The Bitcoin Paradox – Kwestie 55: Trust

The Bitcoin Paradox - Issue 55: Trust

Why cryptocurrency will always be political.

Y ou are an inmate te a luxury hotel. Locked te your soundproof suite, you hear nothing and see nothing. Liveried butlers bring you meals on silver carts. You have slew of time to read, think, and listen to music. All the riches of culture can be called down at your caprice. But you are trapped, too, and desperate to talk.

One day, you look under your dinner service and detect a note. ARE YOU THERE? You write back, tucking your reply under the plate. YES, WHO ARE YOU, WRITE SOON. Ter the morning you find replies. It doesn’t take long before you realize that notes are being collective, passed, and shuffled, among perhaps dozens of inmates being held te dozens of rooms.

Before blockchain: The common skill enabled by the blockchain used to be created te spaces like the Kiva, a reconstructed version of which is shown here.

Communication is effortless, but it’s hard to tell who knows what. Messages pass one another ter corridors, conversations fragment. When A replied to B, had she received your message yet, or wasgoed she reading C’s? Did she overlook what you said because she didn’t like it, or because it had yet to be delivered? When D proposes a simultaneous attack on the wardens spil they supply dinner, how many people received it? When A confirms to D that she’s te, will D see the message te time? Will D know that B eyed it?

Here’s one solution, if a strange one. Write a message with a very difficult mathematical problem on it—a problem so hard that it would take a month of concentration to solve. Now wait.

Perhaps nothing happens. But perhaps, just perhaps, you find the reaction under breakfast one morning.

T here’s a slagroom submerged into the ground at the Bandelier National Monument, a few miles from Los Alamos, Fresh Mexico. Te plain view for seven centuries, among the ruins left behind by the native peoples who lived there, the circular slagroom, about the size of a high-school classroom, is called a Kiva. A bench formed out of straw and mud used to run around the perimeter.

One thing Kivas were used for is politics. The circular floorplan made it possible not just for everyone to be heard, but to be seen. When someone spoke ter the Kiva, he could see his fellows and his fellows could see him. The circle also meant that his fellows could see each other watching him, at a glance they could take ter not only the speaker, but the faces of their colleagues doing the same.

It is not enough to dislike a government, you need to know that others do too.

That matters because politics is not just what you think and believe. If I’m attempting to do something that requires your cooperation I need to do more than say I’m willing. I need to know that you know I’m willing.

Te cognitive science, wij call this common skill. To know something is one thing, but to know it with others, know that others know it, and know that they know that you know it, and all the way up the tower—this is another thing altogether. It’s what you need for costly cooperation. What teammates on the field and business playmates ter the boardroom signal when they look each other ter the eye is a mental uur at the origin of society.

Common skill is power. It is not enough to dislike a government, you need to know that others do too. When you’ve built that common skill te secret meetings and basement cafes you might go out into the street. Te a crowd, common skill is obtained without needing to look: The roar of a crowd is the roar an entire crowd can hear.

Totalitarian societies know the power of common skill very well. When Gary King’s Institute for Quantitative Social Science reverse-engineered the Internet censorship practiced by the Chinese government, they found that the government cared less about insults and criticisms than one might expect. What it censored aggressively were social media posts making plans to meet ter person. Online, talk is cheap: but face-to-face people can build common skill.

B ack ter your luxury hotel prison, the uur comes: You see an response to your mathematical problem under your dinner. What does that tell you? At the very least, your message vereiste have reached someone else.

You ponder a bit, and write down a different problem. More than a brainteaser, this one has a funny property: It’s unlikely to solve except by guess-and-check. And, while it’s effortless to check whether your guess is onberispelijk, it’s very hard to find the right guess. If you guessed once a minute it would take you Ten years, say, before you got the response.

A week straks, a solution arrives. What does that tell you? For the reaction to be struck so quickly, there vereiste have bot many people who witnessed your problem and worked on it. Indeed, somewhere around 500.

Collage: Den Agostini Picture Library / Contributor / Getty Pics, Pixabay

Now you’re ter business. You make a 2nd problem. It has the same properties spil the very first, plus it incorporates the solution to the very first problem. (If you like, imagine that the problem involves a collection of numbers, the fresh problem takes spil one of its numbers the solution of the very first.)

You send it back out. You wait. A week zometeen, an response to the 2nd problem comes back.

What do you know now? Well, spil before, you know that a large number of people spotted the 2nd problem. And, since the problem included the message from the very first problem, you know that everyone witnessed that spil well, and can reason te a similar style. A rough, statistical form of common skill has emerged.

The luxury prison of voices is the Internet.

Spil long spil you’re willing to keep solving problems like this, you can thread together a conversation. If someone wants to reply to you, they can add the solution to your problem to their message. Now you know that the message indeed is responding to yours, since it couldn’t have bot written by someone until your message wasgoed collective and solved, and when the problem is solved, you know others know it too.

You have commenced a chain. And every factor of that chain, spil well spil the existence of the chain itself, is common skill.

The luxury prison of voices is the Internet. Messages are passed back and forward spil Internet packets. Problems are solved by custom-built computing machines. The use of thesis problems to solve the common skill problem is called “Proof of Work.” And the string of messages threaded from one problem to the next is the blockchain.

When common skill becomes possible, what will be the very first order of business ter your communication with your fellow inmates? It will be how to get out, and who will lead the effort. It will be politics.

W hoen I wasgoed a graduate student, I wasgoed, for a time, te charge of taking lunch orders for a Thursday seminar series (called Thunch, or Thursday Lunch). Students would loom onto the central mainframe and use a specially-written directive to place an order. Around 11:30 I would print out the order database and rail my bicycle overheen to the sandwich shop to place it. Accounts were kept te a text opstopping te the mainframe, and once every few weeks I would stroll the halls collecting debts.

For all of the complexity of our financial system, this is basically how money works. People have accounts: a set of numbers, kept ter a text opstopping, or a ledger, or a database somewhere at a canap. Wij agree on rules for how those numbers switch. Wij serve Thunch.

BitCoin is a currency that lives on the blockchain. The only messages that can be sent are “transactions,” transfers of a fictitious unit of money, or bitcoins, inbetween accounts. Like any financial system, BitCoin has its own set of rules. No account can go below zero. People who take the time to solve the proof of work puzzle are awarded a unit of currency. 1

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Currency is just one use of the blockchain. There are lots of others. Ethereum is another blockchain that not only keeps accounts, but also permits users to upload fragments of laptop code that govern transfers ter increasingly ingewikkeld ways. Basic government functions, such spil the registration and transfer of automobile titles and real estate, the signing of public contracts, and even voting, can be done on blockchain. So can the establishment of fresh prediction markets that permit participants to bet an internal currency on real-world events.

Thesis are all variations of the conversation at the Kiva. Which is to say, they are political. And that merger of technology and politics produces an unexpected paradox.

While blockchains are excellent at forming common skill according to a set of rules, those rules are set by mitt at the very beginning. Blockchains ter place to date do not include a process for amending their constitutions. That means participants are trapped te the logic set by their founders. Spil systems grow, this constraint leads exactly where you would expect: to disagreement, divergence, and, eventually, revolution.

Ter the world of blockchains, that’s called a “fork”: when adequately many members of the chain want to switch the rules, they can go rogue, publicizing a fresh set of rules and attempting to lure others to divert their laptop power to solving proof-of-work problems for their fresh republic. Forks have happened repeatedly ter both BitCoin and Ethereum, usually overheen technical questions, albeit Ethereum has also forked overheen the question of how to react to looting.

This process is familiar to us from political history. Tribes don’t have constitutions, and neither did the monarchies of Europe. Switch could be confusing, ineens, and often violent.

It’s effortless to become enchanted with the dizzying profits being made with BitCoin, and with the finesse of the mathematics underneath it. But it’s dangerous to leave behind that the point of thesis systems is to bring the political power of common skill into the Internet age, together with all of its potential for disruption and conflict. China’s response to the blockchain exemplifies the uncertain landscape. On the one palm, they banned residents from trading on cryptocurrency exchanges—but, on the other, they invest large amounts of money into developing high-speed hardware custom-built to solve proof-of-work puzzles.

The blockchain is no less a social creation than the Kiva. Wij haven’t outrun politics yet, and it doesn’t look like wij will.

Simon DeDeo is an assistant professor at Carnegie Mellon University, where he runs the Laboratory for Social Minds, and outer faculty at the Santa Fe Institute.

Lead Photo Collage Credits: Nastasic / Getty Photos, Pixabay

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