Bitcoin, The Beginning Of Open Source Governance?

Quality Legislation – Nozomi Hayase: 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.