Future Cryptoeconomics - about the future of decentralisation.

56 Pages·2018·26.038 MB·English

by  Matthias Tarasiewicz, Andreas Antonopoulos, Jaya Klara Brekke, Josh Stark, Shintaro Miyazaki, Vitalik Buterin, Ozan Polat, Benedikt Schuppli

FUTURE
CRYPTOECONOMICS
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Future Cryptoeconomics is a quarterly publication that examines
the global cryptoeconomic condition and its effects on culture
and society.
We live in times of zero trust, a term stemming from a topic of computer science”. Vitalik Buterin talks about
computer security research, which is applied to all experiments in token sales and points to the fact that
sectors and businesses. Most prominently zero trust is the “ICO space is cooling down a bit”, demonstrating
used in cryptoeconomic systems such as Bitcoin and that the initial inflationary use of the term cryptoeco-
other blockchain-based technologies - describing the nomics is beginning to mature into a more informed
practice to “never trust, always verify”. culture of cryptoeconomic experimentation. Since the
But what is cryptoeconomics exactly, and what are interview with Buterin and Stark took place in 2017 at
we talking about when we are talking about “Future devcon3 in Cancún, we can see how a lot of the “Crypto
Cryptoeconomics”? We are facing a discipline which Winter” of 2018 was already foreseen.
is not formally defined yet. It reminds us of the early Simon de la Rouviere described how cryptoeco-
developments of game theory, an area of study that nomics are “giving rise to the computing commons”,
at the beginning was very narrowly defined, but then and these effects have still not reached all sectors yet.
grew to be an interdisciplinary field that included Shintaro Miyazaki from the Critical Media Lab of the
the social sciences, political sciences, and many other Institute of Experimental Design and Media Cultures
disciplines. In order to discuss the future developments in Basel conceptualised “models as cultural techniques,
of world computers, immutable code and cryptocur- agential media and designed systems, which catalyse
rency, we must broaden our viewpoints and make sure fruitful discussions on serious matters of our commons”.
to understand the full scope of possibilities of true His text in this issue offers a historic overview of the
decentralisation. “Forking institutions” might be a commons, and calls for design work and aesthetic
starting point, but we have to be aware that this possibly experimentation with diffractive modelling.
also means a “constant destruction and recreation of Cryptoeconomics has its roots in the cypherpunk
institutions and experimental cultures”, to make space movement as well as in cryptoanarchy. Jan Hubik
for invention and new disruptions. from Paralelni Polis talks about the background of
Cryptoeconomics and the first blockchain were the organisation and about how parallel societies are
introduced through Satoshi Nakamoto’s self-published reinventing these ideals and transporting them into
white paper in 2008. This event changed the life course the 21st century. After all, these future utopias of the
of many, including Andreas Antonopolous who told past are the status quo of today for some organisations,
us in his interview that he “dropped everything” to which act decentralised, as well as localised at the same
dedicate himself to this “very powerful decentralised time. Another example is the think-tank Dezentrum,
distributed system with a security foundation based on which contributed the essay ‘The Advent of Digital
cryptography”. The blockchain, which according to Jaya Persons’ explaining why software-based agents should
Klara Brekke some call “a truth machine, others say gain personhood.
it is magic” is thematised in her essay, which outlines Future Cryptoeconomics are debated and tested in
how to find truth in an indeterminate world. Josh Stark almost real-time, and we have a long way to go in order to
describes the roots of the discourse about cryptoeconom- achieve 'cryptoeconomic literacy' and global adoption of
ics and calls it “a very applied thing”, where researchers cryptocurrency. Could anxiety foster mass adoption of
worldwide are “thinking about new ways they can use cryptocurrencies? The transparency vs. privacy debate,
rules in cryptography and economic incentives to build or the shortcomings of fiat, banks and large financial
these systems”. Stark also calls to define more clearly what institutions? This first issue of Future Cryptoeconomics
the boundaries of cryptoeconomics are, and states that tries not to find answers to speculations, but to identify
“one of the biggest misconceptions about blockchain the questions that are foundational for envisioning next
technology and cryptoeconomics is to depict it purely as societies.
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post-DAO
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MATTHIAS TARASIEWICZ
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Since the microcomputing revolution in the 1970s we have lived in the age of permanent
technological disruptions, but institutionalised educational practices have not yet caught up.
“Technologies come and go but the university remains, in a recognisable and largely unchanged
form”. Decentralisation challenges the role of the university as gatekeeper to knowledge, and
questions the structure and organisational architecture of institutions. The only chance for
educational institutions is to find interfaces to informal and technology-driven experimental
cultures to be able to radically reinvent themselves. If universities don’t react to technological
and societal change, they will be forked, replaced, and decentralised.
With the accelerated pace of the introduction of new practices and pedagogies rather than to displace them”
technologies, the appropriation of techno-culture has (Christensen et al. 2011). As Michael Flavin notes,
targeted all niches of informal work. The inflation- “technologies come and go but the university remains, in a
ary use of terms such as hackerspaces and hackathons recognisable and largely unchanged form” and “the use of
show that hackers and makers have been commodified disruptive technologies challenges the role of the universi-
(Davies 2017). In recent years, informal cultures of ty as gatekeeper to knowledge and signifies the possibility
knowledge production are actively targeted and their of a more open borders approach.” (Flavin 2017).
methods and formats are emulated and transported
The age of permanent disruption:
into business and education. The “hacker ethic”, as
from the ‘crypto dream’ to the
Brett Scott points out, is a composite of “not merely
‘blockchain revolution’
exploratory curiosity or rebellious deviance or creative
“disruptive innovation does not take root through a direct
innovation within incumbent systems. It emerges
attack on the existing system. Instead, it must go around and
from the intersection of all three” (Scott 2015).
underneath the system” (Christensen et al, 2011)
Numerous incompatibilities question the interfac-
es between informal and formal research (Wagner, Simon Penny describes how cultural production and
Newman and Tarasiewicz 2015). In the new age of innovation always involves diverse communities of
permanent disruption, “it is not assets we need to toolmakers, and their “particular contributions and
leverage, but networks” (Satell 2013). motivations are seldom noted, except in specialised
studies” (Penny 2008). Often such cultures are, as Penny
Disruption and university
calls them, “renegades” or “eccentrics”, producing their
A “disruptive innovation” (Bower and Christensen tools outside of institutions and “by definition, ahead of
1995) is said to create a new market and value network the technological-industrial curve” (Penny 2008). One
(or disrupt existing ones) with “significant societal impact” example of such an eccentric innovative technology-based
(Assink 2006). Hypes and hype-cycles are evolving, while community are the cypherpunks.
at the same time “tethered appliances” (Zittrain 2008) are Since 1983 cypherpunks already debated the usage of
consequently “reducing the potential for technological digital cash without a central issuing authority (Chaum
literacy” (Wuschitz et al. 2016). Institutions as tethered 1983, 1990; Finney 1993; Medvinsky and Neuman, 1993;
appliances introduce limitations, and have been re-invent- May 1994; Szabo 1997; Dai 1998; Reagle 2005), which
ed (Johnson et al. 1995), hacked (Cohen and Scheinfeldt was only introduced in 2008 by the anonymous entity
2013) and rebooted (Berechet and Istrimschi 2014), while Satoshi Nakamoto (Nakamoto 2008). Within a self-pub-
still being in permanent crisis (Nelson 1997; Scheper- lished paper, Nakamoto described the blockchain ledger,
Hughes 2011; McCabe 2013). thus inventing the first cryptocurrency: Bitcoin. Digital
Although there are many ongoing attempts to currency, and even more so the blockchain, might be the
implement novel and “disruptive” technologies into most disruptive invention since the internet, though its
teaching and learning practices, institutional practices ‘disruptiveness’ is still debated (Iansiti and Lakhani 2017;
have barely changed (Blin and Munro 2008; Christensen Swan 2015; and others).
et al. 2011). “Teachers have implemented computers in
the most common-sense way – to sustain their existing
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Blockchains have a multitude of potential applications for a longer time already. Holacracy, for example, is
and the industry has been “imagining a blockchain a system of organisational governance developed by
world” (Ernst & Young 2016). After the hype of 2017, the company HolacracyOne. It's claims are to “[turn]
in the “crypto-winter” of 2018 we can observe that everyone into a leader” and goes on, explaining “this
mass adoption of cryptocurrencies is still far away isn't anarchy – it's quite the opposite” (Robertson
from being a reality. The techno-utopist future is stuck 2015). Critique of the system is manifold - Bernstein et
in useful prototypes, and the new order is waiting in al. describe “old power rules can be deeply embedded
the shadows in parallel economic enclaves (cf. HCPP in culture and institutions”, so a transition from an
2018). existing (hierarchical) governance model to self-gov-
At the same time traditionally designed institu- erned one appears problematic (Bernstein et al. 2016).
tions are trying to react to the massive technological Other examples are “liquid democracy” or “delegative
and societal change that these disruptive technologies democracy” (most prominently used by the German
and novel trust machines introduce, but the underly- Pirate Party), where an electorate vests voting power
ing own governance models and decision making in delegates rather than representatives (Ford 2002).
protocols are rarely questioned. Futarchy describes a form of governance proposed by
economist Robin Hanson (2007). He criticises that
Code governance and fork politics democracies “fail largely by not aggregating available
information” and that “betting markets are our best
“Generally, no leaderless developers have ever written big
known institution for aggregating information”. Under
and complex software. It is unheard of. Whether that
futarchy, users would “vote values, but bet beliefs”
shows that people cannot or prefer not to do it, is unclear.”
(Hanson 2007). Voting would not be to implement
(Meatballwiki, 2010)
particular policies, but on metrics to determine how
Conflicts appear in coding communities on a regular well their organisation/institution is doing, and
basis, so protocols for resolution have to exist in order prediction markets would be used to pick the policies
to continue development. A Fork in software engineer- that best optimise those metrics. In a binary (yes/no)
ing describes the situation when developers create vote on a specific topic, two prediction markets would
their own branch and start individual development on emerge, and on resolution, all trades on the rejection
it. “The right to fork is inherent in the [fundamental market would be reverted. Vitalik Buterin (co-founder
software freedoms] common” and “also takes place of the Ethereum ‘world computer’) in 2014 described
in non-profit associations and political and religious a decentralised autonomous organisation (DAO) using
movements”. Participants of the social system of futarchy to govern a (fictional) nation. “DAOs allow
software projects can utilise their “right to fork” as well us to very quickly prototype and experiment with an
as their “right to leave” (Meatballwiki 2010). Software aspect of our social interactions that is so far arguably
repositories are usually governed through “benevolent falling behind our rapid advancements in informa-
dictators”, in contrast to “management committees of tion and social technology elsewhere: organisational
meritocratic projects” (Gardler and Hanganu 2010). governance” (Buterin 2014). The Ethereum project
But the introduction of the blockchain (Nakamoto had to face a “hard fork” on the network in 2016,
2008) introduced numerous new governance models, resulting in two different blockchains: Ethereum and
which are based on experimental “cryptoeconomic” Ethereum Classic, as philosophical differences between
settings (Zamfir 2014) and are tested by numerous “radical crypto-decentralists” and “bailout supporters”
initiatives in experimental way. As De Filippi notes, of the first decentralised autonomous organisation
this had been already achieved through the automation emerged (Widrum 2016). The DAO was to this date an
to decision-making processes, the incorporation of investor-directed, stateless venture capital fund, with
legal rules into code and more recently, through the the largest crowdfunding campaign in history at over
“code-ification of law” (De Filippi 2016). $168 million in available (crypto) funds (Metz 2016).
Flattening organisational structures (to emulate After hackers exploited a vulnerability in the DAO code
and mimic development and production cultures) is and a third of the collected funds were moved away,
experimented upon in technology-based companies the original proclamation of Ethereum’s “unstoppable
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code” and “by-laws [which] are immutably chiseled
into the Ethereum blockchain” (Cryptohustle 2016)
was questioned. The community decided to block
the ‘stolen’ funds through a hard-fork of Ethereum, a
modification of the underlying code.
Rules, protocols and the
future of decision making
De Filippi and Loveluck in their 2016 paper differen-
tiate between “governance by the infrastructure
(achieved via the Bitcoin protocol)” and “governance
of the infrastructure (managed by the community
of developers and other stakeholders)”. Blockchains
often get interpreted as a “regulatory technology”,
enforcing a particular set of predefined protocols
and rules (Bitcoin), but we should also consider their
potential as “platform on which people might encode
their own sets of rules and procedures that will define
a particular system of governance” (De Filippi and
Loveluck 2016). For ‘new’ and ‘old’ institutions alike,
governance models based on distributed consensus
and cryptoeconomics offer a significant opportunity
for implementing change to react to technological and
societal developments. The preconditions for such
a model are not only technological, as governance
relates to decisions about the “rules of the protocol
(the code) and the incentives the network is based on
(the economics)” (Tomaino 2017).
There is a strong need for ‘cryptoeconomic literacy’,
but more importantly there must be an emphasis on
the interaction and communication between both
institutions and informal communities (“where the
action is”) to further the research into and develop-
ment of new amalgamations of social and organisation-
al structures. We have to foster the constant destruc-
tion and recreation of institutions and experimental
cultures - cultures in which new forms of governance
are tested and experimented with. Such new systems
in distributed, collective agency between humans
and machines can pave the way for another future,
where “Extended Intelligence” (Ito 2016) can produce
“collective agents capable of transitioning between
multiple levels of political, material and conceptual
organisation” (Laboria Cuboniks 2015). Research is a
collaborative process - a cybernetic fusion of distributed
agencies; part human, part machine, part program.
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REO An Interview
with Andreas
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MATTHIAS TARASIEWICZ &
DANIEL PICHLER
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Matthias Tarasiewicz and Daniel Pichler spoke with Andreas Antonopoulos at the
WeAreDevelopers World Congress in Vienna. Antonopoulos is known for delivering electric
talks that combine economics, psychology, technology, and game theory with current events,
personal anecdote and historical precedent; effortlessly transliterating the complex issues of
blockchain technology out of the abstract and into the real world.
DP: We have met on multiple occasions in the past years, more mainstream, it loses some of its root principles
but I never asked you: what drove you to Bitcoin and and people forget why it was created in the first place.
cryptocurrencies in the first place? But that’s okay, because one of the interesting things is
AA: I’d say I was primed. My background is in distrib- that in many previous technologies, new people come
uted systems and information security. I started in who do not understand, know about or even believe
programming when I was under 11 years old and in the original principles. They change the technology
I’ve been involved with computers since the early to match their new interests. They can’t do that with
days of the internet, but I also got interested in the cryptocurrencies, because the technology cannot be
cypherpunk movement in the early 90s and in the first changed, because no one has control over it. People
digital currencies like Digicash with David Chaum. I can create new cryptocurrencies that don’t have those
was fascinated with the applications of cryptography principles, but they can’t change those principles in
to social sciences and the impact this could have on existing cryptocurrencies, because they have no control
political movements. When I first came across Bitcoin, over them. That’s a very interesting phenomenon. If you
I didn’t understand what it was and ignored it, and believe, as I do, that those principles translate to greater
six months later I found a link to the white paper of usability, greater freedom and in the end greater utility
Satoshi Nakamoto. The moment I read that, I realised and value, then the fact that they can’t be changed
what it was: a very powerful decentralised distributed means that we will continue to have this technology and
system with a security foundation based on cryptogra- we will continue to have these principles, and they will
phy and in fact, the entire construction incorporated be very useful.
all cypherpunk ideals that I strongly believed in. So I MT: I want to shift the discussion to what people are
immediately dropped everything else and dedicated actually using cryptocurrencies for. There is the term
my focus to that. Here we are seven years later, still as #HODL, and the Ethereum community often calls to
excited as ever and fascinated by this technology which #BUIDL. Monero with Monerujo suggests to #SPEDN
has gone further than I ever expected. more. Could too much focus on hodling in the end hodl
MT: I personally came to Bitcoin through the experimen- back cryptocurrency mass adoption?
tal research project Bitcoincloud in 2010. I started AA: Absolutely! Any form of single focus, refusing to
further researching on the culture of decentralisation appreciate the diversity of applications, the diversi-
through “Cryptocurrencies as Distributed Communi- ty of viewpoints, and the diversity of interests that
ty Experiments” (2014), which examined how different come into this space and trying to make this a single
altcoins emerged from Bitcoin and how forking culture choice that everybody has to follow is not relevant to
emerged. I was fascinated how value was created in these everything that this is about. It’s all about choice. One
emerging communities. A lot has changed since then, of the beautiful things about this is that in traditional
especially the actors in the cryptosphere and how they startups, traditional funding mechanisms and tradition-
interact. How is your perspective on this, do you think al platform technologies, especially centralised platform
cypherpunk ideals are still there, out there? technologies, to introduce a new application to the
AA: Oh they absolutely are, because they are still being platform it has to have a very, very large addressable
espoused by a lot of people who are very much engaged market, otherwise the entity that controls the platform
and are working in research, innovation, technology has no interest in introducing it. You don’t get your
and building new systems. A lot of people have joined application to run on Facebook unless it has a very, very
this entire space, for whom this is not interesting, large market. It’s not an open system. The beauty of
because it’s simply inevitable. If a technology becomes cryptocurrencies and open platforms is that the market
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