All revolutions have their dogmas, and the cryptocurrency/blockchain insurgency is no different. Crypto adherents believe that decentralization will solve many social problems, including the issue of governance.
Vili Lehdonvirta, an Oxford University social scientist, author and former software developer, disagrees.
He told Cointelegraph that the underlying technology would change, and that it was already changing. He believes that the blockchain is becoming less blockchain-like and less trustless than the original idea of a trustless network, especially after the Ethereum Merge. Corporate-like “staking” entities will be required to “uphold integrity of the chain.”
Crypto networks could indeed be moving towards centralized digital platforms. “Maintained by a bunch people whom you must trust, but hopefully, you can also hold them accountable if they prove to be untrustworthy.”
Cloud Empires, Lehdonvirta’s latest book published by MIT Press is partly a meditation about the perishability and/or good intentions of ideology. It is about the 21st century’s digital giants like Amazon, Uber, and eBay.
Many people follow a similar life path: Charismatic founders who set themselves out to make a difference in the world and then guide their businesses on a brilliant growth path only to crash into the hard reality. But they do not always survive the collision.
The book’s subtitle is “How digital platforms overtake the State and How we can regain control”. It also contains a chapter about Satoshi Nakamoto, the creator of the blockchain technology. This chapter covers the origins, adoption and metamorphosis of the technology and finally the realization that cryptographically secure digital networks cannot completely replace “untrustworthy” human authorities in matters pertaining to governance.
Amazon founder Jeff Bezos was once hailed as a hero for creating a business environment that allowed many independent merchants to flourish. But, he eventually became a digital monopolist and turned on merchants by “extortionately charging fees and outright taking their lucrative business lines.”
Travis Kalanick, Uber’s co-founder, appears as well. He was initially seen as a “fierce advocate for free-market solutions,” but later he can be seen fixing fares, and regulating the number cars on the streets. Pierre Omidyar is the creator of “the first online reputation system in the world” and quickly realizes that having a bad reputation alone will not deter criminals. His company, eBay, develops into a central authority that regulates its market.
Social order without institutions
Satoshi is the mysterious pseudonymous founder of blockchain. He was first known to the world through a nine-page whitepaper, “Bitcoin, A Peer-to–Peer Electronic Cash System”, published in 2008. Lehdonvirta is a professor of economic sociology at the Oxford Internet Institute. She writes that Nakamoto was concerned by the fact that people had to rely upon opaque financial institutions for their finances.
He places Nakamoto in the Digital Age libertarians’ line, starting with John Barlow, the cyberlibertarian who “dreamed of an order that emerged independent of the authority of territorial governments.” Here, Nakamoto is seen through the lens of a political scientist. Lehdonvirta writes
“Nakamoto wasn’t interested in making institutions more democratic. He wanted to revive the Barlowian dream, which he believed would create a digital social order without the need for such institutions. There would be no bureaucrats, politicians who invariably betrayed the trust of their electorates, and no election rigged or manipulated by corporations. Nakamoto believed that technology could create such a social system, and cryptographic technology was a key component.
Satoshi was not the only one to advocate cryptography for “political freedom.” There was a subculture of “cypherpunks”, and “cryptoanarchists,” who had been spreading this creed for decades. “But after many years of work, they still hadn’t succeeded in building viable payments platforms.”
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Satoshi seems to have succeeded where others failed — at least, in the beginning. What was he able to do differently? The short answer is that he rotated record-keepers.
This may seem a small revelation, given that crypto miners have been called eco-sinners and monopolists in recent years. According to Lehdonvirta, Bitcoin’s miners really are network administrators. They’re “record-keepers.” This is their job as originally defined.
“To review payment instructions that have been recently issued, verify their validity, and then collate them into a record called a block. This record is an official record of transactions which can be used to identify who owns what in the system. The administrator would not need to verify transactions manually. All the work would be automated by peer-to-peer “banking software” running on their computer.
After approximately 10 minutes, “the next randomly elected administrator would take control, double-check the previous block record block, and add their block to it, creating a chain of blocks.”
Each day, rotating judges
The author’s ability put Satoshi in historical context is what makes this Bitcoin genesis story unique. Nakamoto was faced with a classic governance dilemma — “Who is guarding the guardians?” — that dates back to the ancient Greeks.
This problem was faced by Athens, a city-state, 2,600 years ago during the reign of Solon the Lawgiver. Lehdonvirta writes that “Instead of trying making government administrators more trustworthy, he [Solon] decided to make trustworthiness count less.”
Solon had even a machine for this purpose. An ancient Greek technology known as a “kleroterion,” also known as an “allotment device,” was a large slab of stone that had carved slots or matrixes and was filled with bronze plates engraved with the names of Athenian citizens. These were randomly chosen each day using bouncing black and white balls.
“Using the kleroterion random people were chosen to serve as government administrators at ancient Athens. This was how magistrates were elected each year. Every morning, judges were re-selected.”
Cloud Empires compares Nakamoto’s ledger validators to the kleroterion
“The responsibility to check balances could be distributed randomly among users, much like the way administrator posts were distributed randomly among citizens in ancient Athens.” Nakamoto’s scheme rotated administrators approximately every ten minutes , whereas Athenians used the twenty-four hour rotating kleroterion.
In both cases, the justification was to avoid corruption that comes with concentrations of power.
“Just as in ancient Athens this constant circulation was responsibility meant that it would be very difficult for the administration to be corrupted. […] The platform was able to keep orderly records, as long as the majority of its peers were honest. It did not need any trusted authority. Technology replaced trust in good intentions with technological certainty. “The problem of trust seemed to be solved.”
People are still in control
It’s not so easy, alas. Cloud Empires are full of innovation, good intentions and high-mindedness, but they only go so far before they come up against the human nature. The DAO Hack of 2016 was the most significant event. An unknown attacker stole 3.6 million Ether from The DAO project. It is the first decentralized autonomous organization in the world.
A hard fork of Ethereum was able to reverse the hack. The reset button was pressed by the network, which erased the most recent transactions from the ledger and resumed the state of things immediately prior to the attack. Vitalik Buterin, the Ethereum founder, and the core developers of the network held a referendum to support their recommendations. However, opponents maintained that this was merely changing the rules retroactively.
Lehdonvirta concludes that “the crisis showed how a peer to peer blockchain system in its end was never really trustedless.” While the network enforced its rules with robot impartiality, people still had to make and amend them. People decided to modify the rules to take someone’s assets and return them to their owners. […] The funds in the system were ultimately left to people and not cryptography. “The trust problem remained unsolved.”
Lehdonvirta says that the DAO hack has raised the “age-old question of political science that troubled Athenians too: The authorities protect, but who will defend us from the authorities?” How do we hold power accountable?
Lehdonvirta, in an interview with Cointelegraph, was asked last week: Given the many disappointments documented in Cloud Empires do you see any reasons to be optimistic about digital platforms? Are there any reasons to be optimistic?
People are realizing that I’m not living in the libertarian utopia Barlow and other visionaries from Silicon Valley promised me. Lehdonvirta replied, “I’m actually living under an autocracy.” “People are starting to realize this and have started to push back.”
His book includes many examples. Andrew Gazdecki is an entrepreneur who banded together with other businesses to save his business from being shut down by the trillion-dollar Apple. They actually win the right to keep doing business. This is just one example. In April, Etsy sellers went on strike. This was after the marketplace increased transaction fees for independent sellers by 30%. Lehdonvirta said to Cointelegraph that people aren’t taking it.
He said that the crypto space is “really interesting” because there are “lots of people who imagine different ways to organize society and different ways to organize the economy.”
“Maybe the blockchain technology is not as useful or as revolutionary as originally thought, but they are still trying to find new ways to organize society,” such as decentralized autonomous organisations (DAOs) for example. Is it less valuable? People can go further if they don’t conform to this kind of blockchain dogma.
When he was asked where the kleroterion came from and how did it all get there, he replied that he didn’t know. Lehdonvirta, an Oxford University “fellow”, eats with fellows from many disciplines including classicists and historians. One lunch companion was an expert in ancient Greece, who was also “super curious” about Bitcoin.
“I can’t recall exactly how the kleroterion was created. It was in one of my readings. The connection between Bitcoins and ancient Greece was made because I ate in college with ancient Greek experts.
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He sees more hybrid types joining the crypto space, including social scientists. “I think the most interesting thing about crypto is that a lot more crypto people are becoming increasingly interested in political and social science.” They are realizing that many projects and systems are failing not because of technology itself, but because governance has failed. Cointelegraph was informed by him:
“Humanity has been creating governance systems for thousands upon thousands of years. We have figured out what works and what doesn’t. Why not build on this knowledge in the same way that we do software development?
Programmers don’t create everything from scratch. They use primitives instead. To build software, they use well-known components and libraries. “Why not the exact same for governance?”
The Finnish-born social scientist appears to believe that the intellectual ferment created by Satoshi Nagamoto over 13 years may still be useful for organizational and governance purposes, even though the technology never lives up to its expectations.
Eileen Wilson –Technology and Energy
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