Recently Noted — the future of bitcoin and blockchain technologies
The Future of Bitcoin and Blockchain Technologies
A recent article in Medium, EOS.IO and the Evolution of Free, Open-Source Public Blockchain Governance by Sam Sapoznick4 raises many interesting points about the current state of affairs underlying the speculative bubbles that are the current world of blockchain based currencies, including Bitcoin, Ethereum, and 42 others.5
Sapoznick summarizes the situation aptly: “Both succeed at securing substantial amounts of speculative value on public blockchains, but neither are positioned for broad commercial adoption, nor for enabling a fairer distribution of justice and wealth at local, national, or global scales.”
EOS.IO is a new open-source blockchain platform that claims to solve the high transaction costs of its elders. It also is offered as a development platform for products and services that can leverage the key features of blockchain technology, identity, transparency, and transactional permanence. Its builders at eos.io describe this platform, touting its transaction speed, transparency, and flexibility, using words like, disrupt the disrupters, enabling individual freedom, corruption free, hack proof, and so on.
Sapoznick focuses on the issues of governance because earlier blockchain technologies have ad hoc unprincipled governance processes to resolve conflicts among users.
“BTC, ETH, and other ungoverned blockchains do implement minimal governance through community-based ad-hoc consensus. This approach can work in informal situations (clans, small towns, small companies,) but at larger scales communities require formal governance structures. Most ungoverned blockchains overlook this basic scaling law of human social organization. They cannot balance or moderate raw market forces. Their most valuable resource (the ability to make transactions) is completely dominated by the highest bidders, and their potential for broader business and community uses is thereby lost.”
If one imagines a world where there are no rules governing currency and its exchange you can easily see how the exchange would quickly grind to a halt amidst fraud, deception, and simple thievery.
The EOS.IO approach is defined in part as follows:
The EOS.IO software enables blockchains to establish a peer-to-peer terms of service agreement or a binding contract among those users who sign it, referred to as a “constitution”. The content of this constitution defines obligations among the users which cannot be entirely enforced by code and facilitates dispute resolution by establishing jurisdiction and choice of law along with other mutually accepted rules. Every transaction broadcast on the network must incorporate the hash of the constitution as part of the signature and thereby explicitly binds the signer to the contract. 6
This smells very much like the terms of service agreement structures that pop up on our devices every time we upgrade a software package or take on a new financial or other service via the web. And it throws us back to the existing legal system for enforcing contracts or settling conflicts and disputes.
This brings us to a fundamental problem for cryptocurrencies and blockchain technologies. They are embedded within the capitalist system. As such all of the talk about individual freedom and fulfillment that characterizes the claims for these technologies must face up to the actual operating characteristics and structures that control our world. Lets take a look at a couple issues that surface from this perspective.
Calling on the work of Nobel prize winning economist Elinor Ostrum Sapoznick points to some external sources of failure for these new technologies as:
“Government regulatory interference: laws and regulations which damage or erode economic self-sufficiency and self-governance efforts.
Government coercion/manipulation: Direct meddling by governments in specific instances, e.g. “tipping the balance” to unfairly favor Party A over Party B in a conflict or ongoing economic arrangement.”
In the world we live in government is largely captured by the rich and corporations, particularly so in the US, UK, China and others. Government acts as an arm of these interests. So, there is every reason to believe that the rich and corporations will use government to “regulate” cryptocurrencies and blockchain technologies to their ends. Just as the existing financial systems with their fiat currencies that cryptocurrency enthusiasts always mention with distain are extracting wealth from every transaction and controlling the decisions of where and for what capital is invested, so will the new technologies. These crypto-technologies will not rearrange the ownership of the world’s wealth and income by a few thousand wealthy individuals and corporations. These forces have been extremely successful in waging class warfare over the past five decades. The same methods will be applied to control and exploit the new crypto-technologies.
Sapoznick also suggests in his “Moving Ahead….” closing:
Conceive architectures, economies, and governance structures that, when taken as a simple whole within their larger global contexts, provide a reliable net benefit to uninterested outsiders. (Avoid externalizing effort, costs, and social impacts onto existing governments.) “Reliable net benefit” doesn’t have to mean “revenue stream.” Just persisting as a functioning example of trustworthy, efficient commerce and fairer self-governance amid societies struggling to meet those ideals can be seen as a net benefit.
Here we need to recognize that the “larger global contexts” include the operating principles of capitalism. A key strategy embedded in every capitalist enterprise is the externalization of costs, getting someone else to pay for part of the actual cost of your enterprise. We see this every day in the pollution, worker injuries, useless or harmful products, destruction of the commons and the earth itself caused by capitalist enterprises. Externalization of costs is not an optional strategy. It is required of every enterprise because if one of your competitors has lower costs and higher profits because they are externalizing costs you must or go out of business. At the level of the capitalist enterprise being trustworthy and fair is strictly marketing brand talk.
We do not need to go very far to see these issues already played out before our eyes and within our personal experiences. The internet, launched with a similar fervor for individual freedom and personal growth, has already been completely swamped by its global context. Facebook and Google, just to name the two most prominent internet-based companies, are in a race to capture our attention for advertisers. One could view the entire smartphone industry as just another element in this race to monetization. This has become their raison d’être. Big banks and financial institutions are already rushing to mobilize their own crypto-technologies. Why should we think that they will not prove as successful in turning these to their own ends?
Originally published at American Delusions.