On the Social Contract of Tezos
— But do you know what a nation means? says John Wyse.
— Yes, says Bloom.
— What is it? says John Wyse.
— A nation? says Bloom. A nation is the same people living in the same place.”
~James Joyce, Ulysses
A Social Contract for a Self-Amending Ledger
Typically when speaking of social contracts, we invoke three concepts: a subject seeking refuge, an agreed form of rule, and a medium between those forces. The subject was originally covered at length in Thomas Hobbes’ Leviathan, in which humans (in order to escape a dangerous state of nature), will relinquish power to a form of government for safety.
For example, on a micro scale, let’s use the example of being in a store waiting on line to check out. This could be generalized, as stores typically follow the same social contract: the subject wishing to purchase something, the agreed form of rule being the institution that provides a particular good, and the medium being the line itself. It’s how we implicitly know to form a line although we may not be the first to check out (as humans are typically self-interested). On a macro scale, it's the way in which we view fiat money — the subjects of a nation agree upon a government’s rule which is then enforced by fiat.
This article has largely been inspired by Hasu’s Unpacking Bitcoin’s Social Contract in which he explains how Bitcoin’s social contract is comprised of enforcing censorship resistance, confiscation resistance, inflation resistance, and counterfeit resistance. What makes the social contract of a blockchain strong is that it's enforced on two layers: the protocol layer and the social layer. If the protocol is ever amiss, the social layer guides it back to adhere to the original aspects of its social contract. This enforcement can be seen in action with Bitcoin’s recent inflation bug: something amiss on the protocol level was corrected by the social level.
Imagine a non-censorship-resistant Bitcoin. Is that still Bitcoin? Why is it not? Because it doesn’t defend the social contract that is enforced naturally on the social layer.
For a more tangible way of thinking about it, forking may modify the protocol layer, but cannot simply modify the social layer which is why Bitcoin has retained the qualities of its social contract. Value is derived from the social layer while the protocol layer simply keeps the system moving — automation of the social contract is achieved when “the two layers are synchronized.”
In the case of Tezos and blockchains, we have users of the system, those in power (be it the validators, nodes, miners), and the axioms by which we operate to keep the chain working. These systems, although “leaderless” in some cases, still have their own forms of social contracts to keep them running. Tezos seeks to adopt the best qualities of other blockchains, be it characteristics of Bitcoin’s social contract and technology, while creating general forces of its own by which users adhere to.
The Formation of the Social Contract
In August 2014, a paper titled Tezos: A Self-Amending Crypto-Ledger surfaced on the internet, penned by an “L. M. Goodman.” For those who aren’t familiar with the name, it’s actually a play on the name of a Newsweek author, Leah McGrath Goodman, who released an article claiming that Dorian Nakamoto, a California physicist was in-fact Satoshi Nakamoto. As for “Tezos,” apparently that was from the founder wishing to find an available domain for an English name.
One could also associate the Esperanto “tezo” to the name, which translates to “thesis” in English, similar to how the Esperanto “monero,” released just a few months prior to the position paper translates to “money.” — but that’s just my take.
The core of the social contract was embedded right in the abstract: Tezos exists to both be a dominant blockchain, and absorb and evolve based on the best innovative characteristics of other blockchains and cryptocurrencies. Included with this was the means of doing so, as Tezos (will have) a well-defined amendment process in order to upgrade the protocol. This would then go on to define the thinking around Tezos protocol changes, as well as its coordination processes.
Related to this was the way in which forking would be treated in the protocol. The paper outlined the fact that forks lack validity “unless they are endogenous,” which creates a difficult moat to cross. Other sections in the positioning paper were notes on smart contracts, the usage of OCaml for correctness, and an emphasis on the usage of some form of proof of stake for the protocol. These would all follow Tezos in its mainnet implementation by existing as the protocol’s cornerstones.
One key philosophy followed by the position paper is that of Peter Suber’s Nomic — a game in which the mechanisms outlined in the initial ruleset can be changed by simply playing the game itself. Out of the 29 rules outlined in the initial ruleset, some seem to have carried over into the protocol’s deployment such as the writing of rule changes before adoption [106] (the voting process), player voting [207] (bakers), the adoption of a rule as soon as the vote concludes [205] (automatic upgrades), and one of the most important ones:
109. Rule-changes that transmute immutable rules into mutable rules may be adopted if and only if the vote is unanimous among the eligible voters. Transmutation shall not be implied, but must be stated explicitly in a proposal to take effect.
In the case of Nomic, the game starts with “immutable rules” and “mutable rules.” Related to the social contract of Tezos, no “immutable” aspect of it will likely change without the unanimous consent of those playing the game.
Onto the social history—
In 2015 Dynamic Ledger Solutions was created, 2016 saw the publishing of the initial source code, and 2017 featured the launch of the alphanet. In April 2017, Tezos Stiftung was chartered and the fundraiser occurred just three months later in July.
The fundraiser plays a role in the social contract as it was the way in which the asset (XTZ) was initially distributed. It ran from July 1st-July 13th, raised 65,681 BTC (~$775M in today’s value) and 361,122 ETH (~$110M in today’s value), and over 30,000 wallets were to be granted assets from the sale. It not only defines the initial distribution but an acceptance of fundraising as a means of bootstrapping a network. One of the most contested debates in the space is whether or not fundraising for a protocol by an entity to bootstrap it is (A) ethical, and (B) a centralization crutch that will haunt the network for the rest of its existence. In this case, it may always serve as a point of contention within the outside community, but those participating in the ecosystem accept it as a part of the contract.
On the protocol level, the fundraiser also determined how much of the asset would be created in the genesis block for all relevant parties. Having “early backers and contractors” receive part of the genesis block will also always play a key power dynamic in the early years of the network. In total, 763,306,929.69ꜩ was created and 20% of those were locked in “vesting contracts.”
The key to understanding the social side of Tezos’ social contract comes from a study of the foundation. With a foundation comes a form of centralization risk — i.e., the decree of the formed entity should be broadcasted above all other voices as it is the voice of the creator. The purpose of the foundation is to inject the funding from the fundraiser into the ecosystem to support the growth and development of Tezos, therefore, it’s safe to assume that the way in which grants are issued by Tezos Stiftung will greatly influence the future of Tezos. Users and developers will always be the main gas fueling the ecosystem.
That’s not to say that it’s a bad thing, as its protocol direction was clearly outlined from the position paper, and evolution is only expedited by the efficient funding of resources. In this scenario, we can move fast, break things, fix things, and deploy things with plenty of safeguards. No network is decentralized from day one — it’s through development, resources, and direction that a network can achieve its full potential. It’s also important to note that the foundation rejected the retention of its veto power over protocol amendments for a year in June 2018 in order to continue to step back from the network’s processes.
As the foundation continues to deplete its resources by funding teams in the ecosystem, its relevance will dwindle, leaving the network to unanimously decide that it is to fade over a long enough time horizon (a nod to rule 109).
The closing of the formation of the social contract came as an addition to the fundraising mechanism: the KYC process for redemption. Almost a year after the fundraiser, as the network was closing in on its launch, the Tezos Foundation announced that individuals that participated must go through a KYC/AML process in order to access their assets. This, of course, was seen as a threat to the community, and to this day there are still some assets left unclaimed. At the moment, only 84% of total allocations has been activated (515,069,021.303ꜩ).
In summary, the formation of the social contract of Tezos involves adherence to the designs outlined in the positioning paper, the philosophy of Nomic, the foundation as an entity (with their given positions), and the sale and distribution of the asset.
The Solidification of the Social Contract
Now that the framework by which Tezos operates has been established, the ecosystem was sure to grow based on those core principals. The period after the mainnet launch of Tezos in September 2018, just a few months after the betanet launch, saw the growth of the development community, companies building on Tezos, wallets, infrastructure, social channels for deliberation, and the completion of the protocol’s first major upgrade: Athens.
Development shops and projects catered to advancing the mission of Tezos quickly began receiving funding from the foundation. Direct development support came from the likes of Obsidian Systems, Nomadic Labs, Tocqueville Group, Cryptonomic, and others. Wallets like TezBox and Tezori, explorers like Tzscan, and content and research from Cryptium Labs have all been influenced in some way or another by the foundation. That’s not to say that the foundation has been the centerpiece for all of the current initiatives — a few projects and teams building using Tezos have surfaced without their direct support such as Kalhatti and Viaz. Staking as a service providers such as Staked, Battlestar Capital, and Coinbase have also been typically including Tezos as a part of their offerings.
In terms of development, Tezos was written in OCaml, with Michelson being the domain-specific language for smart contracts. However, to increase adoption, many organizations focused on building Tezos have released initiatives to support a wider developer base such as Toqueville Group’s SmartPy (Python syntax), Ligo, and Cryptonomic’s Conseil/ConseilJS. All of the tools were developed for the sole purpose of onboarding more developers while not changing the original architecture of the protocol.
Social channels for deliberation on both the protocol and upgrades have been fostering a growing community. Although not defined as the original points for contact, Twitter, Telegram, Reddit, and Riot have all become the de facto locations for communications with support from Tezos Commons.
What really defined the solidification of the social contract of Tezos was the way in which its first protocol upgrade occurred (which was broken down quite eloquently in a post by Jacob Arluck in which he covers the proposal, exploration, testing and promotion period in detail). That voting process and Tezos’ ability to evolve was put to the test for the first time when Nomadic Labs announced Athens — the first injected amendment. The version that passed the initial proposal period was Athens A, which called to reduce the roll size to 8,000ꜩ and increase the gas limit.
One note on the choice of amendment title comes from Nomadic Lab’s desire to use city names for amendments in order to “provide a wide set to choose from for each letter” — this, of course, is included to some degree in the outline.
The importance of this initial vote was not only the fact that the protocol was to evolve by means of a well-defined amendment process, but also involve a voting body of bakers for updates not only to transactions, but further remove barriers to entry for individuals participating in proof of stake — all of which are a part of the base social contract of Tezos. Tezos’ future will continue to be determined by its stakeholders. After much deliberation across the mentioned social channels, signaling experiments from Kialo and TezVote, and excellent turnout metrics, Athens A passed, demonstrating Tezos to be functioning as outlined.
While we look at Tezos functioning by means of the original ideas outlined in the proposal paper and Nomic, we can also question the Tezos Foundation’s role in the vote. After the announcement of Athens, the foundation released a post on the subject detailing their excitement, and their abstention from the proposal period vote. The importance of them pulling back in this process comes from the fact that they don’t influence what proposals make it to the second stage of voting based on their existing power as bakers. This is a signal to their commitment to gradually let the community be the true driving force of the protocol.
We now can continue to solidify the social contract by adding an additional layer built from organizations, tools, initial social channels, and a completed governance process.
The Future of Tezos
To shape the future of the protocol, there are a few emerging signs to follow such as the announcement of the second vote, Agora, tokenization, and the Dune fork. Nomadic labs is working on an improvement to the Tezos consensus algorithm by increasing efficiency through strengthening block timing and limiting the impact endorsements have on block fitness. This is happening while Cryptium labs is busy working on simplifying smart contracts, the delegation process, and quorum caps. It seems as though Tezos is moving in line with its inherent values and being developed as intended by the original design set out in the proposal paper.
Although other incumbents may continue to appear in the vastly growing pool of smart contracting chains, Tezos seems to be sure of its footing and how it is to evolve amid strong contenders and the dominating force of Ethereum. As Tezos continues to evolve, it maintains its original DNA in a sense with its social contract. With the community and protocol operating in-step with one another, its strength only multiplies in the face of competition.
After a year of the protocol being live — so far so good.
This article was inspired by Hasu’s Unpacking Bitcoin’s Social Contract
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Nothing in this article should be taken as legal or investment advice.
