It’s
only been around for a few hundred years and democracy has already bred
distrust of its institutions and discontent with its processes all over
the globe. Pew research data shows public trust
in government in the U.S. has been steadily declining for more than
fifty years. Polls in Europe show increased suspicion of the EU. Around
the globe, trust in government among the general population has fallen
to all-time lows,
according to the Edelman Trust Barometer; Edelman called their 2015
results “an evaporation of trust across all institutions.”
The
paradox becomes more evident with time: despite the fact that
information has never been more accessible, the global population
wealthier, or violence less prevalent in the 100,000 year history of
modern man– something is clearly wrong with how we run things.
Separatist movements are multiplying across the globe in the wealthiest
and poorest countries. Angry malcontents are so numerous they are
sending reality TV stars and fringe candidates hurtling toward high
office just to do something to alleviate their angst.
And
yet, the perpetually sinking ship of democratic governance hobbles
along, bailing out the hull just enough to keep it afloat, simply for
lack of a better alternative. Scholars seem to be at a loss to explain
such widespread discontent when by most measures, the human condition
has been only improving
over the last century. We should consider then, that innovation may be
the lifeblood of political culture, just as vital as it is in business,
science, and the arts.
Democracy
has been without new and inspiring ideas for the last fifty years. As
conservative and progressive impulses have settled into an unquiet
equilibrium, both grow increasingly discontent. The “Democracy” we all
have been brought up to worship has become cliché, despite its great
accomplishments. How is this possible?
Governments
exist to protect the three natural rights, according to John Locke:
Life, liberty and estate. But as economies grow more complex and
interconnected, and populations put increasing demand on centralized
bureaucracies to smooth out every sort of social ill, bureaucracies are
inevitably seized up by their own inefficiency.
This
inefficiency is a feature, however, not a bug. The state is functioning
exactly as it was designed: its best asset (stability) is the flip side
of its worst (inertia). It resists change in the worst and best of
circumstances, and especially when competing political winds attempt in
vain to sway it in one direction or the other. When the government
inevitably fails to deliver on voter desires, there is no alternative
but to live with it.
We
should consider the possibility that governments have run up against
the limits of their abilities to effectively satisfying the conflicting
demands of their respective voting populations. This may be because
government as a concept has reached the end of its rope as an innovator
of solutions. New solutions are necessary to solve this problem, and
only the blockchain technology is providing real possibilities.
At
a minimum, government must provide a fair and transparent system for
redressing grievances, managing resources and defending the rights of
those who have invested in it. As modern democracies fail at their most
basic tasks– alternatives are taking root.
The Historical Fallacy in Action
This brings us to a questionable academic paper
by Marcella Atzori of the University of Nicosia on the plausibility of
blockchain governance. In brief, Atzori claims that an abandonment of
traditional nation states in favor of blockchain governance would reduce
our civilization to a loosely connected network of rapacious
mini-societies ruled by elite coder warlords that only worship wealth.
The
argument is not well supported and most of her fawning over legacy
government processes pitiable, but we should give credit where it’s due.
Atzori has clearly taken the time to understand the technological
issues surrounding Bitcoin and the promise of blockchain technology. She
also deserves credit for not trying to scare the reader with the
impenetrable language typical of academic writing. But her paper is not
real academic work; it’s full of Bernie Sanders-esque proselytizing that
too often sounds more like a stump speech than a fair and reasonable
critique of the theories that underpin Bitnation or Bitcoin. Just the
same, she brings up some common criticisms of Bitnation that deserve
addressing.
At
the center of her argument–like most arguments against both Bitcoin and
blockchain governance– is the shameless deployment of the “historical fallacy.”
Historians try to explain how things like governments and currencies
arose primarily by examining qualities of the finished product, then
inferring that the qualities they value most must have been necessary to
its development and function. In this case, she claims politics is the
only answer to mankind’s problems, and blockchain governance is
unworkable simply because it is not political:
Nonetheless, why such a society is all but perfect? Simply because it is incomplete: it is still primitive or pre-political. Indeed, in this phase individuals are not citizens yet:
in spite of the sophisticated technologies they may use to create
contractual arrangements, they are still living in a state of nature, in
which the law of might – or the laws of the market – prevails on common
good. In this new-tribal scenario, frictions and conflicts will
eventually rise between different networks and interest-bearers at local
and global level, needing negotiation and compromise to reach a stable
peace. If well-intentioned to avoid mutual abuse of power, groups may
create a non-aggression pact to refrain from violence and seek peaceful
solutions in case of conflict… This non-aggression pact can be gained
through consensus and represents a formal move from the state of nature
towards the establishing of civil society. And nonetheless, as Bobbio
recalled,
reaching consensus is not sufficient and it does not solve conflicts:
indeed, the observation of this pact is not ensured in any way and it is
not protected from external, opposing forces. As a result, society is
still quite unstable, dispersed and agonistic [sic].
That
last sentence easily describes the current state of affairs in
virtually every nation state in the world, not least of all, the United
States and most of Europe. We have clear evidence that democracy and the
nation state model is insufficient in solving serious political
disagreements, with enforcement inconsistent, unduly harsh against
minorities, and subject to the whims of self-interested elites.
State-based coercion has failed to live up to her standards.
But
the most important question for blockchain advocates is not whether
political coercion is necessary to maintain social order, but whether
the right to govern must be 1) tied to certain geographical boundaries
2) exclusive to a single authority within those boundaries. There
doesn’t seem to be any real principle governing how this works in
today’s society that the blockchain technology cannot handle.
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:
-
They must be able to ensure that services can be fairly distributed
-
They must be able to ensure that services will be universally recognized
-
They must be able to ensure that services will be worth the price
-
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 monopolistic power really critical to universal acceptance? We
know that the international system is still anarchic: when you travel
abroad, a foreign country accepts your passport, a method of
identification from an identity verification system they are not
intimately familiar with and are not generally coerced into accepting.
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. So basic observation indicates
that it is not coercive authority, but reliability and predictability
that ensure official information can be trusted.
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. When private
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 government identity, legal, notarial and reputation
services. 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.
Blockchain Aspirations Overly “Deterministic?”
Atzori
condemns blockchain advocates as “deterministic” in their enthusiasm
for the transformative power of technology, while employing some
deterministic logic of her own:
In
the end, the natural need of security and the necessity to avoid
fragmentation of social efforts lead [sic] individuals to establish a
permanent point of control, a neutral Third Party to which [sic]
delegate the responsibility of maintaining order, coordinate activities
and resolve [sic] future conflicts in a legitimate way, through a pactum
subjectionis (submission to organized coercion). That moment is crucial and marks the emergence of the idea of State, which can be deemed as a product of logical thought – as also Kant claimed – rather than an historical event.
Atzori
claims that because the nation state exists, it must not be just one of
many forms of potential human organization but the inevitable result of logic itself; as though no other way to protect human rights or organize human affairs could have ever been possible.
Most anarchists are familiar with counterarguments to this claim: the locally-administered anarchic systems that governed Iceland in the middle ages
are one popularly attested counter-example. I won’t get into anarchist
theory here, but there are theoretical possibilities with blockchain
technology worth addressing.
Perhaps
the greatest challenge of an anarchist society is creating legal
systems that are broadly considered fair and reliable. In a sense, the
world is already a web of competing legal and governance systems, just
tied to geographic territories. But is there a value in creating a
virtual governance system that is not tied to geographical boundaries?
Is it even possible to offer such a thing without a monopoly on
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.
The
blockchain protocol also has some advantages over traditional
government services, including very a high degree of 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 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.
Atzori
doesn’t seem to give much consideration to the possibilities inherent
in providing competitive services or the virtue of experimentation. But
that may be because her analysis was always supporting a foregone
conclusion.
Sufficient Record Keeping Reliability?
Atzori notes:
Government
records require high performance and a high degree of reliability,
accessibility and predictability… Moreover, a formal and transparent
process of legitimization must be strictly required when dealing with
government services, in order to avoid the indiscriminate emergence of
private powers over public affairs.
Blockchain
record keeping passes all of these tests. The mechanism is different,
and really, more efficient. Rather than records kept by petty
bureaucrats hired by plutocrats who are themselves hired by a mostly
ignorant and disinterested population, blockchain record keeping is
reliable, easily accessed and exists for the life of the network. It is
also far more transparent and requires at most a holon to code a smart
contract into the blockchain, and a miner to confirm it in exchange for
his flat fee. Unnecessary middle-men and public or private interests of
any sort are excised from the process.
Blockchain
governance takes the basic idea that humans are self-interested and
employs it to improve the way we govern ourselves. Rather than a form of
“hyper-capitalism” as Atzori describes, it is more accurately described
as “hyper-Madisonian”– a system to constructively employ competitive
self-interest in the service of peace and prosperity for all. This
doesn’t mean it will guarantee prosperity for everyone–attempts to do so
in the past have generally led to mass murder. It will however
guarantee access to both the levers of power and ensure the potential to
self-actualize is real for everyone. Which really, is all democracies
do.
She goes on to completely abandon any pretense of impartiality in an impressive display of cognitive dissonance:
It
is therefore clear that the State, as a guarantor of fundamental
rights, is not an unwieldy third party that can be by-passed through a
technological disintermediation process: the State is us, as a result of
the first and biggest crowd-funded project ever existed in history, and
it should not be defined in opposition to civil society.
Not
once does she address the concerns of nation-state opponents: the
disenfranchisement, oppression, abuse, and mass-murder–even in the
Western nations that she lauds– that has accompanied the existence of
governments throughout history. The downside of
nation state governance is very real history– her criticisms of
blockchain governance are, at present, purely speculative.
Algorithmic Governance Too Impersonal?
One
argument she posits against blockchain governance seems to be that
algorithms are unfeeling mathematical formulae and cannot possibly
guarantee human rights:
In
particular, algorithms and binary codes are not meant for
policy-making, since politics is an art that stems from the ethic sphere
of human beings and it belongs to them exclusively, as creatures
‘endowed with reason and conscience’ (Art.1 of the Universal Declaration
of Human Rights).
Computer scientists tend to overemphasize the efficiency of encryption and codes as
political
tools, capable to [sic] verifying and aggregating individual decisions
on large scale without intermediaries. But politics and governance, of
course, are much more than aggregating votes, keeping databases in sync,
or enforcing transactions through algorithms.
She
provides no examples or proof of this claim, nor any reason why
algorithms could not assist in the defense of human rights by protecting
property rights in the developing world, improving transparency and
reducing the influence of corrupt political actors. In this, blockchain-based organizations working to better people’s lives are
finding some of their first essential uses.
One
of the primary problems in the developing world (as identified by
Hernando de Soto) is the lack of incentive for governments to keep a
careful record of property rights within their own borders. Bitnation
and several other blockchain projects are currently working to remedy
this using the Bitcoin and Ethereum blockchains. Experiments are
underway and several legacy governments have bought into the idea.
Should they succeed, the improvement to human rights around the world
could be staggering.
But
the bigger problem with her paper here comes down to granting
governments undue credit for the state of global peace and prosperity,
and the rapid decline of global poverty. She says:
Not only markets are proven to be incapable of creating social justice and redistribution – in spite of what techno-entrepreneurs may claim– but it is rather the subjugation of politics to “turbo-capitalism”
and its financial dictates that bears most of the responsibility for
the problems currently affecting our democracies
– from long term unemployment, poverty, regulatory capture and erosion
of social capital, to imperialist wars, diffused insecurity and fear
(Luttwak, 1999; Ziegler, 2002). In fact, it is with the increasing
atomization of social life, the extreme individualism and the restless rationalization of
economic structures that corporate power reinforces and reproduces
itself, to the detriment of individual and collective rights (Boggs, 2000; Marden, 2003).
“Turbo-capitalism?” Someone is “feeling the Bern.”
Government
advocates claim governments exist to correct market failures– they seem
to forget that historically, the opposite is true. Governments have
historically made lousy guarantors of rights, while market economics
have had an increasingly equalizing effect from the 15th century to the
present. Modern societies have mitigated the homicidal tendencies of
governments, but only over the last six decades or so, indicating that
the outcomes she wants are hardly inherent, exclusive properties of
traditional nation states. Markets, meanwhile, derided by Atzori, have
created prosperity everywhere, even where governments remain oppressive,
such as Singapore and China. That “unfeeling” technology she talks
about has put capabilities in the hands of even the poorest in
the world
they never had before.
A Rule of Rapacious Programmer-Warlords?
Atzori claims that an elite will emerge that will exacerbate wealth and political inequality simply by being more tech savvy:
In
virtue of their technical skills, code developers, miners, fintech
professionals and technopreneurs would easily have a privileged position
in society, becoming the new policy makers to detriment of a big mass
of computer illiterate or low skilled individuals, reduced to mere
passive recipients of services.
Oddly
enough, she is hypothesizing that coders will fill the same role in the
future that lawyers fill today: the authors and interpreters of the
protocols we all live by. Lawyers, masters of the arcane, complex and
obtuse, have dominated politics for hundreds of
years. And yet democracies still function, primarily because individuals
have always managed to hold elites accountable without sharing their
expertise.
But coders will not be able to keep others from joining
their clique like lawyers do with law school and the Bar. With no
formal governing structure or barriers to entry, anyone can learn or
coding and become an integral part of the feedback loop that governs a
blockchain system. Secrecy and opaqueness will also be far more difficult: Information is porous–a single leak can destroy in a
second any ruling-class opacity that took decades to build. If coders
become a ruling class, they would be unlike any other in human history,
without the exclusive control of the means of violence or formal
structures that inhibit admission into their circles.
The
presumption here, is that the entire globe will not be governed through a
single blockchain. Far in the future, many blockchains will likely
compete to provide services that individuals will be able to choose
from. Deriding the Bitcoin Foundation (as she does) as some sort of oligarchy betrays
ignorance of the nature of such a system. If you don’t like how Gavin
Andresen is running things, you don’t have to overthrow him in a bloody
coup or vainly attempt to vote him out of office– you will be able to join a different blockchain, leaving him
strong incentives to make his services as competitive, flexible and
transparent as possible. These sorts of options don’t exist in a modern
democratic system, which forces you into submission to a ruling system
that inherently and often violently disenfranchises minority opinions.
As an important aside, the
existence of competing blockchains also allows for informational
redundancy– you will be able to put your most vital records on more than
one blockchain in the event of a “black swan” apocalypse that kills any
single blockchain.
Collective Identity Necessary to Protect Rights?
She
does make an interesting point here: the end of the nation state means
the decline of “collective identity” and a return to “pre-political”
social organization:
“The major problem of an [sic] hypothetical global society only run through organizational
patterns
based on individualism – namely Decentralized Autonomous Organizations,
free market rules, and “authority floating freely” – is
that it would essentially lack legitimate mechanisms to regulate the
convergence of the particular into the general, which is the traditional
role of centralized political institutions. Breaking the collective identity building, citizens may not see themselves anymore as a part of a whole, because the general will has been replaced by a myriad of immediate acts of the individual will.
This would entail a serious risk of regression of human communities
into a pre-political condition, characterized by ‘Hobbesian deregulated
landscapes and a retrieting [sic] State” (Marden 2003, p. 90).
Individuals would not be citizens anymore, but mere service consumers
and players, ‘independent interest-bearers … with no agreed-upon norms
to regulate their interactions as free and equal beings’ (Urbinati 2006,
p. 65); and society would be dominated by adversarial private
interests…”
Her
assumption here is that a massive national identity is necessary to
protect human rights. The fetishization of “citizenship” and collective
belonging is evident here, protected by the Historical Fallacy. It’s
important to remember that a blockchain system would enable community
enforcement of basic values and norms through consensus, much like a
democratic government, but in a far more responsive and localized
context.
At
the most fundamental level, governments are just masses of people
acting according to their strongest self-interest. They are only weakly
incentivized to protect the rights of all, but wealthy, educated
populations hold them accountable as a matter of routine. The ability to
provide feedback in the form of reputation damage or if necessary bring
a rights violator to trial would still exist in a blockchain-governed
system.
Even
better, in a competitive governance environment offenders wouldn’t be
able to grant themselves exclusive legal privileges (such as qualified
immunity for law enforcement, or “national security” secrecy for spy
agencies) as government agents do, without enduring real repercussions
and a possible flight from their services. Such a flight is not
practical in the modern nation state system, leaving our hierarchical
systems with weaker feedback mechanisms.
In
short, the benevolence of governments doesn't really protect rights–
self-interest does. The stronger you can align individual self-interest
with the defense of natural and civil rights, the better your system is
going to function. This is one of the goals of blockchain governance.
How Could This All Really Work?
Atzori correctly notes that we are still working largely in the realm of theory:
In
this regard, it is not clear, for example, how a fully distributed,
blockchain-based society would regulate conflicts, mediate between
opposite interests, or rectify social iniquities, other than through
market adjustments, complex webs of smart contracts or other
sophisticated, automated incentive mechanisms.
This
is a fair point. It is not clear how all this will work, but we don’t
have to figure all that out now. We must be free to experiment with the
basic architecture. The details will emerge as a result of trial and
error over the coming years, and a few early examples, such as
Bitnation’s partnership with Estonia, are encouraging.
There is a palpable inevitability to all this. Even major publications like the New York Times and The Atlantic
have hypothesized the obsolescence of the nation state. The United
States National Intelligence Council envisioned that in just 15 years a
“nonstate world” could exist in which “governments had given up on real
reforms and had subcontracted many responsibilities to outside parties,
which then set up enclaves operating under their own laws.” Nonstate
systems will likely develop increasing leverage to compete with legacy
nation states. The New York Times
acknowledged the scenario describes “much of how global society already
operates.”
In general, the future will not be one of grand visions and
master plans to control us all. It will be a complex web of smaller
consensuses, with mediating holons to resolve disputes and confirm
information and identity.
It
would be great to see a better analysis from Atzori, and more critiques
from the academic world are welcome. The idea of blockchain governance
is not going away and whatever it may ultimately achieve in diminishing
the less savory attributes of monopolistic governments can only benefit
mankind.
