A design for decentralized organisations: part 4

In part 3, I introduced the pivotal role that self-sovereignty plays in permitting performant decentralization at scale, and noted how central bureaucratic governance typically suffers enormous (even crippling) inefficiencies due to a lack of respect for sovereignty across each production process. I also noted some self-sovereign aspects of how Bitcoin achieves performance at scale. In this part, I extend this comparison with Bitcoin significantly, devoting considerable effort to establishing the rigour of the comparison, in order to make a case for the fundamentals of decentralized organisations.

Principle 4: obtain consensus only about the fundamentals

This series makes the claim that the fundamental attributes of a decentralized organisation are the same as those of Bitcoin mining; for convenience I’ll term these “energy” per unit time (work) and “form” (how processes are structured, and hence how work is determined).* These are abstract properties, so I’ll introduce them in the context of Bitcoin before extending them to the domain of decentralized organisations.

In Bitcoin mining, “energy” input includes both electricity consumed, and sunk costs in mining equipment. Bitcoin mining “governs” or controls energy input by accurately valuing (and paying for) work done, via its difficulty setting and block rewards. Specifically, at any given point, Bitcoin determines a very narrow target with the limits (a) not using enough energy and (b) not using it efficiently enough. A miner will need to hit this target in order to stay in business. Outside of this sweet spot, mining either uses an unprofitably large amount of energy (eventually putting the miner out of business), or it fails to meet the network’s difficulty target (block hash invalid). The key control on the system is the inherent unpredictability of SHA256, which ensures that, all things being equal, no-one is capable of working harder or more cheaply for a given reward. The result is that “energy” is controlled so well that, as far as I am aware, Bitcoin is the only known perfect market.

In Bitcoin mining, the above controls on miner “energy” is the relevant “form” here. There are, of course, many properties of each block that are verified by the network. However, most of these properties are not determined by coordination, and so they are not strictly part of consensus. Rather, they are determined by each individual node, enforcing its rules of script in a self-sovereign manner — which is the greater part of how Bitcoin scales. There are very many checks: each block is checked for its syntactic correctness, its Merkle tree hash being correct, its hash being a low enough numerical value to meet the difficulty target and lower than any other candidate blocks received and not found later than another low enough block hash, and so forth. The result defines “truthful” or legitimate blocks, so that, combined with equally self-sovereign validation at the level of transactions, only truthful data makes it into the blockchain. The key control on “form” here is that each node on the network verifies data identically (or forks) and relays this information to its peers, such that if a majority of nodes determine that a particular block solution is, for them, the next block in the blockchain, then the entire network comes to agreement quickly. Yet the actual data input to the coordination problem — that is, the data employed for the reaching of agreement between nodes — is essentially just time of block solution, as mentioned above. The simplicity of having only to agree on one factor is how consensus at massive scale becomes workable.

Why this applies to decentralized organisations

Now it appears to me that a rigorous analogy may be constructed from the “fundamentals” secured by Bitcoin mining in order to identify the fundamentals of a decentralized organisation. Analogies are not usually rigorous: if I were to say, for example, that “Binance DEX is a centralized dinosaur,” this would be termed, in the philosophical literature, an “analogy of proper proportionality,” but the statement lacks rigour, because no argument is given specifying which attribute Binance DEX shares with dinosaurs. The analogy could be made rigorous, perhaps, by substantiating the claim that dinosaurs relate to mammals that survived the great extinction in the same manner that Binance DEX relates to actually-decentralized exchanges in terms of their capacity to survive hacks, fraud, law enforcement action, insider trading and manipulation of the order book, which so far have claimed the majority of centralized crypto exchanges. Hence, the common attribute that would establish the analogy rigorously between dinosaurs and Binance DEX is vulnerability in adverse environments.

The task, therefore, is to identify in what respects an analogy holds between Bitcoin’s “fundamentals” as identified above, and those of decentralized organisations.

The fundamentals of a decentralized organisation

“Energy”

Labour requires the expenditure of a scarce commodity and is thus amenable to being directed toward a given purpose via rewards of one kind or another. Outside of projects whose members function in economic superabundance, or projects whose work is so simple that it can be done by casual volunteers, in general it is true that any task that is difficult, or requires exclusive focus, or an intimate understanding of a project’s internal workings, needs to be remunerated in order for people to be able to do sustained work. In the context relevant to this article — that of coordinating action to reach consensus about a given matter — the relevant human labour is:

1. Voting in order to exert political influence. This form of labour is not especially time-scarce, but the political power exerted in a vote is highly scarce: in the system sketched in part 2 of this series, only one vote is permissible per person.
2. Committing capital in a prediction market in order to determine the truth of a matter one has a stake in. The relevant scarcity here is both economic and epistemic: one must take care to learn the truth and commit money to one’s opinion.
3. Risking the stake one has in the Blocknet’s success on the correctness of some team’s decision. The labour here is embodied in one’s economic or political stake in the Blocknet, to the extent to which it is affected by the decision.
4. If one is in a team, the task of evaluating the matter at hand. This is traditional labour.
5. The work of communication required for (1), (2), (3)), and (4).
6. The embodied labour required to build the voting platform, the prediction market, and the Discord server people communicate on, and team members’ education and experience that gave them their skillsets.

As can be seen, in every case, energy input — in the form of human labour — is essentially scarce, and can thus be directed to a “target” via means analogous to Bitcoin’s block reward and difficulty setting.

The rigour of the analogy

The analogy for “energy” holds as follows. “Energy” in Bitcoin mining is what is employed for the purpose of reaching consensus about blocks; “energy,” defined here as human labour, is employed for the purpose of reaching consensus about a decision or about the truth of something. As such, not only are both forms of “energy” intrinsically scarce, but they are both used for the purposes of determining consensus in their respective contexts. Hence, they are analogous in two respects: in scarcity and in application. Moreover, both function as a latent potentiality, present and ready for deployment, and passive to the governance process, that is, to the “form” that directs “energy.” (This latter point is not only a further point of analogy; it also provides inductive confirmation of the energy:form* relationship being employed in this post, by conforming to the Aristotelian relationship between matter and form. Matter/energy require form in order to be actualised, the latter “informing” matter, which, in itself, is mere potentiality.)

“Form”

As with Bitcoin, decentralized organisations have very many “network rules” guiding what things need to be done, and how. Indeed, most conversations about a given decision tend to be about resolving differences of perspective in order to avoid a social “fork” between different groups in the project. There is a major difference, however, in that most rules in decentralized organisations are not formally stated, or even stated at all; moreover, there is a reason that they are not generally formalised: they are not generally enforceable, and so anyone may freely act differently without penalty (save that of facing majority disagreement in some cases). Unfortunately, this tends in typical (un-designed) cases to create an environment of more-or-less perpetual disagreement, along with unsurprising levels of social toxicity, since there is seldom a systemic need to discuss anything unless it is a point of difference about things needing to be done. The subjects of the preceding sections in this piece have proposed alternative, scalable ways of reaching finality, which I expect should significantly lessen both the toxicity and the amount of conversation required. However, this section offers something more fundamental: a distinction between what actually requires consensus, and what can be either offloaded to self-sovereign teams, or left to casual discussion. If awareness of what truly requires consensus were to become widespread in a decentralized organisation, almost all conversations would come packaged with a sense of their import, so that (a) most topics would not fundamentally matter, and (b) if a topic does not fundamentally matter, then any disagreements are not fundamentally significant. As such, I expect the knowledge that such disagreements are not an organisational threat will take the teeth out of them.

Anyway, the goal of this subsection is to establish a rigorous analogy between “form” in both Bitcoin and decentralized organisations. My thesis is that, like Bitcoin, there is only one datum that need be subject to consensus in a decentralized organization, and everything else naturally depends upon it: the determination of which labour to remunerate.

Unlike the case of “energy,” the analogy of “form” is more complex to draw. I will begin by delineating its limits and noting two disanalogies, before establishing the rigour of the analogy.

Limits upon the mechanism

The limits upon this mechanism are as discussed above: it would obtain provided there is no general state of economic or political superabundance, and provided that the core labour is not trivially easy. Within these limits, I hold that a decentralized organisation’s consensus mechanism can function like Bitcoin’s “narrow target” as discussed above, by controlling both whether workers are (a) not using enough “energy” and (b) not using it efficiently enough (e.g. it may become evident that a worker doesn’t have good enough skills for a job, or fails to deliver responsibly on project goals).

Moreover, there is some reason to believe that these limitations define a broad enough space for decentralized organisations to function stably: if the work required in an organisation was trivial, then arguably there would not be a need for the organisation, because its products or output could be provided easily by anyone. Similarly, if its workers functioned in economic or political superabundance, then the public or social good they are endeavouring to create or maintain would not require an organisation, since these people working in economic or political superabundance could provide this without recourse to the organisation’s funds. In fact, such superabundance may be seen as a superior state of affairs, since it would free workers from needing remuneration for any given activity and political power in any given scenario, enabling them to assess what is truly valuable in their world, and then to create it. What they choose to create may or may not be what the decentralized organisation set out to provide; as such, superabundance functions as a filter or adjudicator of what public goods are most worthy of creating or maintaining. Outside of superabundance, there is scarcity, thus “energy” amenable to being directed toward organisational goals, which is the domain of the mechanism being described here.

Disanalogies

There is a notable difference (disanalogy) between Bitcoin and decentralized organisations: Bitcoin is a timestamp server, while in this design, decentralized organisations are not concerned so much with determining the order of valid blocks as they are with determining which labour to remunerate in the next superblock.**

There is also a second notable difference, that of reward distribution: Bitcoin miners all compete for the next block reward and only one miner (or pool) wins it. In contrast, superblock voters together define the majority consensus on the funding proposals of any given month, and all share in the “reward” of directing the organization’s “energy”. Their reward is not monetary, it is political: by coordinating action, they discover (and determine) their collective will, thus subjecting the organization’s “energy” to governance insofar as energy-input admits of scarcity. (That is, superblocks govern “energy” in the hands of those operating in economic and political scarcity, but outside of this, the organisation may also enjoy the contributions of many volunteers, who are not subject to governance because they produce out of an abundance of free time and enthusiasm for the project).

The rigour of the analogy

Regardless of these disanalogies, concerning “form,” Bitcoin and decentralized organisations are analogous in a more fundamental way, which is independent of the difference between specifying block order and specifying labour priority, and independent of the differences in reward distribution. First, they each subject a single attribute to consensus, though these attributes are diverse:

• Bitcoin controls form by reaching consensus on order of valid blocks
• Decentralized organisations control form by reaching consensus on which labour to remunerate

Now the respects in which these diverse attributes are analogous are as follows. In Bitcoin, reaching consensus is in order to determine the next block; in the decentralized organisation sketched here, reaching consensus is in order to determine the next course of action. As such, these two uses of “energy” share the attribute of being ordered to the reaching of consensus, and so they are analogous in this respect. Furthermore, being “ordered to” is a formal attribute, which in both Bitcoin and decentralized organisations operates upon “energy” for the same purpose, because in both cases the purpose of reaching consensus is to coordinate action into an ordered process that achieves the central aims of Bitcoin and the organization respectively.

Hence, not only do decentralized organisations and Bitcoin share the same attribute in their use of “energy” — namely, its being ordered to the reaching of consensus — but they also both use consensus as the core mechanism to achieve their purposes. As such, the analogy holds both due to the (direct) function of “form” to reach consensus, and the (ultimate) function of consensus determining their respective purposes. As with the case of “energy” above, this is another “analogy of proper proportionality”: just as form in Bitcoin consensus determines the purpose of Bitcoin, so does form in a decentralized organisation determine the purpose of the organisation. Therefore, the analogy holds.

One further point on the rigour of this analogy: one of the strengths of this type of analogy is that its analogates really and independently have the attributes establishing the analogy. This is not the case with metaphor and with analogy by attribution. In these latter cases, only the principal analogate has the relevant attribute, and the other(s) are only said to possess it, without possessing the relevant attribute in the real. These latter types of analogy hold in virtue of the speaker employing a term univocally and then employing a further term connoting the previous term, so that a transfer of meaning is established from the one analogate to the other.*** For example, “the birds are singing” is an analogy of attribution that transfers the meaning of what it is for a human to sing (involving culturally-bound tonal and rhythmic sign-systems, language, occasion, etc.) onto a bird, which does not appear, in itself, to literally sing, but nonetheless may be experienced by humans as eliciting melodious sound. Here, meaning fixes to how the analogate is experienced by the listener, rather than how it is in itself. In contrast, analogies of “proper proportionality” are established on the basis of an attribute shown to be really common to both analogates, as I have shown in the analogies of “energy” and “ form” given between Bitcoin and decentralized organisations above.

Background on analogy (for the sceptical)

Many contemporary scholars in the modern vein (1630s-today) tend to be uneasy — if not actively sceptical — about the use of analogy in argumentation, and tend only to be comfortable in univocal systems of thought, especially ones determined by necessary and sufficient conditions. This aversion is not entirely unwarranted: not only are most analogies not rigorous, but few people are aware of how rigour operates in the domain of analogy. Moreover, their exposure to rigorous philosophical argumentation in defence of analogy generally lies at absolute zero, because, to my knowledge, its florescence occurred in second scholasticism, the least-known period in intellectual history, and was not passed on to the classical moderns. Prior to second scholasticism, Thomas Aquinas had an implicit (not formalised) doctrine of analogy which played a key role in his philosophical system, and which was later developed by Cajetan. Yet the thinkers best known to modernity who followed after Aquinas all abandon analogy: Scotus’s system relies upon univocity of being, not analogy; Ockham emphasises individual things, and is nominalistic about relations; since analogies are relations, they are not taken to be real. The great (and biased) interlocutor between the Latins and the Moderns, Francisco Suarez, is a thoroughgoing nominalist and did not, in his Disputations, pass on the arguments of his contemporaries and forebears in favour of analogy (and of real relation in general). If the classical moderns had been more historically aware, they would unavoidably have encountered John Poinsot, perhaps the greatest of the Latins, who writes at great length and in quite incredible technical detail on analogy. The fact of this long-held modern ahistorical ignorance should engender, in contemporary sceptics about analogy, a degree of openness to the use and nature of analogy, if not a serious reconsideration of their positions on it. In any case, in my opinion there is little doubt of its reality, if not its pervasiveness as a natural and cultural phenomenon. Interested readers in English are encouraged to consult The Material Logic of John of St Thomas (1955); those in Latin should consult the Reiser edition of Poinsot’s Ars Logica (1930).

Why analogy is an appropriate tool for establishing the fundamentals of decentralized organisations

Thinkers more used to “proofs” in the cryptographic sense, or used to theories representing the truth of a matter as analysis into necessary and sufficient conditions or syllogistic argument, may be surprised at my use of analogy to make this case. However, its use is not merely for fun, or because I have an intellectual interest in analogy, it is because there is reason to believe that no other method can better capture the real relations of the scenario. First off, the fundamental nature of decentralized organisations is one of vagueness: rules are seldom formalised and seldom enforceable; organisations that do try to formalise almost instantly find themselves stating one ruleset while actually following another ruleset. In such a scenario, it is not obvious how an analytical method would work: delving into the intrinsic nature of a decentralized organisation to draw out its fundamentals looks to me like expecting to find that clouds in fact maintain their structure with steel beams. It’s hard to see how constructing unduly “tidy” necessary and sufficient conditions for x to be true, or a set of premises in a traditional syllogism, can succeed without first resorting to analogy with something like Bitcoin, since otherwise it would be an attempt to model a vague object using highly determinate signs. The logical links between premises and conclusion, or between conditions, would certainly be strong, but formulating (a) true premises about such a vague object, that (b) can actually lead to the desired conclusion, looks unlikely to me.

Moreover, not only does it look unlikely to me that a typical analytical approach to argument-construction would succeed, it also looks improperly suited to its object. Analytical philosophy — especially when philosophers attempt to extract arguments from literary sources — is rife with unduly “thin” exegetical work, followed by internally-rigorous models that, of course, fail to model their objects accurately. This is simply a failure to practice exegetical rigour. Now exegetical rigour overlaps with analogy: one notices a potential interpretation of a text; one constructs reasons why the interpretation maps well to the text, its context, etc.; one notes where the interpretation may diverge from what the text and context can support; one compares the interpretation to rival interpretations and notes respects in which it is superior; and so forth. This activity is primarily interpretive and synthetic, and so is the testing of an analogy: drawing up of analogies is an act of synthesis, not analysis, because one takes two ostensibly disparate things and demonstrates a relation between them. Such a synthesis depends on being able to see a situation in a particular way, rather than innumerable other ways, and thus to interpret it as having a particular nature — and then to show that the interpretation is correct. Moreover, both exegesis and the drawing up of analogies begin amidst a fundamental vagueness**** and extract determinate respects: an uninterpreted text is just information, not meaning, yet exegesis is to establish meaning; similarly, the innumerable disparate things in the world may be related in uncountable ways, but their co-presence may not signify anything in particular, until an analogy is drawn up that establishes relations between things, demonstrating specific respects in which they are related. Such interpretive synthesis is not the work of analysis, nor of learning about things by studying their intrinsic natures in isolation, but rather by comparing disparate things and interpreting creatively. Hence, analytical methods are not the proper tools for understanding vague, complex objects. And decentralized organisations, when considered as processes between states, certainly look vague. Hence, analogy is the proper tool for the identification of the fundamentals of decentralized organisations.

Summary

I have given two analogies between Bitcoin and decentralized organisations, one for their “form” and one for their “energy.”

• For both, “energy” is defined by scarcity and a passivity (or potentiality) to being employed
• Both use “form” to direct “energy” to the reaching of consensus
• Both reach consensus as the core mechanism to achieve their purpose or goals

I have further supplied arguments for why “energy” and “form” are really analogous. Finally, I have supplied background information on why analogy is the proper tool for finding the fundamentals of decentralized organisations.

If the above is satisfactory, then our final conclusion follows:

Conclusion D: if a decentralized organisation can control what it funds, then it can give “form” to the latent potential “energy” in its community; moreover only these aspects need be controlled in order for a decentralized organisation to govern itself; the rest can truly be left ungoverned by consensus; it is the simplicity of governing only what gets funded that allows a decentralized organisation to scale.

Optimisation: two derivations from conclusions A, D, and principle 3

Let’s assume that everything in the preceding four parts is implemented in a decentralized organisation; we have sybil-resistant voting, we use prediction markets to find truth, and we fund teams to sovereignly carry out certain tasks. Inevitably, part of a team’s output will be either the truth of some matter, or will set the direction of the project in some respect. Now it is obviously important for the organisation to realise this and thus to be prepared to accept the team’s output, or else it will go round in circles and be unable to reach finality. To achieve this, certain measures can optimise the situation, aside from obvious ones like the team needing to deliver work that establishes beyond serious dispute the relevant truth or the direction the organisation must take. However, the optimisations to be recommended shortly concern the structure of teams and of funding proposals. To reach them, let’s first recap briefly:

• Conclusion A: if conversation is to be used to reach consensus, no sensible design would implement consensus-reaching conversations in groups bigger than 8. Aside from spreading information or casually hanging out, it is a bad idea to discuss things in larger groups at all.
• Conclusion D: if a decentralized organisation can control what it funds, then it can give “form” to the latent potential “energy” in its community; moreover only these aspects need be controlled in order for a decentralized organisation to govern itself; the rest can truly be left ungoverned by consensus.
• Principle 3: either be transparent, or don’t make something other people’s problem.

The latter scenario — avoiding making things other people’s problem — directly concerns teams in three respects: firstly, people working within a team need not confer or communicate everything with the broader community, since they have been given a task that (a) is best done by a team smaller than 8, and (b) cannot be done without the low communication overhead of a small team. The second respect has not yet been approached, however: it is that in order for the organisation to know whether to continue to fund the team, it will need good data on the team’s performance, and this requires an efficient means of communicating to voters. The third respect is that a crowd is eminently ill-equipped to make well-informed hiring decisions with respect to individual team members, because they lack access to the intimate information inside a team about not only how people perform, but also about how well people work together. This is an obvious case where hiring and firing should not be made the voters’ problem, yet voters’ express function is to make well-informed decisions about what to fund and what not to fund. How to reconcile these two goals? I suggest an obvious answer: first make it obvious whether teams are delivering by funding them per project. This places the onus on teams to first define their goals, and then to deliver them unambiguously. Now among other things, this would require them to hire and fire responsibly in order to avoid failing. Furthermore, this directly resolves a seriously disadvantageous knock-on effect of the third respect, which is that if voters need to hire and fire but cannot typically make well-informed decisions, then workers are placed in a continually precarious position, where bad information — for example, negative sentiment, mistakes in communication, not naturally being good at PR, not doing work that have short term measurable goals, character assassinations by competitors who want your job, etc. — can haphazardly result in their losing their jobs, with no warning, no appeal process, no good feedback, no severance pay, and no notice period. This sort of disaster can be elegantly avoided if teams are made responsible for hiring and firing. Hence the final two conclusions:

Conclusion E: implementing consensus chiefly on funding-per-project permits a decentralized organization to function at scale, since work tasks may thus be carried out on a self-sovereign basis alone (where each team is modelled as a single self-sovereign actor) and actors’ quality of output easily measured. With this in place, no additional (unscalable or hard-to-implement) consensus mechanism would be required for funding individuals.

Conclusion F: provided (a) funding is per-project, and (b) project output is determinate and measurable, transparency about only project output is sufficient to govern in a decentralized manner, because voters will know what merits funding, and because nothing other than choosing what to fund is required to govern a decentralized organisation.

Conclusions E and F create an efficient and easily delineated communication requirement from teams to the broader voter base, in order that (a) voting may be conducted on the basis of unambiguous information, (b) teams may be in a position to be confident of securing continued funding and (c) not work in peril of losing a key team member, and (b) may offer their members non-precarious employment and thus make more attractive job offers.

Such is my design for decentralized organisations. It consists of self-sovereign actors proposing projects with easily-identifiable goals or outputs, these projects being funded by superblock vote, and any attendant questions of truth or collective opinion being settled through the use of sybil-resistant voting or prediction markets. One can let everything else truly slide.

**end**

This design will be submitted for discussion by the Blocknet community, and, provided it enjoys some support, shall be summarised in a funding proposal and submitted for approval by vote on the Blocknet’s network.

Endnotes:

* With this distinction, I hope to alarm both Aristotelians and physicists — the former of which may suspect a matter/form hylomorphism via the application of the latter’s doctrine of matter-energy equivalence. The heart of the matter, however, is semiosic.

** A superblock is a special type of block on a blockchain, staked once a month. Prior to this superblock, anyone may submit a funding proposal to the network, in which they specify (a) what work they propose to do, (b) the remuneration they want for doing the work, and © the address they want to receive payment on. Nodes on the network then vote on the proposals. Proposals which (a) are voted in, and (b) are not unpopular enough to be excluded by the sum of the coins required to fund all voted-in proposals exceeding the maximum number of coins per superblock, have their coins minted in the superblock.

*** For technical discussion on this point, see Poinsot, J., The Material Logic of John of St. Thomas, Simon et al (eds), University of Chicago Press, 1955: pp. 167–183.

****: ibid. p. 176.