Author Topic: [Paper] Help brainstorm: Political implications of blockchain technology  (Read 491 times)

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Hi everyone,

I am thinking about writing my master's thesis about the "political implications of blockchain technology". Here I would like to share some of my ideas with you and see whether this topic has enough substance. Your ideas are very welcome.

Where do you think lies the biggest potential of this technology to change how social interaction and the resolution of conflict among humans is arranged?

What would you say is the core of the innovation that changes how humans get along with each other? My take: Being able to control (hold private keys) assets that are tracked on a distributed ledger that is maintained based on public rules (open source software defining the rules to update the ledger). 

Any ideas you have help! Especially those that are very specific or are substituted by an example or embedded in sociological / political theory.

Here are my thoughts up to this point:
1. Money sovereignty: With debt based asset management (today) the control of the asset is transferred from it's owner to either banks or any entity that has control over the bank (e.g. a state). Blockchain technology would allow the owner to fully control his/her assets. This might lead to less influence of the state due to the increasing difficulty of collecting taxes, imposing capital controls etc.
2. A new form of governance: Continuous voting, voting for representatives in specific areas (vote for a health politician etc.).

3. In my opinion libertarian solutions don't work without the according political culture, not without certain norms and not without social enforcement of these norms (outlawing that is not only based on the interests of the individuals that practice the outlawing but on a social norm they follow that does not increase their personal profit). In a global society where the individual does not depend as much on "its" group like in Rothbard's ancient Ireland the cultural basis for a state free society is at least more difficult to establish. Blockchain technology can help here in two ways:

a) Less trust necessary among anonymous individuals: The lack of reputation and trust based on personal relations and on being known in today's relatively anonymous society with its global markets is compensated these days by government regulations (customer protection etc.). Blockchain technology would allow to write the customer protection and the "regulation" into the open source software that defines the business rules that can not be changed by any one party. Further any change to the self enforced "terms of conditions" would be public. Example: Collateral rules for blockchain based derivatives.

b) Bringing back trust and reputation to otherwise anonymous individuals: Blockchain technology would allow an unforgeable reputation system that creates "local liability" on a global scale. Unforgeable rep. system means: No identities with an arbitrarily high repuation can be created and no identities can be destroyed by  a system administrator that does not exist with decentralized databases.
What other problems with rep. systems can blockchain technology solve?

Smart contracts should be very helpful in the sense described under 3a and 3b. In what other sense would "smart contracts" have political implications?

I find 3) the most interesting part and might focus on that.

If you have any scientific literature you think I should read let me know! If you know someone that would like to collaborate let me know.

I find libertarian theory and austrian economics very valuable in that they widen the narrow view of many mainstream theories about the existence of the state and it's relation to the economy. I am also critical of libertarian and austrian theory and think it has a few blind spots. But I think blockchain technology could help to relativise them substantially. The potential implications of this can not be underestimated. It is a challenge thought to make them understood.
Therefore I would attempt to embed the use cases of blockchain technology described above in the discourse about political theory and the state and help to mediate between social sciences and computer sciences.
« Last Edit: March 14, 2015, 05:14:23 pm by »

Offline carpet ride

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Imo the important piece is Blockchain based reputations for supporting commerce - ala gets rid of need for contracts and lawyers.  Blockchain voting will show how governments are disenfranchised from their people, however, the people will not be able to shift away from Gov'ts until Blockchain reputations are ubiquitous. 

Good luck with your paper. Keep us posted!

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All opinions are my own. Anything said on this forum does not constitute an intent to create a legal obligation between myself and anyone else.
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Imo the important piece is Blockchain based reputations for supporting commerce - ala gets rid of need for contracts and lawyers.  Blockchain voting will show how governments are disenfranchised from their people, however, the people will not be able to shift away from Gov'ts until Blockchain reputations are ubiquitous. 

Good luck with your paper. Keep us posted!

Sent from my iPhone using Tapatalk

Thanks for your comment!

That could be categorized as the elimination of private law (enforcement).

Offline bitmarket

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The whole interview is worth the watch, but this 3 minute slice is epic.  That is what it is all about for me.  BM at his best

I would be interested in having this vision filled out...  what are the components needed.  Fill in all the blanks.  What will it take to get there?
« Last Edit: March 14, 2015, 09:24:22 pm by bitmarket »
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Offline Geneko

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In my opinion block-chain technology wouldn’t change much in established political system. It represent significant treat to established arms of power and will be treated as such.

Libertian theory ignores one of two basic mechanisms in acquiring goods. Let me explain.
There are only two ways in acquiring goods. First one is by creation of good and/or a service which is then exchanged on the free market for other goods and services. Second one is by extortion of goods created by first way.

Humans has learned long before that fear of pain and loss creates much more motivation then love, gain, pleasure and achievement. Since then they use it as most effective way of acquiring goods.

Political establishment represents those animal of pray people. They are hunters and they are hunting.
Block chain technology tries to disassemble majority of traps that man hunter has developed over ages.

In order to succeed block-chain has to disassemble and reorganize the state. Is this going to happen?
I doubt but I hope.

Offline arhag

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Here are some of my thoughts:

1) It allows anyone with access to the internet to participate in the global financial system regardless of what restrictions their local financial gatekeepers have set up.
These restrictions can be intentionally imposed by their government for whatever reason, or it may just be a byproduct of it not being profitable enough to set up traditional financial institutions there (I'm referring to the unbanked).

This can provide a lot of good to people (especially poor people). They don't have to deal with cash for their business that can easily be stolen. They will have access to same investment instruments that people in developed nations (I'm considering future financial innovations on the blockchains here like bond markets, loans, and companies that issue cryptostock on the blockchain) will have since the blockchain does not discriminate. Speaking of loans, even people in developed nations like the US will have more investment opportunities because of the blockchain. Non-accredited investors can provide micro-loans to people stimulating development that would have otherwise not occurred because it wouldn't be worth the traditional bank's time (of course they can also be scammed into losing their money, but I really dislike the nanny state that restricts the level of risk individuals are allowed to take with their own money in investments/gambling).

There are of course potentially negative aspects to this as well, which may interesting to touch on in the paper. For example, without an easy way to impose capital controls, it becomes difficult for a government to sanction another country. They could still restrict shipping of physical goods to and from that country (unless an intermediate proxy country is used), but it would be too difficult to restrict purchasing of services that can be entirely consumed digitally (creating media, software services, etc.). Now this may actually be seen as a positive depending on one's political philosophy and the particular instance of the sanction and whether one thinks it is justified or not, but for the paper I think it is still worth exploring what it means geopolitically when governments lose (or at least weaken) that stick from their tool bag which has helped them get what they want. And of course one could explore what blockchain technology means for money laundering, supporting criminal activity, and financing terrorism.

Anyway, moving back to the positives...

2) Transparent, fraud-free online voting is a huge deal IMO.

I suspect once you lower the barrier to entry (allow people to vote early and often from their smartphone) and give them confidence that their vote is actually counted then voter participation will go up. Also, if you can vote early and update your vote before a deadline, it allows you to vote how you really like rather than for the lesser of two evils and then change your vote in the last day to vote strategically. And since everyone can also follow this strategy, it means you get to see how everyone else would really like to vote. This means if you vote for some party or candidate that the media tells you has no chance but it turns out they actually have very large support and can win, you don't bother changing your vote. On the other hand, if the media is correct and that candidate only has less than 10% of the vote, you could then change your vote in the last day to pick the lesser of two evils that actually stands a chance of winning. I hope a voting system like this may stand a chance of breaking up the two-party system in US and actually providing real change to the government by allowing candidates that a larger percent of the population actually likes to be elected rather than one of the two serious contenders that they hate a little less than the other serious contender.

3) Smart contracts.

I agree that your points 3a and 3b in that post are very interesting to focus on. I find the idea of imposing restrictions on yourself through a public smart contract for the purpose of gaining benefits from other people very interesting. The smart contract is immutable and public (so you cannot change the conditions in the future in a way that is not supported by the contract), is enforced by the blockchain (so people have a guarantee that once the conditions of the contract are triggered, the stated outcomes will occur), and precisely (through code) defines the mechanisms through which these triggers can occur (typically this could not be done through software alone and would involve selecting arbitrators or oracles that feed in the data that triggers the contracts). For the enforcement of the contract by the blockchain to have any weight there would need to be something the user loses if they fail to meet the obligations of the contract. This can include cryptocurrency locked in the smart contract or other locked assets that can be automatically sold through an exchange or auction for cryptocurrency to pay off debts and pay for restitution, and/or simply recording how much money the user (who in this case would have to have a real-world identity established and linked to the blockchain account to prevent Sybil attacks) owes to others (to pay them restitution) on the immutable blockchain. In the third case, the user could enter smart contracts without having anything of value on hand other than their good reputation. If they already have a bad reputation because of previous bad marks from failure to meet the obligation of their previous contracts, no one would take the new smart contracts seriously (at least until they pay restitution to their victims of previous smart contracts to clear their bad marks). The beauty of these smart contracts is that each individual gets to choose the precise terms that they wish to impose on themselves, however they would of course be restricted to choosing terms that others will find acceptable to do business with them. The reason they bother imposing such limitation on themselves is to be able to do business with others, which they need to do if they wish to survive and thrive in society.

I also should be clear by what I mean by precisely defining the conditions of the contract. I am not talking about the part of the contract that the arbitrator uses to judge outcomes. That of course remains as vague and subjective as it is today. The part I am talking about are things like you must pay X amount every month otherwise you default on the loan, or the variable interest rate of your loan can only increase annually by at most some fixed amount. And all of this would be precisely defined through a programming language. Although it is a small part of the contract, I think getting as much as is possible of the contract done through precisely-defined code in the smart contracts helps. The challenging part is of course the subjective stuff that requires human judgement. Blockchains don't help with that problem (I'm not pretending like blockchains are some panacea). But smart contracts do add an interesting advantage to even this subjective component in that the creator of the contract can define the consensus conditions necessary for the group making these human judgement. The contract can define a set of human judges a priori and give each a weight. Then if the sum of the weights of judges from this set who agree on a particular decision (a decision restricted to some finite set of possible decisions defined in the smart contract) is greater than some threshold, the blockchain carries out the execution of that decision as defined in the smart contract.

My hope is that these systems can replace much (but I don't personally believe it can replace all) of the traditional justice system. Trying to use smart contracts to replace all of the traditional justice system starts to, IMO,  make the new system start looking more like just a technologically-sophisticated version of traditional state-based justice rather than "private law"). Let me expound on that.

One can still opt-in to punishment under certain circumstances as defined by the smart contract they enter. One might bother doing this because they carefully weigh the pros and cons of entering this smart contract versus not entering the contract and come to the conclusion that the self-restriction is in their net benefit due to the access it gives them to goods and services made available by other people in the society which they could otherwise not access if they refused to enter the contract. Now when I talk about punishment I am typically talking about things like forfeiting bonds that, for example, are paid, if necessary, by auctioning off property assets which the smart contract has a lien on. I am imagining some hypothetical future where you can have a property deed digital asset on the blockchain (which has value because some credible enforcer will respect the property rights of the owner who can prove ownership of the digital property deed through cryptographic signatures) and you can put it up as collateral for a mortgage-backed security smart contract, for example. Short of that, however, the public, immutable blockchain could just record what the person (who has an verified real life identity associated with the blockchain account they enter smart contracts with) still owes, or what their other punishment is, and there would be an expectation that the person satisfy that punishment / restitution to get back good standing in the community.

These punishments would be activated if you break certain rules. The rule specifications can be modified by a legislative group (whose members can change through a process described a priori in the smart contract) and the claim of whether one's specific actions actually broke the rules (and what the corresponding punishment is, constrained by the rule specifications) can be determined by a judicial group (whose members can change through a process described a priori in the smart contract). This all starts resembling our existing government system very quickly. But the constitution is made more precise and better enforced through code and in theory an infinite number of variations can be adopted. In practice, I believe societies will tend to adopt very similar smart contract frameworks (where the similarity becomes stronger the more we narrow the view to smaller geographically local societies) simply because they need a certain amount of compatibility between their smart contracts to be able to safely and securely trade, work, and live together, and also because if everyone's smart contract were widely different, there would be a huge cognitive burden in evaluating how compatible a counterparty's smart contract is to one's own smart contract when deciding whether to interact with them.

Then, the issue is what do you do if one has an incompatible smart contract they impose on themselves (or in fact they don't impose any limitations on themselves) but still wants to interact with you? What if despite your request to be left alone, they keep bothering you? What if they are malicious and attack you to steal your property or just hurt you for pleasure/revenge? This then requires enforcers of a given society to physically separate the people with very incompatible (compared to that of the society) smart contracts from the rest of the society. Essentially they would be partly be the police and partly be the border patrol and customs of a nation. In theory this can operate at any scale, but my guess is that in practice it will efficiently operate at the scale of typical nations/states today.

There is also the additional problem of negative consequences to a society even when the aggressors are physically separated. Examples include: cyberattacks (hacking computer systems), cyberbullying, intellectual property infringement (if the society recognizes intellectual property), certain types of publications (whether information, true or not, or visual/auditory depictions, real or simulated) that are found to be undesirable by the society, pollution, overuse of natural resources, global warming, etc. For some societies, these issues may just be a fact of life that they accept despite not being happy about it. For example, they might just work hard to improve their computer security defenses, try to ignore the cyberbullying and the horrific (to their subjective sensibilities) content being distributed over the internet, and simply except that the public goods they create (entertainment, new technology and processes, code, etc.) will simply be copied by others without additional compensation and try to find other funding models if necessary. On the other hand, certain negative consequences might be too much for certain societies that they will be willing to put significant pressure (maybe trade sanctions but perhaps even war) on the other societies to get them to stop. So perhaps the pollution of the air or water supply by a neighboring community is hurting the health of the people in a community, and they decide to actually threaten them with military action (and follow through with the threat if necessary) if they don't stop. So, I imagine we end up with something like a military as well in this system and like today that military threat would likely be used as leverage to get favorable deals that the community wants. And what stops them from abusing this power by escalating from the act of simply stopping the other communities from doing bad things to them (where bad is of course subjective) to the act of coercing other communities into doing beneficial things for them (likely at the expense of the other communities). So maybe they decide they want more of their neighbor's land because of the wonderful resources available there.

As you can see, I like the improvements blockchain technology will bring to justice (more precise rules, better enforceability, and likely more efficient than the current system), but I personally don't believe it is fundamentally different than our current system or that it allows for the removal of a "state" (depends how you define state I guess).


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I am sad to say that I won't be able to write the paper. At least not to the extent I wished. The professor refused it because it is not his "field of expertise". What a surprise :)

But I will at least, at some point make it into a longer blog post ( Can't say when though since the thesis has to be written anyway (on another topic).

THANKS for all your contributions! It will not have been for nothing!