IPDB: Designing Blockchain Governance
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Blockchains may provide the operating system for a new world, but what will that world look like? We dream of a crypto utopia, but the reality has been less hopeful. Proof of work is an environmental nightmare. Proof of stake formalizes the oversized influence of the rich. Since IPDB’s inception, we’ve been trying to create a system of governance that delivers the future we want. This is what we’ve learned. Greg McMullen, Executive Director of IPDB, presents his 9984 Summit: Blockchain Futures for Developers, Enterprises and Societies keynote on how to think about blockchain governance.
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IPDB: Designing Blockchain Governance
- 1. IPDB: How to think about blockchain governance
- 3. IPDB: How to think about blockchain governance
- 4. 1996
- 6. John Perry Barlow The Declaration of the Independence of Cyberspace, 1996 Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.
- 8. A lesson from 1996
- 10. IPDB: How to think about blockchain governance
- 11. People.
- 17. 1996 Web Creating relationships between people 2006 Social Defining relationships between people 2017 Blockchain Enforcing relationships between people
- 18. IPDB: How to think about blockchain governance
- 23. Climate Change
- 26. Mo’ money…
- 28. Whale plutocracy vs Tyranny of the majority
- 30. Rising inequality Mo’ money / Whale plutocracy Climate change Energy consumption Political extremism Tyranny of the majority / Whale plutocracy
- 31. Tokenization
- 35. - F. A. Hayek The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
- 36. IPDB: How to think about blockchain governance
Editor's Notes
- Greg McMullen greg@ipdb.io @gmcmullen https://ipdb.io IPDB coordinates a public implementation of BigchainDB that anyone can use, run by its member organizations, or caretakers. It’s a public blockchain database that puts governance first.
- Just under one year ago we held our first ever IPDB Caretaker meeting at the BigchainDB office. In the middle of last October these fine people got together and laid the groundwork for what we have achieved over the past year at IPDB. You’ve met most of these people here over the past couple of days, so I’m pleased that even after two days locked up with last October us they decided to come back for more this year. https://medium.com/ipdb-blog/first-ipdb-caretaker-meeting-governance-technology-295bfc45966a
- So what have we done since then? We’ve launched our test network, which currently has over 750 people signed up for developer accounts. We’ll be launching a limited production network soon. And we’ll be moving toward greater decentralization along the BigchainDB roadmap Tim will talk about. It’s exciting. Legal org Board of directors: https://ipdb.io/foundation/#board Articles https://ipdb.io/foundation/articles/ Bylaws https://ipdb.io/foundation/bylaws/ Terms of service - binding everywhere (we hope) GDPR - authenteq Pricing model by Jamila Omaar and Simon Schwerin https://medium.com/ipdb-blog/forever-isnt-free-the-cost-of-storage-on-a-blockchain-database-59003f63e01 22 mil bitcoin 4.6 mil eth But all the while we’re thinking about governance and how the network is run. So today I’ll talk about some of the stuff that goes into that thinking.
- Yesterday David Holtzman opened the conference by talking about his experience building the DNS, and watching domain names go from something no one cared about to one of the most important forms of digital property.
- He said that we’re in the blockchain equivalent of 1996, with mass adoption just around the corner. The original internet boom was an exciting time. I wasn’t old enough to build anything beyond stupid homepages - which are definitely long gone, so don’t bother looking. But I was old enough to know that something new and important was happening.
- There was a general feeling that network society was winning. Internet users were “netizens” and they declared independence. https://www.eff.org/cyberspace-independence Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather. I declare the global social space we are building to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear. Governments derive their just powers from the consent of the governed. You have neither solicited nor received ours. We did not invite you. You do not know us, nor do you know our world. Cyberspace does not lie within your borders. Do not think that you can build it, as though it were a public construction project. You cannot. It is an act of nature and it grows itself through our collective actions.
- And how did that turn out?
- So I see 1996 as two things. It’s an inspiration. We’re on the cusp of something big, and it’s flattering to see ourselves as the smartest and most innovative people building things. But it’s also a warning. 1996 had its share of smart and innovative people, and they built the internet we want to fix today. The signs were there. We should have known better.
- This was the first banner ad. It was an ad for AT&T, back in 1994. By the end of 1996, Doubleclick had launched and was helping advertisers track clicks and optimize ads during campaigns and defining a lot of the practices we see online today. Doubleclick isn’t a household name anymore but they were bought by a company you may have heard of - Google. https://gizmodo.com/5984165/this-was-the-first-banner-ad-on-the-internet So maybe the 1996 comparison isn’t so flattering?
- So when we’re thinking about blockchain governance in 2017, we need to remember that we may not be as smart as we think we are. We also need to think about exactly what we are building.
- The technological parts are exciting, the tools are powerful, and the engineering challenges are overwhelming. But first and foremost, everything we build is about PEOPLE. Which sounds really trite. But it’s true and I’m running with it.
- The 1996 internet revolution was about connecting people. Like Juan Benet pointed out this morning. It was about linking everyone together on this crazy worldwide network. It was a ton of infrastructure... but totally chaotic.
- While we’re digging up 90s classics… here’s a hit from 1993. https://en.wikipedia.org/wiki/On_the_Internet,_nobody_knows_you%27re_a_dog It’s funny because dogs can’t use the internet! But it also captures the feeling of people using the internet at this time. You can be totally anonymous if you want, and in fact aliases were expected. And there was a general attitude that you were weird if you met people from online in real life.
- It was a frontier. But there is money to be made taming a frontier. The next 20 years took things pushed further. We started to understand the context between people. We had friends and followers. We had dating sites. We had real name policies. More and more of our lives took place on the internet. Eventually there wasn’t a difference between the online world and the real world. Now it’s just the world.
- And like Kaspar said - 10 years ago this chart wouldn’t make sense to us. But it does now. We are totally comfortable with the concept of social graphs. Even if the reality is still a bit creepy. And now blockchain is being built on top.
- Blockchains are about enforcing relationships between people or between institutions. Enforcing sounds harsh - it can be! But it doesn’t have to be. Blockchains let us set out rules for our interactions with each other, with businesses, with society, that will be mathematically enforced. Whether that’s money, or identity, or voting, or new forms of collaboration.
- So just to review. 1996 web - relationships between People 2006 - defining relationships between people 2017 - enforcing relationships between people
- So now we know where we have been. We know where we are. But how do we decide where we are going? We need to look into the future.
- First we need to remember the bubble.
- Not this one.
- The bubble we all live in. The bubble insulates us from a lot of the negative things happening in the world. They still impact us, but for most of us it isn’t as big a hit as others feel. We’re all aware of these issues and we’ve already talked about them a lot but let’s just take a quick review without many details.
- First - rising inequality. Economists are in increasing agreement that there has been a stagnation in wages for working class people. And in this room we’re probably agreed that automation is leading to increased unemployment.
- We can probably agree that climate change is real, that humans are causing it, and it’s going to be disastrous for us in the near term. And even if the storm last night wasn’t caused by climate change, keep in mind - we’re looking at a potential 150 million climate refugees in the next 40 years. https://www.theguardian.com/environment/2009/nov/03/global-warming-climate-refugees
- We’ve had a huge upsurge in far right politics across the west, further fuelled by refugees. Including Brexit and the AfD here. And I feel like I’m forgetting someone… Oh well.
- But together these trends are incredibly dangerous and threaten the world order we think we’re building. We need to keep this in mind. There are also trends happening inside our bubble that we need to keep in mind.
- Our ecosystem is flush with funding right now. This is great for building stuff. And while we lawyers break into a cold sweat thinking about the legal issues, ICOs let projects get funded on their own terms. But it also threatens the ethos of failing fast. Promising projects should be allowed to die if they don’t produce something useful or if the team can’t deliver. ICO level funding threatens to let them limp along for years, wasting money and brain power.
- Proof of work is a big problem. The energy used in bitcoin mining increases about 5% per month. It’s closing in on being 0.01% of total global energy consumption. Which doesn’t sound like a lot, but remember that 1) bitcoin is currently only used by a few people and 2) it’s increasing at 5% per month. https://digiconomist.net/bitcoin-energy-consumption This gets even worse: Right now close to 75% of mining is based in China, and 75% of electricity in China comes from coal. Doing the math: that’s a lot of coal.
- So we move away from proof of work to proof of stake, and we get to a problem that kept popping up yesterday - whale plutocrats. The biggest investors in a network get to control it. Or if we move too far the other way to one vote one person we get to tyranny of the majority. This conflict isn’t insurmountable, or even necessarily bad for some systems. But for the core networks that we are building a society on, or the systems running basic services, we want to make sure we have fair, responsible, humane systems in place for deciding how things work!
- Artist’s rendition
- When I mapped these things out I found the problems inside the bubble line up with the problems outside the bubble in interesting ways. Our bubble’s trends look like they might actually make the problems outside the bubble worse. That is really worrying.
- There’s one more trend inside the bubble that’s really huge right now, and related to all of the others - tokenization and the application of cryptoeconomics to everything. https://blog.bigchaindb.com/tokenize-the-enterprise-23d51bafb536 https://blog.bigchaindb.com/tokenize-bits-and-atoms-6f2ed6800ba6 https://blog.bigchaindb.com/starships-and-tokens-d8c32728a24b It’s beautiful in its simplicity. Give everyone a piece of the value of a network, so when the network increases in value everyone wins. But it has to be done carefully. Trent went into a lot of the considerations you’d look at in designing a token yesterday, bringing together data providers and data consumers in the Ocean Protocol. https://blog.oceanprotocol.com/from-ai-to-blockchain-to-data-meet-ocean-f210ff460465 But the further you move down the stack into the operating system for society writ large, tokens have to be even more carefully designed. There is a lot of bad stuff that can happen and a lot of incentives to exploit the system. Tokens are a bounty on both security and inventive design.
- So one risk is that incentives aren’t aligned properly, or incentives change. For example: Everyone who holds bitcoin has an incentive to increase the value of the token. But the timeframe for that increase is different for different people. - Users just want high volume and low transaction fees (and enough stability that they don’t feel like chumps) - Hodlers want max increase in value. Miners want short term stability and increases to pay off hardware investment and electricity cost. Led to scaling debate that has lasted for years and resulted in… multiple forks?
- Let’s tokenize a road network. Everyone in the community is a stakeholder. Can vote on road design, signage. pay for priority traffic. Pay more at rush hour, maybe get paid to stay at home? But that doesn’t work for everyone. What about a rich person who values peace and quiet over everything else, hates car noise? Buy almost all the allotted traffic. Price out neighbours! Economically against his interest and irrational to most of us, but very rational if he has different incentives from everyone else.
- Imagine: A healthcare token that allows insurers to incentivize healthy behaviour like eating veggies and exercising… but requires total surveillance of lifestyle. also allows rich people to buy their way to the front of the line for organ transplants. Or encourages the poor to sign up for clinical trials of untested drugs A self-driving car token that allows whales to bid up the price of safety so they are prioritized in self-driving car accidents Mercedes is already suggesting that its cars will prioritize the driver if there is a choice to be made.
- Hayek. Nice to quote Hayek in the former seat of the DDR. The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. https://en.wikiquote.org/wiki/The_Fatal_Conceit#Ch._5:_The_Fatal_Conceit Or to put it in the words of the great cultural critic Kendrick Lamar: Be humble. https://www.youtube.com/watch?v=tvTRZJ-4EyI
- So IPDB is wrestling with these trends. We are trying to navigate the landscape, and keeping inside and the outside of the bubble in mind, along with the lessons of 1996. We are trying to stay humble. It’s a huge challenge, and very intimidating, because together we are building structures that will enforce relationships between people for the next 25 years. It’s easy to feel like the bad trends are winning, but after a couple of days like this it feels like we are up to the challenge. So let’s get building.
- And thank you to our caretakers. They are the people who will really make this happen.