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Part 3
I have written a 4 part series on how current governance networks can be scaled to create a single network which increases cooperation and reduces conflict. They follow in order so if you haven’t read part 1, it would flow better to start there.
Part 3 looks at an example trustless ledger protocol solution to network governance.
A trustless ledger protocol solution to network governance
Here I propose a mass co-operation network which attempts to optimise for individual freedom/autonomy while also providing a overarching structure which together will optimise for human advancement.
The structure is a form of governance which is to be used in replacement of current governance structures. The structure aims to provide solutions to replace the concept of countries and hierarchical governments. The world in which this structure functions is one in which there are no countries and no separate governments and makes use of a global governance structure and assumes the entire planet as a single nation. For ease of reference I shall name this system/structure Earth 2.0.
Governments are essentially a collection of people and organisations which collect resources from a defined group of legal entities/peers and re-distribute the resources as goods and services (herein after referred to as public goods, although it is noted that the definition of public goods limits the scope good and services to be provided, this is not the intent) aimed at generally benefiting the citizens which form the defined group. Furthermore, the government is a network which sets and administers public policy and exercises power over its peers, again aimed at generally benefiting them. In order to establish a government, we need a mechanism for the selection of persons and organizations which shall govern and we need a mechanism for collecting and allocating resources from network peers.
It is my thinking that by creating a mechanism for better control of the flow of resources from citizens to persons and organizations aimed at providing public goods, a more dynamic and accountable governance network naturally forms. Hereinafter the act of a person or organization aiming to provide or providing a public good is referred to as a project.
Capital collection and allocation
Earth 2.0 collects taxes from each peer, where all taxes are collected in a single capital pool. The taxes/capital is then allocated according to the needs of Earth 2.0 where the needs are established through voting of network peers. For ease of reference we shall refer to currency as €. Here, all taxes paid by an individual peer provide the peer with corresponding tax tokens, where 1€ = nTax tokens (for simplicity we shall say 1€ = 1tax token). The peer then votes for the implementation of a project using her tax tokens. The voting power of an individual peer is set at some minimum value by giving each peer a minimum nTax tokens, this allows persons with no € tax contributions to still exercise voting rights.
Peers can vote to support any project imaginable, for example:
· Auditing of the voting and tax allocation
· A new local swimming pool
· Development of a new defence weapon for dealing with aliens.
· Local or regional road maintenance
Peers may also vote for several projects. Each peer has a budget allocation for certain issues. Eg. 50% allocated toward local service delivery projects, 20% toward natural resource governance projects, 10% toward global issues projects etc. The significance of a vote for a project is then adjusted upward according to the amount of tax tokens the peer allocates to the project. Quadratic voting is used to adjust the significance upward, in this way peers are able allocate more tax to projects they feel more strongly about and this setup may also incentivises deeper consideration of votes.
Note: Quadratic voting is a method of voting which considers the importance the voter places on the item voted upon. This is different from Boolean voting where the voter is only able to vote for or against something. In quadratic voting the voter indicates the importance she places on the vote by allocating an amount of limited units (in this case tax tokens) to increase the number of votes. The number of votes are the square root of the number of units placed on the vote. So, 1 unit gives 1 vote, 4 units gives 2 votes, 9 unites gives 3 votes, n units gives √n votes.
Quadratic voting is used instead of a linear adjustment in proportion to capital for the following reasons:
1) peers with less tax paid may still have a significant impact.
2) peers with greater than normal tax contributions are less able to control the network.
The value of the tax tokens should not be affected by whether the token was generated as a result of a € tax contribution or as part of the minimum tax credit granted to each peer. To solve this all € paid in tax are pooled and divided amongst the total number of Tax tokens that have been allocated. If this is not done an issue may arise where large portions of zero or low tax contributing peers vote for particular projects as their free nTax tokens would not be associated with any €. This also means the value of 1 Tax token will always be < €1. To solve this mental accounting annoyance, once a project has been funded with sufficient tax tokens the total number of tax tokens received is reduced by a percentage equal to the percentage of tax tokens which are not associated with any € value. The project when funded does not receive tax tokens but receives the allocated €.
€ received by projects contain meta data which allows for association with the tax credit which granted the project the €. Peers can use this meta data to follow the flow of their tax contributions. This holds projects accountable and provides a method for auditing the governance network in real time. Given the auditing features, there needs to be some mechanism to anonymise the USDs once they have been used for the purposes of completing the project and are now circulating once again amongst the peers. As projects need to be held accountable and need to be auditable but peers need to be anonymous in their spending. For example:
Peer pays tax → tax tokens credited to account (auditable) → tax tokens/€ credited to project (auditable) → project pays peers to clean local beach (semi auditable) → peers use payment to do shopping (should not be auditable).
Negative voting
Peers should be able to use their tax tokens to down vote projects they are against. This ensures that bad projects are not funded simply because enough peers voted them in. Negative voting still allocates capital. If positive and negative voting result in a project not being realized, I propose that the unallocated capital be reallocated to the pool for distribution.
The formation of a constitution
The requirement of a constitution which all projects and peers must uphold. The constitution may need to be decided upon via some other means of voting such as 1p1v.
Proxy voting
The use of proxy voting allows for the establishment of governors which perform the function of allocating tax resources on behalf of peers. Peers may allocate the tax credits to a governor or multiple governors according to the peer’s agenda. This removes the requirement from individual peers to perform the complex task of evaluating projects and allocating capital appropriately.
Governors will need to advertise their agenda and services publicly and peers may select to allocate their votes to the governor. The governor would need to set its remuneration which all citizens will be able to view and audit. By simply removing a governor from a proxy voting allocation, each peer may control the power they give to any governor in real time. An escrow system may be established where a governor allocates her own resources to a project and only receives capital reimbursement upon completion of service delivery.
Investing tax credits
A peer may select to invest the tax tokens by allocating capital to an investment project if no suitable projects are available at the time she is required to vote. She may then receive more capital/tax tokens in the future which she may then allocate (this may become an issue in a capitalist society as advancing networks require investment in projects not necessarily the market).
Natural resources may be exploited sustainably
As there are no nations, all natural resources are owned by the Earth 2.0 network. Various companies publicly tender for the rights to exploit natural resources, companies who win the tenders will most likely be companies which offer the largest percentage of profits to the Earth 2.0 pool. This arbitrates out much of the value that would normally accrue to select individuals each time a natural resource is exploited in Earth 1.0. Because the benefits of exploiting a natural resource are socialized throughout the planet, the benefit an individual will gain will be negligible. Thus, a natural resource will only be exploited if it is sensible to do so.
Global issues may be appropriately budgeted for
The costs of an issue such as global warming are socialized. Therefore, in Earth 1.0 when an individual country pays for R&D toward renewable energy they are subsidizing other countries which are not investing in R&D as all countries will benefit. In this way the incentive to solve global issues are diminished and the free-rider effect is in place. However, in Earth 2.0 each individual may vote for funds to be allocated to a global issue. If a percentage of the budget is allocated toward global issues, it is simply a case of which issue take priority over another. In Earth 2.0 everyone pays for the solving of global issues, no one over pays, and no one is a free rider.
Wealth inequality between nations
If nations are replaced by a single network and a percentage of each peer’s tax credit expenditure is allocated toward global issues or toward projects being run outside of a certain location radius of the peer with the tax credit. There will exist a flow of capital down the gradient from the wealthy regions where tax contributions will be substantial to developing regions where tax contributions will be minimal.
Technology required for an Earth 2.0 network
The technology underpinning the network will rely heavily on distributed ledger protocols. These protocols are able to establish consensus on the state of the network without there being any centralized entity in control of the ledger. Any other system for recording of the network state would place all the power of the network in the authority confirming the state.
Distributed ledger technology already has virtually all the features required for the implementation of the Earth 2.0 network described. Below some of the integral features of the network are highlighted:
- Immutable personal unique identity: Required for identification of the individual peer within the network as an individual human is not able to be recognised by a digital network.
- Smart contracts: provision of if/then functions which allow for procedures and protocols to be put in place and executed upon. Eg. If project ‘clean beach’ is funded with requiered tax tokens then €X will be placed in escrow, following this if the beach is recognised as being clean by n nearby peers within a period of time then €X will be released from escrow.
E.g If peer Alice invokes that peer Bob has violated the terms of a contract then 10 peers and an investigator will be selected to examine the contract evidence placed on the network and investigate the violation of the terms. If it is found that Bob violated the terms of the contract then a third party will be invoked for execution of punishment. Appropriate amounts are paid by Earth 2.0 pool to fund the operation.
- Voting mechanisms: This and others form part of the general smart contracts feature. Delegated proof of stake systems provide an example of allocation of resources for distributed governance of a network.
- Currency: Everyone knows examples of distributed ledger currencies.
The story probably has more holes in it than a sponge but is a starting point for thought and new ideas. Please share your constructive opinions below. And continue to the next article in the series :)
References
Brilliant works whose ideas gave rise to the ideas presented in the article.
- I have been influenced by the vision of Daniel Larimer to create solutions for ‘securing life, liberty and property for all’. The book ‘Sapiens: A Brief History of Humankind’ by Yuval Noah Harari highlighted the importance of mass co-operation networks in the advancement of humans. Many of Larimer’s posts can be found here: http://bytemaster.github.io/all/
- A 4 part series by Matthew Pirkowski entitled ‘Crypto Beyond Capitalism’ helped me to understand how governance optimised for either autonomy or greater structure. https://hackernoon.com/crypto-beyond-capitalism-the-rise-of-distributed-valerism-7e3c1285a308
- A paper by Vitalik Buterin, Zoë Hitzig and E. Glen Weyl entitled ‘Liberal Radicalism: Formal Rules for a Society Neutral Among Communities’ formed a large piece of the puzzle as it shows how quadratic voting can be used for the provision of public goods and the formation of non-authoritarian rules that support collective self-organization of an ecosystem.
- The Ontology whitepaper provided an excellent example of how blockchain technology can be used to aid in the governing of many aspects of life currently governed by traditional governance systems.
