Theories on Incentives, Scaling & An Evolved Economy Pt. 1

After meeting lots of great people and learning more about interesting free and open source (FOSS) software projects at LibrePlanet last year, I had the pleasure of attending and speaking at the conference again this year. The Free Software Foundation has been hosting these events since 2009 where foundation members (and non-members) gather to discuss technology, legal concepts and the general philosophies relating to free and open source software (and hardware). It was also my second opportunity to see Edward Snowden give a remote keynote which in both cases clearly fill the room with excitement and renewed energy to defeat the insecurities and threats towards human rights brought on by mass surveillance and censorship.

Last year at the conference, I gave an overview of the SAFE Network and hosted a booth in anticipation of introducing people to the network while this year, I focused on the economics, incentives and distribution specifically regarding free software and digital content. I’ll expand on the thoughts presented there in a short series of blog posts here. In particular, economies of scale play a significant role in how our businesses and organisations have evolved to serve a global society. This centralisation of resources has enabled significant scaling properties which allows for conserving input cost while maintaining output growth. While this blog has featured many thoughts regarding the interesting economical aspects of building a new Internet from the infrastructure-based incentives to the inherent difference in consumption of physical products to digital products, there is more to explore in those thoughts if we want to consider and implement the best solutions. Explaining these concepts to free software enthusiasts was an invigorating experience for me and I hope that MaidSafe can continue to be an positive influence on this topic in this community. Sometimes it’s very difficult to see a future where money and value exchange systems work for the people instead of becoming monopolised and serving the special interests of those in power but by taking a step back, we can begin to see how current incentives promote centralisation and what new ways we can understand the nature of human economics and our perceptions on property and ownership to build tools for an evolved system.

Rai Stones & the Dynamics of Accountability and Distance

The Internet and monetary systems have very similar histories in terms of tendency towards centralisation in their reach for globalisation. If you weren’t aware already, the insecure and controlling effects of the server-based Internet are the main factors for the SAFE network’s design and development. However, understanding the history of economies throughout various cultures and their diverse solutions to issues around the transfer of property, ownership of services and general value management in addition to their common incentive characteristics are also key factors in building this evolved Internet particularly when it comes to scaling. In small communities and tribes where individuals have established relationships with everyone they interact with, it is relatively simple to sustain an economy and the trade of property and maintenance of common services. On the Island of Yak, for example, the inhabitants famously used Rai stones (massive, stationary representations of value used as a local currency) where members of the community simply kept track of their ownership when exchanges happened. This sort of system can work well within a small scale such that remembering ownership is not a problem, but as soon as this community is expanded past ability for individuals to keep track of exchanges, the Rai system will inevitably fall apart or centralise such that the responsibility becomes more efficiently handled by trusted third parties. Alternatively, the widespread adoption of gold and silver coins can be attributed to its ability to scale further. Instead of remembering ownership of immovable rocks, individuals can physically trade more granular representations of value and that value is more easily kept private. However, you can imagine that this anonymity feature in gold brings along problems of counterfeiting especially as the distance of trade grows and trust between the parties in an exchange is lost. So even with increased scaling characteristics in physically traded tokens, establishment of community banks around ownership, security and purity of gold would eventually inserted themselves as efficient third-party solutions.

The Downward Spiral in the Nature of Scaling

Now this per community centralisation is perhaps not the worst form to take, especially if members of the community are able to hold this third-party accountable and prevent those running the services from becoming self interested. With any service meant for community consumption such as policing and public security where individuals are granted special responsibilities involving trust, we see a breakdown in the system if it is not kept 100% accountable. This accountability requires active community participation itself and itself has a stability threshold. If a community bank is depended on by too many people, the responsibilities of those managing the bank start to become more abstract as the relationships with their members is spread out and ultimately lost. It is not to say that a community bank managed by a group of well intentioned and well organised individuals cannot sustain itself to scale, but this is not the norm and we should not assume this can be standard. Any altruist, scalable bank must take on additional responsibility of preventing malevolent actors from infiltrating as those who crave power for power’s sake typically have more incentive to obtain those positions of control.

This problem is in fact quite similar to the centralisation of the Internet in many ways and we can see this tendency towards third-party responsibility with solutions for security, identity, storage and many other services. The quick rate of change in the Internet’s evolution (mostly due to it’s historically open and free nature) allows ideas, experiments and development to iterate quickly and find better solutions. On the other hand, we are just now seeing some substantial research and testing for better global economic solutions (mostly due to it’s historically closed and controlled nature) such as cryptocurrencies which in large part is driven by the open and free nature of the Internet

These parallels between systems in how they scale within human society is not to be overlooked. In fact, if you were to explore systems based on other biological organisms in nature, you might find similar thresholds and patterns in scaling. Nature is rarely ever successful at widespread scaling, but in some systems, there are interesting properties with resilience and long-term efficiencies which may also develop in human-based networks and technologies. As you may know, Argentine ants have an interesting scaling that the SAFE network is in part inspired by in our mission for a sustainable, resilient, decentralized Internet. However, there are further considerations related to properly scaling the Internet which I will explore in the next part of this series. The ownership of property and how it compares to intellectual property is a key element especially as we dive deeper towards the relevance to free software and digital content.