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Crypto Constitutionalism

  1. 1. Crypto Constitutionalism - Public Choice and Constitutional Catallaxy JongseungKim (deframing@gmail.com) 2018. 11. 17
  2. 2. Institutional Technology Information Technology Two Characteristics of Blockchain Technology Institutional Cryptoeconomics Crypto Public Choice
  3. 3. What is Cryptoeconomics?
  4. 4. Making Sense of ‘Cryptoeconomics’(Joshua Stark) “Crytoeconomicsis the practical science of using economic mechanisms to build distributed systems, where important properties of that system are guaranteed by financial incentives, and where the economic mechanisms are guaranteed by cryptography.” Cryptography Economics + <Source:https://medium.com/l4-media/making-sense-of-cryptoeconomics-5edea77e4e8d> Signatures Hash Functions Zero-Knowledge Proofs … Game Theory IncentiveDesigns InstitutionalDesigns …
  5. 5. What is ‘Economic Design’? ü Game theory provides a structured language that helps in analyzing interactive situations; when several individuals have to make decisions, and the outcome depends on each person’s choice. ü The generalpurpose of mechanismdesign is to design games in order to achieve specific outcomes. ü Market Design :Auctions and matching or assignment problemsare in fact special cases of mechanism design. <Source:GuillaumeHaeringer, <Market Design :Auction andMatching>TheMITPress,2018> Game theory,behavioral economics,and market design all allow us to look at rules, and howpeople interact with them, understand them, circumventthem, and change them.
  6. 6. Game Theory – Mechanism Design –Market Design Game Theory The study ofmathematical models ofstrategic interaction betweenrational decision-makers Mechanism Design How to design the ‘ruleofthe game’? Market Design A kind ofeconomicengineering, utilizinggametheory, algorithms, simulations, and more ’94 : JohnHarsanyi,JohnF. Nash,Reinhard Selten ’05 :ThomasC. Schelling,Robert J.Aumann ’96 : William Vickrey,JamesMirrlees ’07 : LeonidHurwicz,Eric S.Maskin,RogerB. Myerson ’14 : JeanTirole ’12 : LloydS.Shapley,Alvin E. Roth Reverse Applied Behavior Psychology Behavior Economics Complexity Economics Influenced
  7. 7. What is Crypto Public Choice?
  8. 8. Definition of Public Choice Theory <Source:https://en.wikipedia.org/wiki/Public_choice> In political science,it is the subset ofpositive political theory that studies self-interested agents (voters,politicians, bureaucrats) and their interactions, which can be represented in a number of ways – using (forexample) standard constrained utility maximization, game theory,or decision theory. Public choicetheory is also closely related to social-choice theory,a mathematical approach to aggregation of individual interests, welfares, or votes. Public choice or public choice theory is "the use ofeconomictools to deal with traditional problems ofpolitical science".
  9. 9. Economics of Collective Decision-Making <Source:https://en.wikipedia.org/wiki/Public_choice> Methodological Individualism Homo Economicus Interdependence Cost • Collective action is composed of individual actions and on the rejection of any organic interpretation of the state. • A purely individualistic conceptionof collectivity is maintained. • The sum of external costs and decision-making costs are the cost of social interdependence. • The rational individual should try to reduce these interdependence costs to the lowest possible figure. • Homoeconomicus stands for a portrayal of humans as agents who are consistently rational and narrowly self-interested. • It attempts to maximize utility as aconsumer and profit as a producer.
  10. 10. Choice of optimal time interval between elections <Source:George Tridimas,‘Constitutional choicein ancient Athens’,2017>
  11. 11. Two Levels of Choices Choice within Rules Choice of Rules üHowto govern the actions of individuals within the network and prevent or mitigate opportunistic behavior üThe consensus over any transaction, corresponding to ‘choice within rules’(based on proof-of-workbyminers) üHowto navigate afast-changing world that requires rules and constraints to evolve üThe consensusrequired at the level ofthe codeor protocol:that concerningchoice of rules Constitutionalpolitics(concerningchoice within rules) placesboundaries aroundthe realmof ordinary politics. <Source:ShrutiRajagopalan,‘BlockchainandBuchanan:CodeasConstitution’, 2018>
  12. 12. Loi vs Droit <Source:Alain Supiot,‘HomoJuridicus’,2017> Loi/Lex •The generalidea of law (lot, legge, ley, Gesetz) includes the rules over which people have no influence. •Lex always expressesan imperative, but it can be a physical or a metaphysical power as well as a human power. •Thinking in terms of law, in all its forms, is certainly not self-evident and by no means universal. Droit •‘It derives fromius, a word which in Roman law referred to the formulas in which the judicialprocess was expressed. •It is based on the idea of direction (directum)and associates the idea of justice with that ofline ofconduct, an association already present in the Latin regula (ruler)or norma (set square).
  13. 13. Crypto Public Choice <Source:Alastair Berg,ChrisBergandMikayla Novak,‘CryptoPublicChoice’,2018> The applicationof public choice to blockchaintechnology Concernedwith the mechanisms and incentivesfor collective choice in two blockchain contexts a) Regarding the economicsof collective choices around the consensus mechanisms for updating the contents ofa shared ledger b) Communities making collective decisions around the design ofblockchain protocols,the upgrade of those protocols,forking those protocols, and making decisions as to whether to ‘cryptosecede’
  14. 14. Blockchain and the Supply of Public Goods ü Blockchains are institutional environments (protocols)which provide public goods in order that their ‘citizens’(users) can pursue diverse ends (simple exchange, contracting, wealth creation and so forth). ü There are at least two public goodsin the blockchain institutional environment. Consensus • Blockchain consensus mechanisms are economicdevices to compensate users (ora class ofusers) to performthe economically valuable task of updating the shared ledger. Security • Blockchains natively enforceproperty rights throughtheir combination of (asymmetric, or public key) cryptography and economicincentives. • Cryptography provides the base layer of security. <Source:Alastair Berg,ChrisBergandMikayla Novak,‘CryptoPublicChoice’,2018>
  15. 15. What is Constitutionalism?
  16. 16. The Meaning of 憲法 <Source:https://hanja.dict.naver.com/hanja?q=憲> 憲 = 害 + 目+ 心
  17. 17. What is Constitution? <Source:https://en.wikipedia.org/wiki/Constitutionalism> Constitutionis a set offundamental principles or established precedents according to which a state or other organization is governed. üThe term constitution comesthrough French from the Latin word constitutio,used for regulations and orders, such as the imperialenactments (constitutionesprincipis: edicta, mandata, decreta, rescripta). üPolitical economy theoryregards constitutions as coordinationdevices that help citizens to prevent rulers fromabusing power. üAn alternative view considers that constitutions are not enforcedby the citizens at- large, but rather by the administrative powers ofthe state.
  18. 18. Definition of ‘Constitutionalism’ <Source:https://en.wikipedia.org/wiki/Constitutionalism> Constitutionalismis "a complex ofideas, attitudes, and patterns of behavior elaborating the principle that the authority ofgovernment derives from and is limited by abody of fundamental law". üPolitical organizations are constitutionalto the extent that they "contain institutionalized mechanisms of power control forthe protectionof the interests and liberties ofthe citizenry,including those that may be in the minority". üUsed descriptively, it refers chiefly to the historical struggle for constitutional recognition ofthe people's right to 'consent' and certain other rights, freedoms,and privileges. Used prescriptively, its meaning incorporates those features of government seen as the essential elements ofthe...Constitution.
  19. 19. Constitutional Economics <Source:https://en.wikipedia.org/wiki/Constitutional_economics> Constitutionaleconomicsis a field of economicsand constitutionalism and analyzes the specific interrelationships between constitutional issues and the structure and functioning ofthe economy. ü Constitutional economicsdraws substantial inspiration from the reformist attitude which is characteristic ofAdam Smith's vision, and that Buchanan’s conceptcan be considered the modern-day counterpart to what Smith called "the science of legislation". ü Constitutional economicshas been characterized as a practical approach to apply the tools of economicsto constitutionalmatters.
  20. 20. Characteristics of ‘Constitutionalism’ <Source:Dieter Grimm,‘Constituionalism :Past,Present andFuture’,2016> 1. The constitution in the modern sense isa set oflegal norms,not a philosophical construct. 2. The purpose ofthese normsis to regulate the establishment and exercise of public power as opposed to a mere modification of a pre- existing public power. 3. The regulation is comprehensive in the sense that no extraconstitutional bearers of public power and noextraconstitutional ways and means to exercise this power are recognized. 4. Constitutional law finds its origin with the people as the only legitimate source of power. 5. Constitutional law is higher law. It enjoysprimacy over all other laws and legal acts emanating from government.
  21. 21. Constitutionalism vs. Constitutionalisation <Source:Edoardo Celeste, ‘Digital Constitutionalism’, 2018> Ideology that aims to establish and gurantee the existence of a normative framework forthe protectionof fundamental rights and the balancing of powersin the digital environment Processof productionof normative counteractionsvis-à-vis the alteration ofthe relative equilibrium of the constitutional ecosystem produced by digital technology Digital Constitutionalism Constitutionalisation of the digital Environment
  22. 22. Information and Incentives üEconomicsystem structured to deal with the twin problems ofinformation and incentives üHowcan we coordinate action — make exchanges, build relationships and communities — in a world ofincomplete information and potential rentseeking? üWhere cryptographers have found their solutions in public key cryptography and PoW mechanisms, economists have found solutions in markets, regulation, and institutions. <Source:https://medium.com/cryptoeconomics-australia/byzantine-political-economy-de25bf8f047e> Byzantine Fault Tolerance Robust PoliticalEconomy ConstitutionalQuestionsAlgorithmic Questions
  23. 23. Code as Constitutional Rules and Constraints “The Bitcoin protocolin particular is essentially a set ofrules written in computer code governing what is, and what is not, allowed by the participants in the Bitcoin network. No single participant can change the rules, but newrules (in the form ofupgrades to the open-sourcesoftware) can be advanced by different participants. The key to understanding Bitcoin’srulesis to understand consensus.” Computer Code <Source:ShrutiRajagopalan,‘BlockchainandBuchanan:CodeasConstitution’, 2018> ConstitutionalRulesand Constraints governingBlockchain Technology
  24. 24. From Authority to Governance üDecentralized platforms, like those that utilize blockchain technology are complex economic system that require rigorous design because they lack authority. üOn decentralized platforms, authority has to be replaced by incentives and other mechanisms. <Source:https://prysmgroup.attach.io/B1KdY0dEm?viewer=new> (Bureaucratic) Authority Rule of Office Bureaucratic Paper-basedSystem (Algocratic) Governance Rule of Code Technologically drivenCode-basedSystem
  25. 25. Code as Law <Source:Primavera DeFilippi,‘BlockchainandtheLaw’, 2018> 『LEX Cryptographica』 ‘Autonomous’Code-basedRules “By relying on blockchain technology, governmentscould regulate society more efficiently by reducing the costs of regulatory compliance and law enforcement,automating laws, while simultaneously reducing the degree of uncertainty that is inherent in the legal prose.”
  26. 26. Monitory Democracy <Source:JohnKeane, ‘TheLifeandDeath ofDemocracy’,2009> In the age of monitory democracy,in contrast to the earlier eras of assembly democracy and representative democracy in territorial state form,many new mechanisms are mixed and combined with new ways of publicly monitoring and controlling the exercise ofpower. What is meant by ‘Monitory Democracy'? The emerging historical form of'monitory' democracy isa 'post-Westminster' formof democracy in which power-monitoringand power-controllingdevices have begun to extend sideways and downwards through the whole political order. The chasteningofpower:LemuelGulliver trapped bytheLilliputians, fromC.E. Brock’s drawing,1894.
  27. 27. Constitutional Catallaxy <Source:https://medium.com/cryptoeconomics-australia/crypto-constitutionalism-c25d0c503ac>  Rule-Systems in which individuals(or firms, or algorithms) can make economicand political exchanges. üBlockchains have systems of governance. üBlockchains look a lot like countries. üThey have currencies(tokens),property(digitalassets), laws(protocols), corporations(DAOs),and security systems(proof-of-work,orproofof stake, or delegated byzantine fault tolerance, etc.). Blockchains are ConstitutionalCatallaxy!  Open source constitutionalordersin which participants are continually developingtherulesof thegame evenafter thegame has started.
  28. 28. “Man’s reason is the slave to his passions, and recognizing this about himself, man can organize his own association with his fellows in such a manner that the mutual benefits from social interdependence can be effectively maximized.” - James M. Buchanan and GordonTullock,<TheCalculusof Consent>

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