Tag: bitcoin

Decentralised Monopolies

October 11, 2019


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[context: I never actually made a decision to step away from blogging and twitter, I just had more interesting things to do]

Ten to twenty years ago, one of the big buzzwords was decentralisation. New communication technology means that things that used to have to be organised by a central body can now be done spontaneously between users.

By decentralising an activity, you remove the bottleneck of the central coordinator. You reduce the status war of having a “leader” (who leads Extinction Rebellion?) You can evade countermeasures.

Also, it was generally assumed, you create choice. If you can have one decentralised network, you can have two, or ten, or a million.

Some of that was hype, some of it is true. But the issue of choice has turned out to be the most interesting. Replacing a hierarchical organisation (of authority, or of communication framework) with a decentralised network does do away with the nominal leader or controller. But it doesn’t do away with network effects. Indeed, by removing some of the barriers to scale it can greatly increase them.

The result of decentralisation plus network effects is the decentralised monopoly.

Outside of one special case I’ll come back to, I think the best examples of decentralised monopolies are open-source software projects. The essence of these projects is that there is no control; anyone can take the source code, change it, build it, and distribute it. That goes even for large widely-used things like the Linux kernel or the Apache webserver. But, most of the time, there’s no good reason to do so. The result is a voluntary centralisation.

The recent trend has been to recentralisation: the old centralised Television and newspapers give way to decentralised blogs and podcasts, which gives way to recentralised Facebook and Youtube. But that is still voluntary. The newspapers and television stations had control because they owned the actual infrastructure. Facebook and Google own some infrastructure, but in comparison to their actual business that’s negligible. Alphabet market cap is apparently USD 825bn, their balance sheet lists plant & equipment at USD 60bn.

That’s not really counterintuitive. It’s just network effects, and/or Schelling points. I’d love to see that recentralisation reversed, but I don’t think it’s possible — if there’s going to be a monopoly because of network effects, then a business that can pay to market its network is bound to outcompete a network that doesn’t have a central owner.

Where you have something that is made of decentralised contributions, the network effects get so much stronger than they do for pure consumers. You have to put real work into contributing, and the return on doing that work depends on the contributions of others.

Wikipedia is a prime example of this. Now it isn’t 100% decentralized, as somebody owns the servers and the domain name, so while anyone can contribute, there is an actual hierarchy with a root of sorts. But if you could design out that root authority, I don’t think it would change much. There is still just one Wikipedia, and all the work that is contributed to it can’t be contributed anywhere else instead without severely reducing its value. The decentralised selection of content (selection is of course the main work of an encyclopedia) still has to be done by those people who show up to do it, coordinated in some way that enough of them can put up with. If you fork it to produce some rival, as has been done a few times, your rival has none of the value.

That’s not to deny Wikipedia’s many flaws. There are many areas where it is systematically bad. But I think Wikipedia is what it necessarily must be. That’s the real point of decentralised monopoly — if it is not under some central control, then there is nobody who can make it other than what it is. This echoes, somewhat, the repost about political parties: how can one political party, open to anyone and run by its members, be different from any other political party open to anyone and run by its members? In a sense, complete openness is the most unyielding authority of all.

The one special case of decentralised monopoly is, of course, the bitcoin blockchain. It’s special because being decentralised and a monopoly are not incidental attributes, but the central aims of its design. As such, it bears the same relationship to a study of decentralised monopoly as dog breeding does to natural selection.

I explained the essence of what makes bitcoin before: it’s a voting system where you are fined for voting on the losing side. That rule is guaranteed to produce a consensus, and the consensus is likely to be “correct” from the point of view of the contributors. That’s the design aim, but see how similar it is to making a contribution to any other open collaborative project. Work that is put into maintaining a Myspace page, or keeping a presence on Gab, is nearly as wasted as the work spent mining an orphan bitcoin block. Either I’m contributing to the project that everyone else is using, or I’m shouting in the wilderness.

The most important aspect that drives this authority is probably not decentralisation as such, or even openness to contributions, it’s being public. Ed West tweeted yesterday that he wished he could maintain different “flavours” of his twitter stream — a toned-down one for the normies, and a more hard-hitting one for the fans. I’ve tried to do that sort of thing numerous times, but it never worked; it failed on the same point: if I wasn’t blogging or tweeting as AnomalyUK, I was losing most of my audience. Moldbug outed himself because he couldn’t resist discussing his technical work on UR. He didn’t have to do that — it is possible to be two people online, but it’s not possible to be one person with two public faces. They automatically become one under the pressure of being public.

That basically is the same point as I made about the decline of conspiracy: the political mode we are now in is the one that you get when nobody conspires to prevent it. As such, you would expect it to be the historical norm, unless it destroys itself. And it isn’t the historical norm. (This is just a restatement of Jim on left singularities).

Bitcoin as a Model Voting System

November 3, 2018


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[note: this is the thread that I was in the process of tweeting when my account got locked]


Bitcoin is fundamentally a voting system. That is the clever bit. Answering “Did A transfer his funds to B?” is a trivial piece of public-key cryptography. “Did A transfer his funds to B before attempting to transfer them to C?” is decided by vote. How is that not terrible???

Reason 1 is that it’s costly to vote. That has to be better than letting any scumbag vote for free. But not that much better.

Reason 2 is that you are then rewarded for voting, if and only if you voted for the winning side.

What that means is that there is a huge incentive to vote for what you believe to be true. Trying to vote against it is bound to fail, because everyone else has huge incentive to vote for it, and because it will cost you big money.

Forget the fashionable silliness of applying “blockchain” to every problem. Think about applying “give people incentives to get it right” to every problem. Think about making “non-human value maximisers” out of people.

Related: are secret ballots the worst thing you can do to a democracy?

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