Bitcoin, The Beginning Of Open Source Governance?

In my previous article on this site, “Bitcoin, Open Source Movement for Decentralized Future”, among many other issues I addressed some concern about the existence of early adopters and this apparent inequality within the Bitcoin ecosystem. I argued how in the Bitcoin network, the accumulation of money is not easily translated into power over others. Someone asked me to further elaborate on this. Here I will explore how the Bitcoin ecosystem offers a different model of governance and how within it, our familiar notion of power can be redefined to mean something radically different.

Before we jump in, for clarification, I would like to note that when I say Bitcoin, I am talking about the underlying technology of the blockchain (which is much more than currency), along with its decentralized network, and also blockchain-based cryptocurrencies in general. Bitcoin might not be the final currency that ends up bringing us into a decentralized future, but it has opened the door. If it fails, it will only be because there is an even better cryptocurrency to replace it.

Culture of Ownership and Control

First of all, let’s look at the larger context behind the existing oligarchical system run by the 1%. This can help us understand a posited decentralized Bitcoin system and how it is so fundamentally different from current centrally organized societies.

We live in the culture of ownership and control. The current system has evolved with the idea of “representative democracy/government” as a model of governance (especially in the context of the U.S.). At a global level, it is manifested in governing structures and interlocking bureaucratic organizations such as the UN and IMF that have been set up by the industrialized first nations (North Asia, Europe and North America). This model of representation requires accountability. Elected officials and anyone in positions of power have the potential and tendency to abuse that power, as humans are inherently corruptible. For this reason, it has been an accepted fact that safeguards of “checks and balances” are necessary to ensure the basic idea of “consent of the governed.”

The problem of any centralized governing system is that it naturally creates levers of control. Representation only works in combination with checks and balances on power. In recent years, we have seen how this system of accountability has weakened, as representation has become more and more used as a cover or an instrument by those in power to exercise their agenda and domination. What we have seen over the decades is a corporate takeover of governments, creating an interlocking power of states and corporations that Mike Lofgren describes in his essay “Anatomy of the Deep State.” Just one example is how transnational corporations use treaties like Trans-Pacific-Partnership (TPP) to deny the sovereignty of countries and control the international rules and lawmaking in regards to trade, agriculture, medicine and exclusive rights.

One avenue of creation of this deep state is the cozy relationship between the government and monopolistic banks (as in the private Federal Reserve consortium holding the power of unlimited monetary printing). In the case of the U.S. dollar and its status as world reserve currency, the power it has created has become a tool to advance U.S. hegemony in the world. It is not just the political system that the 1% hijacked, but also other primary pillars of society, namely media, legal and financial institutions. They have all been turned into complex patronage networks that serve U.S. foreign policy and corporate greed and vice versa. This has led to the forming of invisible governance structures, including a two-tiered justice system and the creation of expert opinion that facilitates camouflaged democratic processes to engineer consent.

More and more people are becoming aware of this hidden force of control. The 2008 economic meltdown and institutional failure woke people to the fact that the system of and balances is broken beyond repair. The unfolding global crisis of legitimacy, followed by a cycle of protests in recent years is a testimony of a deep systemic breakdown of Western liberal democracy. It is within this socio-political climate that the invention of blockchain technology emerged.

New Open Source Code of Governance

Bitcoin brings a radical departure from the governance model of the old world. It is an encryption-based currency, something that evolved out of the cypherpunk movement. It follows trends of decentralization that have emerged through the internet in recent years (Bittorrent, Free Software and Open Source Movements and collaborative production platforms like Linux and Wikipedia).

The Bitcoin protocol is open source. Anyone can freely use, modify or share it. The seed of it is based on a culture of sharing that diverges from the dominant corporate culture’s practice of ownership and control and its mindset of proprietary use that restricts or rent-seeks users and prioritizes private profits over all else.

The essence of this game-changing invention is distributed trust (solving the problem of double-spending without third party reconciliation). Bitcoin solves the scaling issue of trust. With its decentralized security, we can now create a more open and inclusive society at a global scale. This elimination of the need for a third party intermediary enables the following:

  1. Representation as option,
  2. Individual autonomy in relationship to others
  3. The principle of distributed consensus
  4. Default global jubilee/ redistribution of wealth
  5. Voluntary taxation/innovation without permission

If truly understood and the technology is developed to its full potential, the heart of Bitcoin’s revolutionary effect lies in challenging the fundamental of what most of us were taught to believe about democracy, namely the common notions of check and balance of power and consent of the governed.

Bitcoin offers a potentially more efficient and inviolable model of governance than the current systems of representation. Instead of trying to hold those in power accountable, we can directly participate in vital parts of society and this individual empowerment over time can more and more remove the levers of control over others in society. The idea is that when more people start to govern themselves with collaborative smaller communities and engage in direct democracy at a larger level, there aren’t so many avenues for individuals or institutions to exploit others. I am going to present some core concepts of a decentralized society step by step. First let’s look at the idea of representation as an option.

Representation as Option

In the realm of payment systems, for instance, author and technologist Andreas Antonopoulos talked about how Bitcoin can introduce a recourse capability (bitcoin payments are designed to be irreversible), independent from the payment system itself. Currently, services like Visa and MasterCard have a monopoly and consumers who use Visa for instance don’t have a choice but to use the dispute resolution that comes with the payment system. With Bitcoin, one can choose a different risk management and fraud protection by using multi-signature transactions according to one’s needs. This opens up a previously monopolized market for arbitration services and customers can have a choice and can readily employ a particular company and a group to represent or carry out specialized tasks.

In the context of broader society, we are now locked into monopoly of electoral politics as a product of representative government. It comes with a package of a two party duopoly (particularly in the U.S.) and corruptible politicians. It appears that we have had no choice but to accept it, no matter how the system is rigged. With the Bitcoin security protocol, a totally new voting infrastructure can be built that may solve many of the problems that permeate the current electoral process. When technology is developed, it can open up accessibility and encourage people’s direct participation on issues that are currently dealt with by elected officials or a professional class that are often divorced from the interests of everyday people.

With transparent and secure voting processes enabled by the blockchain, the electoral arena can be transformed in a way that manifests the uncompromising power of citizens. In this we can still have representation where we wish, but it would be an option chosen by individuals freely. In fact, the idea that encompasses the very notion of this representation as an option is already emerging. For instance, the Pirate Party in Berlin put forward the concept of liquid democracy, which is a way to delegate one’s vote to trusted individuals who are more knowledgeable about an issue. Those who are engaged in this are the ones who have power to assign certain responsibilities anew each time and withdraw that trust when it is appropriate. If this were coupled with direct voting on laws as practiced in Switzerland or with citizen ballot initiatives typical in some US states, a completely new decentralized method of lawmaking could emerge.

This shift of power in governance is ultimately what many have wanted and tried to create in the wake of Occupy Wall Street. Occupy was a collective effort to move away from the electoral arena. Many people felt that the solution is not about voting for a better political candidate or creating a new party within the dysfunctional system, but totally transforming or walking away from the current system as it is too corrupted and flawed at its core.

The global Occupy Movement was to some degree an effect of the decentralization of information that came about with social media and organizations like WikiLeaks challenging the gatekeepers of institutionalized media. This was a testimony of what would happen if information is freed and people are able to inform each other without corporate or government intermediaries. Yet, this was the just beginning.

For people to be able to act on what they know requires a freeing of money from central control. There had to be a way of creating value and sharing it with one another that is independent from the state. The deeply transformative aspect of blockchain-based crypto-currencies is the Swarm effect it creates, generating new streams of economic activity. This in turn sustains and expands the decentralized network. With its first application as currency, Bitcoin is the next wave of decentralization of information, this time in finance.

Individual Autonomy in Relationship to Others

The second key concept of the Bitcoin ecosystem is autonomy and self-governance. Decentralized networks inherently empower individuals. With this power comes responsibility. A Bitcoin open society is not a utopian society. There is risk of failure in every system and indeed in this each person is challenged to become more informed and learn how to be responsible. A great example was seen with the demise of Mt. Gox. The Bitcoin system is outside of the purview of regulatory authority so it offered no consumer protection. Because governments no longer intervene on behalf of the people, each individual gains more responsibility to govern themselves.

For instance, users of cryptocurrencies need to educate themselves about how new decentralized security systems work and how crucial it is for them to keep their private keys in their hands and not trust centralized exchanges like Mt. Gox which was basically operating in the old paradigm, doing fractional reserve banking. This is a world of “buyer beware” where each person needs to become more careful and face the consequences if their judgment falters. This is also a system that allows inadequate companies to fail, unlike in deregulated capitalism that removes risk for powerful corporations and hands them monopoly power to exploit. Even if they screw up or break the law, no one goes to jail.

As I pointed out earlier, one part of taking responsibility means individuals can use third party arbitration and risk management on their own terms. In this case, an individual’s chosen company will perform a service of “representation” for them. This replaces institutionalized, coerced trust as with massive monopolies like VISA or commercial banks. As more and more people directly engage in making decisions about aspects of their lives that used to be handled through bureaucracy, they can take ownership of their own actions and what they create. When people are connected to their own will, they are less divorced from the consequences of their actions. This helps cultivate a sense of individuality and awakens a sense of shared responsibility that is defined through a deeper web of interconnectedness.

A Principle of Consensus

In the existing hierarchical society, those at the top of the system enforce domination through pulling the levers of control. With regulatory tools and laws, they create monopolies in markets and through consolidation of media engage in secrecy and manipulation of information to engineer false consent of the governed.

The problem with monopolistic behavior is that it artificially creates dominance of a particular company, product or political perspective through manipulation and then shields the entity from competition with little checks and balances on abuse of power. For instance, a tech giant like Google didn’t become this massively influential and powerful company on their own merits, purely chosen and supported by consumers. It involved the engineering of consent through constructing a façade of a friendly and progressive image while hiding their decrepit roles such as becoming a private arm of the NSA, as Julian Assange exposed in his new book “When Google Met WikiLeaks.”

The dominance of a particular company or idea itself is not a problem as long as it has attained its status through legitimate means and is truly subject to challenge. If Google became popular only because people genuinely like their service, then their popularity would be a result of a kind of democratic election process through the market. Yet if Google attains dominance in the market through colluding with the government and rigging competition, this presents a problem.

Domination through monopoly is an imposition upon individual freedom. It fundamentally undermines the democratic process. Unlike this systemic domination that works through the logic of “power over”, the Bitcoin decentralized system fosters an environment that creates “power with.” Access to the network is open to anyone who chooses to be in it and it responds to every node equally. The protocol of algorithmic consensus introduces a new rule in the market and at a larger societal level. It encourages a rule of consensus among those who choose to be a part of the Bitcoin network. This is a principle where no one is made to act against their will or their best interests.

This is a shift away from the idea of “consent of the governed”, which is held as a vital principle in the old model of governance. This form has now become mostly corrupted by central power and has come to actually mean “manufactured consent.” In the old system of representative democracy, there was an unexamined assumption that there is always a preselected class in society outside of the general populous that must govern and the role of individuals is reduced to mean one that gives consent to that external force of governance.

The principle of consensus starts with the premise that individuals have a certain autonomous power and that if they wish to, they can temporarily grant that power to institutions and other individuals on their own terms. In this, the source of legitimacy lies in ordinary people and they know that they are the ones who temporarily assign certain tasks, granting authority to others and they can withdraw it anytime they want.

This new rule of consensus embedded in the Bitcoin protocol is supported by the genius incentive structure of the currency. Many people ask what is Bitcoin backed up by? I say what gives it value is the powerful network effect of all participants’ commitment to decentralization. We saw it during Occupy in the form of the general assembly and horizontal decision making processes. The circle of consensus back then was protected by each person’s commitment to the decentralized networks. Similarly in the Bitcoin network, the circle of computers spread around the world are working to ensure this decentralized network of globalized trust.

The more people invest their time and energy and participate in a network like Bitcoin miners and developers, the greater the shared responsibility that each carries to steward this decentralized ecosystem. The self-regulation and organizing of this ingenious network can be seen in how whenever a mining pool gets too concentrated, the miners disperse to avoid a 51% attack because such concentration could destroy their common value and the network in which they are invested.

The transition into a Bitcoin ecosystem brings a shift of values not only in a literal sense of weakening or replacing the value of fiat currencies, but also a shift toward human values that we hold in society. These are values such as transparency, individual autonomy and mutual aid that spring naturally from decentralization. The principle of consensus lies at the heart of these attributes.

Global Jubilee and Redistribution of Wealth

Bitcoin is a global phenomenon. With waves of disruption, it is shaking up our preconceived notions of the world. It opens eyes to other parts of the globe that have mostly been invisible over the horizon from the West. The vast majority of the global population has been exploited and long hidden under the shadow of Western civilization.

It is interesting how in discussions regarding the disparity between 1% vs 99%, many people focus only on inequality within Western society (or their own country). The long history of colonization of the ‘third world’ we are currently benefiting from for cheap resources and goods is often not talked about. In debating changes in the economy, the world for many has come to mean the West instead of the whole Earth. In most of these discussions about the viability of Bitcoin decentralization and paradigm shifting, many don’t take into account the reality of the Global South.

This Western civilization was built up through the British Empire (the old colonization after the age of exploration that began the extraction and transference of wealth from the South to the North) and upon which the current U.S. Empire was built. It has morphed into the world’s first global corporate empire (new colonization in the industrial age, oppressing people in the south with debt and poverty, in the East with sweatshops and resource extraction and control by military occupation in the Middle East).

Right now, currency is imposed upon us. Under the reign of this corporate empire, countries have no choice but to accept the U.S. dollar as a world reserve currency. It is backed by the world’s largest military force. Here, the 1% has the power to control people through the money they accumulate. But more importantly they are the printers of the money and control its flow. The rich wage class warfare through the tax code and loopholes that allow them to live off the value that workers create. They also use financial instruments such as debts as a weapon. Instead of bombing a country, those in power can indenture third world countries, steal their resources and make people act against their will.

Each person’s direct participation in a peer-to-peer network creates a ripple that disrupts the patronage payment network of states and corporations. This can be done, not by protesting, but through each person acting as if they are already free. We can halt the operation of extractive capitalism, free the flow of human labor and creativity stagnated by financial colonization (through rent seeking and financial exclusion) and redirect it to generate a real economy of, by and for the people.

The Bitcoin network frees the flow to the world that has been captured by financial institutions. This technology can be used to help the unbanked and underbanked begin creating a new world economy and its activity on their own terms. This alone could create, through the virtually inevitable Bitcoin takeover of the remittance industry, a massive redistribution of wealth. In the long term it may facilitate the healing of a long history of oppression.

The invention of the blockchain technology emerged in the midst of a financial crisis and the old world around it is already starting to crumble. With currency crises, a massive spiraling tower of debt and the end of the oil age are all signs pointing to an imminent global system failure. The writing is on the wall, as the BRIC countries are moving away from the petro-dollar and the U.S. is now desperately trying to hold onto power by creating crises in Ukraine with Russia and Syria with ISIS.

In this context, blockchain based crypto-currencies can be seen like a phoenix rising from the ashes of the global corporate empire. They play a key role in moving us into a new decentralized civil society. When the petrodollars weakens, it is likely to bring the U.S. empire down along with it. All empires eventually fall. When this one falls, what would happen to the mountain of usurious debt? This could potentially lead to a default debt erasure, a kind of global jubilee. This also may lead to flattening the imbalance of wealth between the West and so-called “third world nations.”

Voluntary Taxation/Innovation without Permission

Bitcoin is the world first stateless currency regulated by algorithm. As more people move into this autonomous network, the states and banks lose power to infinitely print money. Taxation becomes more voluntary (as it is difficult for governments to confiscate people’s bitcoin when they are maintained in a decentralized ecosystem). This means the influence of government weakens. They have to beg for money to set the military in motion. Once they cannot pay soldiers, much of their coercive power dissipates.

By choosing to embrace stateless decentralized crypto-currencies, people can exercise financial freedom and associate freely with their fellows. The Bitcoin ecosystem is a fertile ground for diversity. Unlike the old world of empire where one particular nation or group of corporations exerts dominance, this is an environment where many different communities can co-exist and foster a society within which people create their own currencies and generate value based on each person’s affinity and voluntary association.

With crowd-funding, crowd-lending and micropayment, more people now have a way to direct the flow of their own will and exchange of value. This creates innovation on the edges where we no longer have to ask for permission. This is already happening. Many bitcoin early adopters use their invested money to fund startups and build new innovation and infrastructure for the Bitcoin decentralized world.

To conclude, in the Bitcoin ecosystem, power formerly used for control in the old system can be transformed into individual autonomy and a network of collective decision-making that fosters mutual aid. Bitcoin doesn’t create a totally equal society such as generating equal distribution of wealth, as this was not intended in the design of its protocol. As I see it, the revolutionary force of this technology is to offer everyone an equal opportunity to interact, transact and associate freely with one another.

I see Bitcoin as a technology that simply enables decentralized consensus. This alone cannot determine the outcome of decision-making. Ultimately it is the responsibility of each individual who participates in this process and the collective decision-making of all people that would determine the direction of society.

Bitcoin opens the door to new forms of governance with more direct democracy. Those who choose to use it can live into the attributes of a decentralized society and redefine relationship and actions in this new context of interconnectedness. The Bitcoin world is not perfect and there is much improvement needed, but in my view, it is a far better system than the existing apartheid society where a majority of people are excluded from vital decision making, with the destiny and wealth of humanity controlled by a tiny elite. Bitcoin makes possible open source governance. The power to decide the course of one’s own destiny is now in the hands of ordinary people.

Discussion

  1. David

    the fact that the system of and balances is broken beyond repair.

    should be

    the fact that the system of CHECKS and balances is broken beyond repair.

    1. Nozomi

      Thank you for catching it.

  2. Anarcho Communist

    Interesting Article, for sure Crypto Money has some interesting aspects. But i have still some questions:

    1.) At the Moment we see the industrialization of Bitcoin/Altcoin mining. So those who can afford big data centres with special elite high cost ASIC Hardware can earn a fortune. So will this not Lead to the point where a new capitalist elite emerges, the “digital 1%” who controll mining and therfore the mony creation process ?

    2.) When decentralised currency weakens the state and government in a way that it could not afford military/police. Who would then care for those masses of people who are not the winners in this new digital capitalism ? (especially given the fact that more and more work will be done by robots). So if the new digital elite does not pay taxes, the state is poor and cannot pay any social security while at the same time there is not work availible due to technological progress. So, what will be the situation for the average people ?

    1. Nozomi

      1). In the recent conference, Gavin Andresen addressed and rejected concerns regarding mining centralization, but I am aware that this is a concern for some people.

      http://www.coindesk.com/gavin-andresen-rejects-bitcoin-centralisation-concerns-web-summit/

      I see the Bitcoin ecosystem as a voluntary network where people are not held hostage. If a particular trend of centralization of the mining starts to really happen, people can choose to move away from it and build a new platform. This is the reason there is a spontaneous consensus happening among miners for instance to move away from mining pools that get too big or opaque, as without the network effect created through all participants in a network they would be mining an empty blockchain having shot themselves in the foot.

      Here is a link to a video where Andreas Antonopoulos, one of the most prominent and well-respected figures in Bitcoin addresses concerns about mining centralization (at 40 min into it).

      http://youtu.be/4U-xINzWOnA?t=39m30s

      2) I think you made an assumption in this question that Bitcoin system creates a new digital elite. In my opinion, the jury is still out whether we see Bitcoin early adopters (one like a mysterious creator Satoshi Nakamoto) to become like an existing 1% or will we come to view them as innovators who contributed to the betterment of society.

      Bitcoin decentralized system opens a door to a new paradigm where people can choose to abide by a protocol of consensus which is a different from the logic of domination and control of the current paradigm. I also don’t have the utopian vision that technology would solve everything. Technology is just a tool. It always needs to be accounted for by democratic consensus of people. Technology should never be used to replace human interaction and connection and it should be used only to enhance it. In some ways I see the future very differently in terms of humanity’s relation to technology.

      I view how it is only governments and corporations (a small percentage of elites who are divorced from experience of everyday people’s lives and use those institutions as instruments for control) that want wars. It is corporations that want maximum profits and promote secrecy, terrorism and surveillance to keep people in fear.

      Public sentiment repeatedly has shown that they want an alternative to this current extreme form of predatory capitalism. No one can predict how wealthy early adopters will act or whether they will be as psychopathic as the current cadre of .01 percenters.

      Right now I see more and more people are interested in privacy for the individual and transparency for the powerful, rather than what we have now, which is the opposite. More people are coming to embrace health care and education as a universal right and think the system seen in many of more balanced socialist-capitalist societies like Germany is more desirable.

      The reason why this is not yet happening is because there is a force that blocks the flow of human goodwill. These levers of control are deeply imbedded in a current financial system. We need to simply remove the levers of control that blocks this flow. In my view, Bitcoin does this.

      There is one caveat in what I am saying here. I must admit that there is an underlying assumption in my argument, which is that I believe the majority of human beings are innately good and people want peace and don’t like to exploit others. I see how society exists the way it is now is because a small percentage of psychopaths get hold of insidious levers of control and people are coerced to act against their will. I think if we find a way to transform these methods of control, we have more opportunity to create a better society. Early adopters in the decentralized world could never have levers of control that the current 1% have now.

      I think you are thinking in a paradigm of centralized society and money that functions as an instrument of coercion. I see in the Bitcoin ecosystem the potential to radically transform money as we currently understand it. In a decentralized system where there are no levers of control, there is no checkpoint to stagnate flows of values. Money becomes simply a medium through which people freely exchange and transfer value without anyone meddling with that freedom. We have never experienced money with that flow-ability. Money in this sense is like a language that expresses what is agreed on in a peer-to-peer (unmediated social relationship) process. Until we fully experience it, we are not in a position to judge what qualities it might support or bring out in people.

    2. LennStar

      1) Hardware: The “Problem” is that Bitcoin (still) uses a PoW (Proof of Work) mechanism where Bitcoins are generated as a result of doing calculations.
      There is no other mechanism to create coins or generate more blocks = store transactions (which is essential for the funktioning)

      So yes, with this system Mining is only profitabel anymore for “professionals”.
      That could lead to the situation where the rich in Dollars are the rich in Bitcoins, too. (But then they could also just buy the Bitcoins 😉 ).
      Ultimately their % will decrease because they have nothing from Bitcoins just sitting there in their wallet.
      Another big point is the problem with resource use (electric energy and hardware), which also is bad for the poor.

      However I think the solution lies in PoS (Proof of Stake).
      Here every coin has a chance to generate a new block. If you use (slight) inflation then there is an incentive to keep the clients open = the network alive (besides beeing able tro send and recieve coins.

      If you use no or only a slight inflation power does not concentrate _from the coin alone_ – of course buying more is always possible. Coins are tradeable, thats the definition of money.

      —–

      But you can also do good with the existance of a coin. In the case of Bitcoin you use energy to produce the chain.
      What if an energy using activity that is already done gets used to produce the chain?
      What if that activity is highly desirable from societys point of view?
      What if you connect that? What if doing humanitarian work like donating computer power to research a HIV treatment results in you getting paid in coins?

      You probably guess it, I will name it 😉

      That is done by Gridcoin Research – to be released on the exchanges in the next time to replace the “classic” Gridcoin (partly Bitcoin-like PoW).
      Here a PoS mechanism is used to create blocks – the energy bill is negligible. At the same time you can get paid for doing work for BOINC projects – what already 230’000 participants on more then 1 million comuters are doing out of humanitarian reasons or basic curiosity for science. Thats decentralization 😉

      Gridcoin is a win(user)-win(science)-win(freedom)-win(ecology) Coin. I think that is the future.

      2) currently the old elite is not paying taxes (or far less in case of persons or nearly nothing in case of big corporations). Worst case: The people who dont pay change. Means it can only get better, not worse 😉

      The rest of your questions is taking a deep dip into the whole fabric of our society, which NOBODY can answer with any amount of sureness. But: It is the same question that was already asked several times in the history, in forms like “If we dont have slaves, who does the work?” or “How do families survive if we dont allow 12 year old children to work longer then 10 hours a day to earn money?”

      We have survived these crises, including the abolishment of the free market that was bemoaned by the second question. (Yes, that was a real one caused by a law in England about children in the wool industry, it didnt even applied to other work. Could be it was 10 year old for 12 hours, of course, I wont look it up again.).

      I do believe that the human race will find a way to have enough for everybody to eat and live in, even if most work is done by robots. If we really really want this, of course. If we would, wwe coudl have it in 50 years, for that we have to abolish the elitist ruling that we currently have – and here the circles closes.

      1. Nozomi

        Yes. I hear you. I myself thought about the necessity to use proof of work because of its effect on the environment (even though the energy used for mining is still far less than that used to sustain the existing financial system) and also the expense as you pointed out. Nevertheless the large hashing power is actually necessary to accommodate the level of transactions of a future growth that is close to the size of a current fiat currency system.

        I think the Bitcoin space allows us to imagine a different future and find a solution through innovation and new more direct democratic decision making processes. I think it is important for people who are concerned like you and me to bring this issue to core developers and count ourselves in as a part of the consensus and innovation mechanism. Maybe we can strive to find a solution that addresses issues such as this.

        As understand it, Bitcoin’s hashing power is necessary to secure the system for transaction activities that happen at a global scale. I don’t know if proof of stake would generate a system to do that, though at a local and small scale, I see this may be possible). But I am not so knowledgeable about how proof of stake works.
        So what we are looking at is a question of finding a way to secure the system from the threat of centralization without using that large scale of hashing power. I am thinking about another avenue. Let’s say if we need to use proof of work to secure the system, would it be possible to harness computing power with renewable energy so that mining processes won’t be environmentally destructive and would also be less expensive perhaps.

        I know this may seem idealistic, but I am thinking of a potential that the Bitcoin ecosystem can lead us into a post-industrial era in energy (as we are reaching to the peak oil, we are definitely moving into this direction anyway). As I noted in this article, the core invention of blockchain technology is distributed trust (an ability for strangers to achieve a consensus without centralized authority at a large scale). Bitcoin currency as its first application can challenge the existing exclusive decision making process by the 1%. Bitcoin decentralized network could potentially weaken, for example, the Washington consensus that is backed by lobbyists of banking, oil, coal and nuclear industries.

        When more people move into blockchain based stateless cryptocurrencies, people gain their power of consensus and determine various issues that impact our lives that till now have been dealt with by a small minority of elites. We can align with companies that advocate renewable energy like solar and wind and develop that infrastructure to ultimately shift energy sources completely into renewable energy. As this is a decentralizing of energy, it goes hand in hand with the Blockchain decentralizing of money. Then we can harness computing power with abundant energy of sun (which no one can make undue profit out of!) making it cheaper and creating a more environmentally sustainable future. I didn’t know about the existence of Gridcoin. Thank you for bringing that up. It is interesting. I will explore more about it!

        1. LennStar

          I am not a crypto geek, so I cant explain the crypto details, you can read about security here
          http://wiki.gridcoin.us/Proof-of-Research

          As far as I have understand it as i informed myself a year ago on what PoS is, PoS is even safer then PoW, and there is no problem with masses of transactions. I read htat Bitcoin developers plan to move to PoS sometime in the future.

          Unfortunately there is no way to tell if your electricity is “green” or “brown” or “yellow” 😉
          I use water/wind only, and I can assure you its as fast as any other sources electricity 😀

          If you talk about political coins it is also possible to make one where a certain account (of an political group) is getting a part of every newly minted coin, or a transaction fee, so that political groups can sort of auto-donate with each transaction.
          Or it can be used as a form of voting / confidence mechanism, where you get a defined amount of coins per year and can then distribute them to cause or people you like. Lots of possibilities.

          I am sure somewhere in the future all (bigger, monetary) coins will be easily interchangeable, like now on the stock market you dont need an expensive broker like only 20 years ago.
          Gridcoins developer has that in mind, but right now the new research Gridcoin has to run really smooth first, because there is a lot of new things in it, there are still problems.

      2. Nozomi

        LennStar,

        Proof-of-work is a vital feature of Bitcoin to secure the system. I am still not sure if proof of stake creates the level of security that Bitcoin has and a decentralized exchange system vitally needs to insure against centralizing control.

        Here is an excerpt on the subject from the article:

        (3) Nakamoto improved a significant security shortcoming that my design had, namely by requiring a proof-of-work to be a node in the Byzantine-resilient peer-to-peer system to lessen the threat of an untrustworthy party controlling the majority of nodes and thus corrupting a number of important security features. Yet another feature obvious in hindsight, quite non-obvious in foresight.

        unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html?m=1

  3. Socialist Leninist

    How does this democratic consensus work ?

    If i make a transaction in Bitcoin the network does not ask if im hiring a Hitman or donating money to terrorists or doing some other fraud activities. So there is no democratic control by the general public what hapens with that money.

    So if i have tons of coins, and others not. I have much more power to make decisions than others have. So this will lead to Oligarchia, a few coin billionaires to become the masters of the universe. Capitalism will be even more brute and bloody if it relays on a payment system wich is not controllable by a democratic elected government wich represents the will of the people.

    It will result in the Dictatorship of the Masters of the Free Market.

    1. Scary Devil Monastery

      “So there is no democratic control by the general public what hapens with that money.”

      Of course not, and that’s a two-sider where the good decidedly outweighs the bad.

      The benefit is that you, as an individual, can not be held to task for how you spend your money. Unlike as now your influence power can be abolished by fiat thanks to any of a hundred authorities capable of removing your ability to decide for yourself.

      “So if i have tons of coins, and others not. I have much more power to make decisions than others have. So this will lead to Oligarchia, a few coin billionaires to become the masters of the universe.”

      Actual bullshit. There will always be inequality of some sort, but every migration towards a more easily portable currency system has benefited the have-nots more than it has the haves.

      In the days before money inequality instead took the form of feudalism where the reigning lord could hold his subservients in slavery since all they owned was tied to nonmovable land.

      You will always have inequality but your choice is simple – either there are haves and have-nots on a decidedly unequal playing field…or you have the same situation on a playing field where the rules are equal for all. The easier money becomes to migrate the more that paradigm shifts towards the latter.

      “It will result in the Dictatorship of the Masters of the Free Market.”

      No the reason the “Free Market” is currently a dictatorship is exclusively due to the fact that the people who have tons of money also have a say in how that money may move. Remove that say and more equality is gained, not less.

      There is no system capable of achieving true equality because such systems assume there’s no such thing as human nature. Ambition and Greed will always exist while humans are still human and thus any system designed to achieve the migration and flow of wealth MUST incorporate and accommodate those traits or it will fail.

      1. Nozomi

        Scary Devil Monastery,

        Thank you for your comment. They are very insightful.

        “You will always have inequality but your choice is simple – either there are haves and have-nots on a decidedly unequal playing field…or you have the same situation on a playing field where the rules are equal for all. The easier money becomes to migrate the more that paradigm shifts towards the latter”.

        This was very well articulated. I completely agree.

    2. Nozomi

      The consensus that you are referring here is an algorithmic consensus to verify transactions and prevent double-spend. All transactions as long as they are not spent previously regardless who you are, your credit history, race, nationality and social status will be accepted. Bitcoin can be used to buy drugs just as Euros and U.S. dollars are now. Right now under “democratically elected governments”, assassination is carried out and terroristic activities are funded (like drone attacks and signature strikes, the creation of ISIS and arming Israeli government’s massacre in Gaza, militarization of police in Ferguson for instance).

      The Democratic consensus I was referring in my article is a decision making process of what can be built on the blockchain technology and creates wider adoption by the people in general. It is what Marc Andreessen characterizes as “a four-sided network effect”, namely “four constituencies that participate in expanding the value of Bitcoin”. They are 4 participants, “(1) consumers who pay with Bitcoin, (2) merchants who accept Bitcoin, (3) “miners” who run the computers that process and validate all the transactions and enable the distributed trust network to exist, and (4) developers and entrepreneurs who are building new products and services with and on top of Bitcoin”.

      http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/?_php=true&_type=blogs&_r=2

      The Bitcoin decentralized system weakens the levers of control that exist in current centrally organized society. With less choke points, all individuals have less chance to gain “power over others” (without the consent of those others). It creates true meritocracy in a similar way that net neutrality gave an unknown blogger the same level of influence as big media institutions like the New York Times. Bitcoin early adopters will have far fewer levers of control available to them than the current .01 percent. What you described as a disaster scenario is more similar to what we have now with a few mega multinationals effectively controlling the governments and the currency systems and impoverishing the vast majority of humanity.

  4. granite17

    Very thought-provoking article. I had a chance to view Andreas Antonopoulos’ Bitcoin talk at the Toronto Bitcoin Expo 2014, where he talks about crypto-currencies being, at their core, an entity that allows “expression of transactional will”. He envisions a future where different crypto-currencies will be used for different types of expressions of transactional will. For instance, when doing a real-estate transaction, there will be a unique altcoin for real estate transactions; when purchasing wool sweaters from someone in New Zealand, well, there will be a one-of-a-kind altcoin for doing that type of transaction. Upon hearing Antonopoulos explain this potential scenario, I thought that when people need to purchase gasoline in the future, they will use a unique currency for expressing the transactional will for buying gasoline. And what might that particular currency look like? I believe it would still be the dollar. Am I missing anything here to draw such a conclusion?

    1. Scary Devil Monastery

      Depending on the convenience of the commodity of the transaction, yes, the currency for buying gas might be the dollar. But more likely the liberty dollar or a digital equivalent than a government-sponsored fiat currency.

      However…”transactional will” is a good expression but the idea of a thousand microcurrencies bounces off the factor of human nature. We like things as simple as possible. I don’t think we’ll face more than perhaps a half-dozen different “currencies” adapted to specific venues.

    2. Nozomi

      I watched that video too. I share a similar view about how Bitcoin creates an ecosystem where different currencies can co-exist.

      I interpreted what he said about transactional will as a different mode of transaction, for instance micropayment capability will be different than handling large transaction like real estate. Also each community might want to create a different monetary system that reflects their communal values and people may move in and out of different currencies just as people move through different social networks etc.

      Currency for oil … I wonder why dollars are particularly suited for such transaction. Right now people are forced to use dollars to purchase oil because it was a forced agreement. My question is if the use of dollars were not imposed by men with guns, do other nations like to use dollars to purchase oil? If answer is yes then maybe there is something intrinsically special about US dollars that are suited for transfer of oil in a way that other currencies cannot.

      Currently, whoever controls the flow of oil controls the geopolitics of the world and the fiat U.S. dollar has a specific feature which is to exert its hegemony by violence (by printing money at will). So it is more accurate to call it a currency designed for coercion. From this point of view, the existence of such currency is determined by future adoption rate. If people don’t agree with the specific values carried in this currency, with invention of stateless cryptocurrencies, more people can then choose to move away from it.

  5. nameofmychoice

    What would “A Day in the Life of a Citizen of Open Source Government” be like?

    1. Nozomi

      To me the answer to that question is only to be made through each person, because there are as many answers as there are individuals. The revolutionary effect of the invention of the blockchain lies in unleashing people’s imagination, freeing us from the current monopolistic worldview of neoliberalism. I personally feel it opens up a future where not only another world is possible, but many other worlds are possible!

  6. […] Nozomi Hayase explained the disruptive potential of Bitcoin. Now she further elaborates in a new essay on Falkvinge’s site, and explores how the Bitcoin ecosystem offers a different model of […]

  7. russpears

    What about using continuity as security. Our phones can now verify identity using meta data, 8 bio sensors and a long history of movements to work, home and the like. What potential do you think this will have.?

  8. […] Nozomi Hayase explained the disruptive potential of Bitcoin. Now she further elaborates in a new essay on Falkvinge’s site, and explores how the Bitcoin ecosystem offers a different model of […]

  9. […] Bitcoin, The Beginning Of Open Source Governance? […]

  10. […] oversight will be redundant. Tessa Hoser of Norton Rose Fulbright raised the possibility of open source governance, a substantial conceptual and cultural change from traditional […]

  11. Martin

    The development is certainly interesting. On one side we have the block chain idea that disruptsreplicating money without consensus. Interestingly, this is also a very good solution for DRM. On the other side we have the BitTorrent idea that allows and encourages replication. I think the block chain represents anything the majority of it’s users wants to be limited, like gold or land. The BitTorrent idea takes care of the rest. Or?

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