip oppression under the radar through formal, but seemingly miniscule loopholes, tricks and caveats. It illustrates perfectly why people with even a small amount of power can never be trusted... and why "freedom" is a process (or more correctly a constant struggle), not a state of being protected by judges and pieces of paper.

Conor Friedersdorf outlines some of the more egregious abuses by Ferguson cops. Much of it was a litany of race-related abuses most of us who are paying attention are familiar with by now. What was really fascinating to me was a slick, under-the-radar way that the little dictators in blue manage to subvert the rule of law. If a cop suspects someone of a crime but doesn't have probable cause, he can post something called a "wanted" status into his department's server.

This creates yet another magical immunity power-up for police that renders them lawfully able to arrest someone without probable cause.

From the report:

FPD and other law enforcement agencies in St. Louis County use a system of “wanteds” or “stop orders” as a substitute for seeking judicial approval for an arrest warrant. When officers believe a person has committed a crime but are not able to immediately locate that person, they can enter a “wanted” into the statewide law enforcement database, indicating to all other law enforcement agencies that the person should be arrested if located. While wanteds are supposed to be based on probable cause ... they operate as an end-run around the judicial system. Instead of swearing out a warrant and seeking judicial authorization from a neutral and detached magistrate, officers make the probable cause determination themselves and circumvent the courts.

... If officers enter wanteds into the system on less than probable cause, then the subsequent arrest would violate the Fourth Amendment. Our interviews with command staff and officers indicate that officers do not clearly understand the legal authority necessary to issue a wanted. For example, one veteran officer told us he will put out a wanted “if I do not have enough probable cause to arrest you.” He gave the example of investigating a car theft. Upon identifying a suspect, he would put that suspect into the system as wanted “because we do not have probable cause that he stole the vehicle.” Reflecting the muddled analysis officers may employ when deciding whether to issue a wanted, this officer concluded, “you have to have reasonable suspicion and some probable cause to put out a wanted.”

At times, FPD officers use wanteds not merely in spite of a lack of probable cause, but because they lack probable cause. In December 2014, a Ferguson detective investigating a shooting emailed a county prosecutor to see if a warrant for a suspect could be obtained, since “a lot of state agencies won’t act on a wanted.” The prosecutor responded stating that although “[c]hances are” the crime was committed by the suspect, “we just don’t have enough for a warrant right now.” The detective responded that he would enter a wanted. There is evidence that the use of wanteds has resulted in numerous unconstitutional arrests in Ferguson.

It's that easy! I was under the impression all these years that if a suspect was "wanted" by the law, that meant they had probable cause and an arrest warrant on hand. Assuredly, this is a power that gets abused by cops all over the country.

These abuses are tough to find out about; the political will needed to expose them is massive. We have it in Ferguson. But Ferguson will blow over soon enough and everything goes back to normal. The struggle against power is something that power gets to dictate the terms of. Maintaining some reasonable level of transparency is essential to maintain accountability, but in an increasingly (and paradoxically) fearful country, the state's argument for secrecy rings bells for most people.

So Ferguson PD has been exposed, and the cockroaches of fascism will skitter back into the darkness for now. Great. Only around 18,000 police departments and other law enforcement agencies to go.

Networks vs. Hierarchies

If you're interested in the technical plausibility of anarchism in the context of a high-tech networked society, I suggest reading this great bit of research by mutualist Kevin Carson, who also blogs for C4SS. Chapter 2 is really eye opening.

In a nutshell, Carson argues that networks have properties (such as a quick information feedback loop) that make them highly-efficient, anti-fragile and superior modes of experimentation and response, learning from problems and obstructions in a way that makes them inherently stronger. Hierarchies, in contrast, with large corporations and governments as prime examples, are inherently fragile due to the conflict-of-interest necessary to hold them together. This fragility and slow-response time makes complex hierarchies adapt poorly to rapidly changing circumstances and obstructs clear feedback channels that would make them more efficient. Given the rapid growth in networked and crowd-sourced information available on the web, governments will seemingly always be playing catch-up, and may be increasingly overwhelmed by what historian Samuel Huntington called an "excess" of democracy.

Networked "governance" may in fact be the future of human organization. Certainly technolibertarians are working hard to build alternative institutions and uncensorable channels, while of course the U.S. along with the world's finest authoritarian regimes keeps a finger on internet chokepoints and even a nationwide "kill switch" is on the table in the U.S., though it hasn't worked well in Middle Eastern countries such as Egypt. Given the inherent adaptability and resilience of networked organizations, this problem for the government may intensify.

I can't say I know what the future of humanity will look like, except that I have a hard time picturing humans in a few hundred years colonizing the outer reaches of space and engaging in economic transactions using currencies issued by central banks millions of light years away. Or, for that matter, obeying laws and regulation issued by far away bureaucrats. New models will assuredly replace what we're familiar with now... the big question is... is the Bitcoin revolution a glimpse of the future?