There Will Be More Intermediaries. Not Less.
- Introduction
Before we expand on identity and reputation in upcoming articles, we want to discuss another topic first, to lay a foundation from which we can explain our vision and designs further. Most of this article will be based on the works of one specific cypherpunk ninja from the 1990s. Yours truly feels like his work is somewhat underexposed -re: blockchain hype-, and hereby advises anyone interested in cryptocurrencies, and quasi-related peer-to-peer technologies, to read further into it.
Those who’ve been properly exposed will already know that we’re referring to RAH, a.k.a., Robert (Bob) A. Hettinga. He coined the term “financial cryptography”, was founder of the world’s first conference on financial cryptography (“FC97”), and broadly wrote about the developments he expected to see in the Information Age, mostly in regard to the financial markets. Back in 1997, Bob was already presenting views on digital bearers, cryptographic reputation, micropayments, regulators and the Internet, markets and finance, and similar topics. Though we usually shy away from gospelizing people, there is a reason why some refer to him as a “hyperactive genius saint from the future.” [1]
In all fairness, this story started long before Bob was born. Even before that, before civilization. Also, as we did from Bob, he borrowed some thoughts from a man named Peter Huber.
“This isn’t new. In fact, it’s outlined in Peter Huber’s landmark ‘The Geodesic Network’, written in 1986 as a report for Judge Harold Greene as part of the Modified Final Judgement which broke up American Telephone and Telegraph, and with it the US telephone monopoly.”
― RAH [2]
We will summarize the history of communication technologies and social structures, explain how peer-to-peer networks resemble tribes and their social structures, and how this relates to technological advancements in the present. Quotes from Bob and others will certainly make it more enjoyable to read. And, be honest. When was the last time you’ve contemplated on geodesics ..?
2. A Short History of Communication Technologies & Social Structures
Once upon a time, before civilization, there were tribes. Most of these were self-sufficient, and did not have to rely on trade with others outside of their tribe. Any information or goods were generally ‘switched’ between two persons directly, from one human to another, or ‘geodesically’:
“Literally, the straightest line across a sphere, rather than hierarchical, through a chain of command, for instance.”
― RAH
On most occasions, a person would walk up to another person and deliver the messages or goods, to then go back to where they came from, in the straightest line possible. Information was communicated directly, from one person to another, in the most cost and risk efficient manner.
Side-note: We can only assume that secrecy was already part of the human spirit at that time, which could mean that the earliest forms of encryption originated when humans lived in tribes. It’s natural for people to conceal their valuable information whenever there are risks of exposure to other parties, before, during, or after the transport thereof. Encryption is normally also done in an economical fashion. Just as we’re supposed to do it today, for example, with IT security. We will need to make risk assessments first, before we can decide how many efforts and resources ought to be invested in securing the value of any given object.
Apart from the security aspects, everything changed with the invention of agriculture. You may wonder what food production has to do with communication technologies. Briefly put: It has changed our social structures, and thereby our methods of communications.
The earliest developments in agriculture, that we’re currently aware of, were some 15,000 years ago, in present-day Iraq.[3] Here, humans frequently realized food surpluses for the first time. And when there are surpluses, it becomes interesting to sell them off on the market, or export them elsewhere. A side-effect is that humans tend to produce more children when there’s more food going around, and so, cities were born. All at once, it became viable to build towns in the middle of nowhere — near crossing trade routes; locations where goods and information continuously passed by.
“Civilization means, literally, ‘life in cities’, remember?”
― RAH
To economically route information and goods within cities, hierarchies replaced the geodesic social structures. Information and goods were now routed through chains of command. This is where the ‘human information switch’ was introduced, a.k.a. the middle man, or Trusted Third Party (TTP). By adding TTPs to interactions, hierarchies were brought into existence.
In essence, trust networks solely exist in the heads of those who acknowledge them to exist, as with any other form of power or authority. When a group of people reaches consensus on the creation of a fictional entity, and decides that everyone within their group has to add the newly spawned entity to their own personal trust networks, in almost every case, a hierarchy has been established. As long as these people can maintain consensus on its existence, to them, the entity will surely seem real.
“Notice we finesse the whole trust problem by using the entire hierarchy as one entity in everyone’s trusted-person list. That’s why people die for king and country, for instance, instead of just their family hunter-gatherer clan.”
― RAH
Let us fast-forward a few thousand years, to the Romans, who ruled a vast empire, connected through a network of technologically advanced (paved) roads. It enabled them not only to transport goods and troops quickly, but also to route information faster than most of their adversaries. Up to now, all switching was done on foot, by animal (horse, donkey, pigeon, etc.), or sail.
“Staged Mongol riders could carry messages across their own short-lived empire from a capital near China to the gates of Warsaw in as little as 14 days. Napoleon invented his 10-mile-an-hour stagecoach and highway system for exactly the same reason, and could almost legitimately call himself an emperor for the feat alone.”
― RAH
Then to the printing press, a technology so radical during the era of its conception, that in some parts of the world, you could’ve been put to death for operating one.[4] Some time later, the telephone was invented. Afterwards, steam engines and airplanes assisted in exponentially speeding up the flow of information and goods. Withal, all of these technologies required humans to switch the information. Every book was printed and distributed by hand, and every phone call was routed through operators behind switchboards. From passing on messages within tribes, to pyramids, to telephone calls: during all of history, all information communicated by humans was switched via human labor.
3. Automated Switching of Information & the Information Age
Finally, after some 15,000 years of civilization, it was AT&T’s monopoly on the U.S. telephony network that incentivized investments in the development and research of electronic automation, which finally catalyzed us into the Information Age. More specifically, this technology is the transistor.
For the first time ever, information could now be switched automatically. without an operator present to connect you to the recipient of your call. You could now dial a number and have a conversation with anyone connected to the network — automatically.
“Oddly enough, the ‘future’ starts with the grant of telephone monopoly to AT&T in the 1920’s in exchange for universal telephone service. When AT&T figured out that a majority of people would have to be telephone operators for that to happen, it started to automate switching, from electromechanical, to electronic (the transistor was invented at Bell Labs, remember), to, finally, semiconducting microprocessors. Which, Huber noted, brought us Moore’s Law, and, finally, that mother of all geodesic networks, the internet.”
― RAH
Transistors → Moore’s law → Internet → What’s next?
Moore’s law -or, how the number of transistors per square inch on integrated circuits doubles approximately every two years, ever since the invention of the integrated circuit- plays a crucial role in this theory. If Moore’s law keeps scaling at its usual pace -it has defied expectations more than once [5]-, within 5 to 10 years, the amount of calculations that can be made (per second, per $1000) will exceed the processing power of the human brain.[6]
“No exponential goes on forever, and we’re approaching atomic dimensions. I’ve always said it will last two or three more generations [of chips], but the technologists have surprised me, so I guess they’ve still got some tricks up their sleeves.”
― Gordon E. Moore [7]
As information technology advances, people tend to lose jobs. Respectively, the jobs that are being automated. Meanwhile, many well-paying and popular jobs didn’t exist 10 years ago. Think of drone operators, 3D designers, blockchain developers, digital strategists, et al. Many of these jobs require specific skill sets that aren’t taught in any school around the world, and almost anyone who possesses one of these skill sets has learned -at least part of- them through autodidactic mechanisms. To illustrate this picture further, think of platforms like Wikipedia, Coursera and YouTube. Education is already being organized more geodesically, yet, the TTPs are still in place.
“My realization was, if Moore’s Law creates geodesic communications networks, and our social structures — our institutions, our businesses, our governments — all map to the way we communicate in large groups, then we are in the process of creating a geodesic society. A society in which communication between any two residents of that society, people, economic entities, pieces of software, whatever, is geodesic.”
― RAH
It’s nearly impossible to draft a guide for the future based on past performance. On the other hand, when we look at history, there’s a fairly good chance Moore’s law will stay with us for a few more years, to provide us with more geodesics. We can’t predict with certainty what the future holds in store for us, but the reasonable possibility of being connected more geodesically should be worth an investigation to many. Foremost, to businesses, institutions, and governments, that will be affected by it, in case it does transform into reality.
“Moore’s Law, I like to say, operates like a surfactant of information, breaking great globs of concentrated information fractally into smaller and smaller bits, like so much grease in soapy dishwater. Capital, for the most part, can now be converted into information and instantly bought or sold, or, more to the point, instantly settled and cleared in digital bearer form, in increasingly smaller and smaller bits, by smaller and smaller and increasingly more automated financial intermediaries. Microintermediated, in other words.”
― RAH
By breaking up information silos into smaller bits, Moore’s law causes more TTPs. Not less. And due to the information silos that are being broken down into “smaller and smaller bits,” the argumentation that this will lead to smaller, automated, intermediaries, sounds logical to us. More intermediaries will cause more routing of information, which is known as a (NP-)hard problem to computer scientists [8]. Apart from this problem, serious issues can arise when a TTP is introduced, regardless of its size. However, utilizing a TTP can still be cost-efficient, as their existence over the past several thousands of years demonstrates.
“Traditional security is costly and risky. Digital security when designed well diminishes dramatically in cost over time. When a protocol designer invokes or assumes a TTP, (s)he is creating the need for a novel organization to try to solve an unsolved security problem via traditional security and control methods. Especially in a digital context these methods require continuing high expenditures by the TTP and the TTP creates a bottleneck which imposes continuing high costs and risks on the end user.”
― Nick Szabo [9]
From this perspective, again, it seems like intermediaries are here to stay. At least, until we’re able to solve all of the world’s remaining (electronic) security problems, while we can safely assume that perfect security will never exist. Nonetheless, whenever we have mathematical answers that can provide solutions on the protocol layer, we can develop truly peer-to-peer applications, geodesic-by-design. And whenever a mathematical solution is presented that allows for a greater cost and risk efficiency, compared to administering a TTP, it becomes feasible for the geodesic variant to make the hierarchical one obsolete, over time.
“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”
― R. Buckminster Fuller [10]
4. Peer-to-Peer Networks & Geodesics
The Internet is the network of all interconnected networks, and it’s practically impossible to measure exactly how many networks are connected to it nowadays. The topological structures and inherent power mechanisms of these networks vary from centrally organized master-slave relationships, to equally privileged peer-to-peer ones.
“Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or work loads between peers. Peers are equally privileged, equipotent participants in the application.”
― Wikipedia [11]
We sometimes hear or read that platforms such as Uber or AirBnB are peer-to-peer, yet, as we can see above, any centrally controlled platform clearly does not fall into that category. This is because centralized platforms connect peers to other peers through their centralized servers. Without these servers, peers are no longer able to connect with each other through their known communication channels, a.k.a., a Single Point of Failure (SPOF). On a peer-to-peer network, no central intermediary is required, in order to connect peers to others. Two examples of purely peer-to-peer networks are BitTorrent (P2P file sharing) and Bitcoin (P2P informational value transactions). On these networks, the load of work is distributed among the (voluntarily) participating nodes, who are equally privileged in the application by design.
“What we get is a world where anything which can be digitized and sent down a wire will be auctioned off in real-time in cash-settled markets. Stuff like capital we’ve seen, but lots of other things, which are not immediately intuitive. Machine instructions — teleoperated or not. Software of all kinds including entertainment and art. Bandwidth; I talk about a router saving enough micromoney out of switching income to buy a copy of itself.”
― RAH
Independently of its scale, the topological structure of a peer-to-peer network can be compared to the social -and geodesic- structure of a tribe, whereas centralized topologies are proportionate to hierarchies. On average, there is still an enormous amount of hardware and software positioned between any 2 given nodes on a peer-to-peer network, that needs to be relied (read: trusted) on, for them to communicate. Nevertheless, the information is once again being routed from Alice -in the straightest possible line- to Bob, without the specific need for a TTP.
“I joke about VISA being replaced someday by an innumerable swarm of very small underwriting ‘bots’ whose job it is to form an ad hoc syndicate which buys the personal digital bearer bond issue you floated for today’s lunch. In a geodesic market, the one-to-many relationships of hierarchical book-entry-settled industrial finance, like checks and credit cards, becomes to the many-to-one relationship of the geodesic digital-bearer-settled cash and the personal bond syndicate.”
― RAH
This may have sounded implausible to many, in 1998, but when we look at Bitcoin, smart contracts, and the amount of resources invested into these types of technologies today, it may suddenly seem doable, peer-to-peer, in the foreseeable future.
5. Conclusion
The ability to increasingly switch exponentially more information, more geodesically, contributes to changing societies and markets. Hierarchies normally control their monopolies through the aggregation of centralized information silos, whereas the transistor seems to be breaking existing information silos into smaller and smaller bits, causing more, increasingly smaller, geodesic, automated, intermediaries; micro-intermediation.
On peer-to-peer networks, intermediaries will eventually be introduced to provide services that the protocol itself can’t render, or can, albeit less cost or risk efficient. For this value, users might be willing to pay. Hence, intermediaries won’t disappear, and so, neither will hierarchies.
We believe this to be worth a deeper investigation, to research how these findings could impact existing network topologies and power mechanisms, and how we should design and develop more secure peer-to-peer communication protocols. Initially, new systems barely ever outperform existing, optimized, (legacy) systems. Nonetheless, as time passes, the costs for operating these protocols should lower, while the risks to the end user, for invoking a TTP, stay relatively stable. Eventually, it seems that this could lead to users adopting the more secure option: the more geodesic one.
References
[1] RAH’s twitter bio
[2] RAH quotes
[3] History of agriculture
[4] Global spread of the printing press
[5] How Moore’s Law keeps defying expectations
[6] What is Moore’s Law?
[7] Gordon Moore’s journey
[8] Travelling salesman problem
[9] Trusted third parties are security holes
[10] Buckminster Fuller quote
[11] Peer-to-peer on Wikipedia
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Copyright © 2016 — Tim Pastoor
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