Bitcoin, Innovation Of Governance; Lightning Rod Striking Balance Of Power

Photo credit – Dr. Frankenstein's dream II by Joaquin Casarini

In its seven years of existence, Bitcoin has gained wide mainstream attention with its disruptive potential in finance. Yet, currency is just its first application. The technology’s other potential lies in affecting governance and law. Democracy has weakened in the existing systems of governance. With concentration of power created through hierarchy, ordinary people are kept out of influencing policies or participating in vital decision-making. In this lock down system, many politicians do not represent true interests of the people and those who do are often blocked out. Can Bitcoin strike this balance of power? In this article, I argue how Bitcoin is not just an innovation of banking and finance, but at its core concerns innovation of governance systems, built upon a new security model that protects and empowers everyday people.

For many decades, activists, workers and concerned citizens have been working hard and dedicating their life to bring equality and justice. Unprecedented levels of government and corporate corruption in recent years have signaled a breakdown of checks and balances, while an extreme trend toward authoritarianism has discouraged popular dissent, often depriving people of hope.

Problems are not simply a lack of care or will for change. The fundamental issue seems to revolve around our basic view of humanity. Many tend to think that people are inherently good and operate with similar motives to themselves. The deep failure of democracy has shaken up these assumptions, showing this to be a naive and overly idealistic view of man. The 2008 financial meltdown and crisis of legitimacy exposed the existence of individuals who have a radically different makeup than the rest of the population. These are psychopaths, whom psychopathy expert Robert Hare called “social predators who charm, manipulate, and ruthlessly plow their way through life”.

Psychopaths exhibit total lack of conscience and empathy for others. They embody a dark side of individuality, with aggressive and narrow selfish desires that often come in conflict with the public good. Regulation has shown to be ineffective and laws often fail to offer protection because its very mechanism has been gutted and used by those in power for their advantage. The question now is how to account for this hidden vulture within humanity and build a system that is resilient to these adversarial forces.

Security Holes Within Representative Democracy

In that seminal white paper, mysterious creator Satoshi Nakamoto described Bitcoin as a purely peer-to-peer version of electronic cash that would allow “online payments to be sent directly from one party to another without going through a financial institution”. The core invention is distributed trust and Nakamoto stated that it was put forward as a solution to the “inherent weakness of the trust based model”, where financial institutions act as trusted third parties.

What is this inherent weakness identified by the inventor of Bitcoin? Most people are bound by empathy and naturally restrain actions in consideration of others’ needs. On the other hand, psychopaths are not governed by these internal laws of empathy and therefore cannot regulate self-interests. Moreover, as was articulated by psychiatrist Hervey M. Cleckley in Mask of Sanity, deception is at the core of psychopathy. With superficial charm, these predators hide their claws and teeth and gleefully trespass other’s boundaries, erasing their trails and even manipulating laws to get away with their crimes.

Trust is a vital foundation of human relationship and this has become psychopaths’ primary entry point for predation. These ruthless individuals fake empathy to elicit trust and then exploit it. When a governance model is structured in a manner that relies heavily on trust, such a system inevitably becomes vulnerable to this unknown member of society who can cleverly mimic good attributes of human nature and blend into society.

Representative democracy that requires people to trust those who claim to represent them in the form of elected officials has increasingly become a mask used by these ruthless individuals to hide and gain a grip on the populace. Behind the veil of secrecy, psychopaths leverage our trusting nature and construct promise-based governance. For instance, corporate masters behind the charade of electoral politics sponsor political candidates, who with campaign promises keep people passive and manage down their expectation levels. With future faking, which involves making plans that will never happen and gas-lighting, a tactic known to challenge one’s memory, they deceive and gain power over others.

Money dependent on systems of representation requires trust to work. It has now largely been turned into promissory notes and fabricated interest obligations, becoming a weapon for psychopathic control. The hidden captains of this managed democracy direct the flow of currency through financial engineering and have created incentive structures that are bent toward preserving their power. Radical deregulation is enacted under the banner of a ‘free market’ to manipulate interest rates and fiscal policy, creating never ending cycles of harsh austerity and usury.

Stimulated by toxic asset bubbles, derivatives and quantitative easing, these incentives work like invisible hands of the market, promoting fraud and depravity. It suppresses democratic values by controlling information, which is the currency of democracy, and constraining free speech with economic censorship, as was seen in the case of the financial blockade against WikiLeaks. All of this has resulted in the creation of a two-tiered justice system and derisked capitalism, where those in power are never allowed to fail and are not held accountable either by markets or the legal system.

Bitcoin as a New Security Model

Bitcoin addresses this inherent weakness of third party trust that has been exploited to create systemic parasitic rent-seeking structures. As asset-based digital cash, it offers an alternative to the promissory system of value creation by decree from above. Bitcoin’s underlying technology, the blockchain is a public asset ledger. This is a distributed database that records a history of transactions in the network without anyone in charge. Once data is verified, no one can undo it. This immutable timestamp goes beyond simple accounting of monetary transactions.

Bitcoin enables a new security model and it addresses the problem of security holes in the existing trust-based model of governance. Author and security expert Andreas Antonopoulos called this “trust by computation” that has “no central authority or trusted third party”. He explained this form of trust as follows:

Trust does not depend on excluding bad actors, as they cannot ‘fake’ trust. They cannot pretend to be the trusted party, as there is none. They cannot steal the central keys as there are none. They cannot pull the levers of control at the core of the system, as there is no core and no levers of control.

With this trust by computation, the need to trust institutions or central authorities is replaced with mathematics. Human trust is easily exploited by those prone to act with little concern for others. In the Bitcoin network where there is no point of control, attackers cannot fake trust. In order to gain control over the network, they would have to compromise math.

Power corrupts, and the best way to check and balance power is to not have these points of control in the first place. Thus, decentralization is a natural progression of security models. In a decentralized system, there is no ladder of power that psychopaths can climb and exploit others. Through distributing trust across a network and minimizing the necessity to trust a third party, the system removes vulnerabilities that often lead to such concentration of power.

Honest Account of the Darkness Within

So, how does Bitcoin distribute trust and secure this peer-to-peer network? In traditional systems, psychopaths rise to power, cheat and control the game. In these new cryptographic systems, psychopathic deception and attempts to cheat the system could manifest in covert chip fabrication, spam attacks and miners colluding in a mining pool to earn more than their fair share at the expense of honest miners.

Yet, the genius of this protocol is in the ability for this math-based network to enforce rules of consensus and fair play. At its foundation is Satoshi. The Japanese character of his name is translated as history of philosophy. This philosophy is like wisdom gained through history; an understanding of the contradiction inherent in man as both corruptible as well as perfectible. This is at the crux of Bitcoin’s game theory. Instead of naively assuming good intentions in others, the creator of this technology expected that some would try to cheat and attack the network. This is an acknowledgment that we live in a world where we cannot just eliminate psychopaths out of the equation.

This assumption is shared by developers who are committed to Satoshi’s vision of this particular security model. At the Hong Kong Scaling Bitcoin conference, developer Andrew Poelstra explained the mindset that Bitcoin lives in an adversarial environment and that the possibility of individuals acting selfishly and taking advantage of others’ good will needs to be factored into designing its governance. Bitcoin core developer Peter Todd also emphasized the necessity of adversarial thinking. In a Twitter interaction on the topic of security, Todd noted, “security isn’t about people promising they won’t do something, it’s about people being unable to do something”.

When greed and self-interests are condemned or denied, these aspects do not disappear, but are simply pushed out of sight and kept hidden. Efforts through law enforcement to regulate and punish selfish actors can just make them more cunning and deceitful. Bitcoin’s security model is based on honest accounting of our selfishness within. Instead of trying to shun this darkness, it finds a way to acknowledge and openly work with it.

Rule of Algorithmic Consensus

What governs Bitcoin is a consensus mechanism called proof-of work. By embodying Bitcoin’s particular security assumption, it works like a lighting rod. It attracts potentially destructive forces and diverts them in order to protect the network.

Through using bitcoins as tokens of value with a combination of cryptographic hash functions, game theory and economic incentives, a whole new economy is now being created. Bitcoin mining is a broadcast math competition engaged by a network of computers around the world with clear rules such as the total number of bitcoin created, a predictable issuance rate and automatic adjustment of mining difficulty. By using precious resources, miners work to solve difficult math problems. Each 10 minutes, problems are solved and whoever solves the problem first wins a fixed number of bitcoins. This process leads to both creation of money and clearing of transactions and it is designed to create economies of scale, with rewards proactively incentivizing all to follow the network rules of consensus.

Miners play a crucial role in the Bitcoin ecosystem. Yet, what makes the system resilient is not just miners and developers, but everyone’s participation in the network. This includes merchants, investors, entrepreneurs and users. Journalist Aaron van Wirdum describes how full nodes that relay and validate transactions within the network check and enforce Bitcoin’s consensus rules. He explains how “not all full nodes are equal from a network perspective”. The full nodes that miners, companies and developers run “all add weight to a set of consensus rules”. Yet, he emphasizes how all users play a crucial role in governance, as they are what ultimately gives Bitcoin value.

By removing third parties, the inventor of this technology found a way to create a direct feedback loop among all participants, aligning the balance of supply and demand with the force of consensus, which is more democratic than the current oligarchic system that operates under a pretense of democracy. In the current financially engineered markets, monetary supply does not correlate with the real needs of people. Yet, with this new Bitcoin market, monetary supply is created through real demand with the feature of infinite divisibility (bitcoin can be divided into 8 decimal points and more if consensus is reached).

The only way miners and developers get paid for their work is to be on the side of consensus, so they are incentivized to respond to the demands of users. This direct feedback loop created though decentralization is a crucial wire that connects the lighting rod with the ground.

Law of Self-Regulation

In the current system of representation, activists and human right lawyers have been trying to regulate greed and hold selfish actors accountable. ‘Power does not concede without demand’, yet in the existing model of governance, people struggle to make real demands. Any plea for change does not reach the merciless logic of this small section of society. While traditional efforts have shown to be ineffective in enforcing rule of law upon the elites, Bitcoin brings a new form of accountability through algorithmic regulation.

The Bitcoin incentive structure, designed as a lightning rod, captures and creatively engages the mind of psychopaths. Hare pointed out how a psychopaths’ brain is wired differently and how they have weakened moral force. Unlike most people, they cannot overcome temptations and restrain their actions in the face of opportunities for short-term self-gratification. Hare described this as a lack of ability to imagine the consequences of their own actions, noting that for psychopaths, “concrete rewards are pitted against vague future consequences – with the rewards clearly the stronger contender”.

Research from Vanderbilt University on the brain’s reward system in psychopathy further supports this finding. Lead researcher Joshua W. Buckholtz described how in experiments, individuals with high scores in psychopathy get heightened levels of dopamine responses in anticipated rewards compared to non-psychopathic subjects, showing how the brain of a psychopath is more susceptible to rewards. Buckholtz explained that this is because “once they focus on the chance to get a reward, psychopaths are unable to alter their attention until they get what they’re after” and these rewards override any concerns over threat or punishment.

With this ability to think like an attacker, market forces are used in the Bitcoin network to create a kind of electric circuit that allows energy to move naturally and convert it for good use. This enables a new law to regulate ruthless actions without relying on the moral strength of any individual or external authority. Robert Wolinsky, senior manager of blockchain research, explains how “Satoshi introduces a cost equation to cheating/collusion via the proof-of-work protocol”, making it clear to parties what the cost of attacking the network is and having them pay for it upfront. Furthermore, by making the rewards for playing by the rules higher than the value of attacking the network, it can proactively protect the system from the lack of impulse control of those who are instinctively programmed to strike with no remorse.

While the language of altruism and empathy doesn’t compute with those who have fallen from a communal ground, Bitcoin is a source code that speaks the language of cold and calculating rationale that can reach the selfish parts within ourselves and turn on the brain of the super computer of the world. Bitcoin mining reintroduces risk into the market. Here, concrete rewards are used to channel risk-taking and self-serving inclinations, making all compete for honesty and truth. The competitive drive of survival of the fittest, fueled by this global math contest does not create ruthless bloodbaths or make a killing on the back of someone’s misery, but instead is guided to serve the whole network. The fire of this hashing power burns aggressive and violent parts of our humanity, transforming them into generating global level security for all.

Power of Free Speech

Over the decades, many democratic governments have been taken over by cannibals within humanity and become vehicles of control that have lost their fail-safe. Increasingly, people are held hostage by corrupted political systems. While the flow of currency is controlled, free speech as a foundation of democracy has increasingly become permissioned.

Satoshi’s act of publishing the white paper in 2008 unleashed the power of free speech. Progress and true social change is only possible through each person freely sharing their ideas and associating with fellow men and women to innovate better systems. Bitcoin is an open source project that brings together diverse developers around the world who are inspired by Satoshi’s freeing of speech. By writing codes, they too have begun exercising free speech.

While psychopaths deceive us and exploit our trust with promises that never match real actions, Bitcoin, as a holy grail of the Cypherpunks is stewarded by those who speak with codes instead of making promises. By making software open source, which allows anyone to read and modify the codes, innovators of this system make themselves available to be held accountable by their equal peers. This freely available code calls for voluntary association with this language of risk and reward, which then builds the network demand for armory against any psychopathic attack.

Governance without central authority can at first seem inefficient. But it is more secure than the current system of representation. The more the system reduces the need to trust a third party, replacing it with a borderless network, the lower the security risk becomes. The Bitcoin blockchain opens a door into a pluralistic society where all can participate in creating many governance models and currencies that manifest our true values through the principles of mutual aid and voluntary association. Upon such a secure foundation, progressive ideas of basic income, universal health-care, free tuition as well as privacy and truly free markets can be built as an app.

As Bitcoin gains more value, the proof-of-work lightning rod attracts malicious attackers. Man is fallible and each person alone can’t account for themselves. But, through our genuine efforts of working together to keep the network decentralized, a spark is created that emanates light out of our own darkness. Every 10 minutes, the heart of the Bitcoin network expands, time-stamping on greed and antisocial impulses, so the beast inside does not grow too large. The networked consensus lights the lamp of liberty, validating the universal truth that ordinary people are the source of all legitimacy.

Photo credit – Dr. Frankenstein’s dream II by Joaquin Casarini

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Discussion

  1. LennStar

    While Bitcoin may be all you write here, there is still the problem with energy usage in it.
    It may work with Bitcoin, but you cant put all things in that one blockchain. You need thousands. And then it is impossible (or at least blatently wasteful) to power those chains with proof of work.

    So I put up the opinion here that the “lightning rod” for competition and harnessing its psycopathy power “for the chain” is only be able to work in a certain part of society. (as long as proof of work in simple hashing is used)

  2. David Gerard

    And yet, Bitcoin is increasingly centralised, with a tiny development team on one side, four Chinese mining companies on the other side and a price decided by Willybotting between OKCoin and Huobi. This suggests it may not be a good example for future emulation.

    1. Nozomi Hayase

      You might be interested in watching these videos by Andreas Antonopoulos.

      https://www.youtube.com/watch?v=BuqZvdA08JE

      In this, he addresses the issue of Bitcoin mining centralization and energy costs. He explained how Moore’s Law works and how the mining centralization has reached its peak in 2015 and will open the system more and more to a level playing field.

      With this, we can possibly have mining chips in consumer devices like toasters using solar energy and renewable energy, and millions of them producing energy.He also emphasized how mining centralization has not lead to any nightmare situation yet.

      Here is another video where he touches on the question of who controls Bitcoin.

      https://www.youtube.com/watch?v=uzwxewJipHI

      Bitcoin has five constituents and is not just run by one particular company and no one group is in charge.

  3. Lori

    You mention these four categories of participants: merchants, investors, entrepreneurs and users. My understanding of the role of the first three seems fairly straightforward, basically profit-motive-driven opportunities, so I assume those three roles are the lightning rod, although I’m not sure whether the activities associated with these roles will be the same under a Bitcoin regime as they are in the world as we know it. “Users” seems to be a fairly generic term. Am I to understand that a user is someone who is not a merchant, investor, or entrepreneur? Does a user play a relatively passive role in the Bitcoin ecosystem compared to people in the other three roles? Will the role of user be a lower hanging fruit than, say, the role of investor, who I imagine being someone already in possession of wealth (bitcoins?), or else what is invested?

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