Financial Cryptography

Scott on blockchains -- could these fussy smartcontracts change anything?

Brett Scott disassembles the Bitcoin 2.0 visionary concept surrounding contracts:

The political vision 2.0

By removing a central point of control, decentralised systems based on code - whether they exist to move Bitcoin tokens around, store files, or build contracts - resemble self-contained robots. Mark Zuckerberg of Facebook or Jamie Dimon of JP Morgan Chase are human faces behind the digital interface of the services they run. They can overtly manipulate, or bow in to pressure to censor. A decentralised currency or a decentralised version of Twitter seems immune from such manipulation.

It is this that gives rise to a narrative of empowerment and, indeed, at first sight this offers an exhilarating vision of self-contained outposts of freedom within a world otherwise dominated by large corruptible institutions. At many cryptocurrency meet-ups, there is an excitable mix of techno-babble infused with social claims. The blockchain can record contracts between free individuals, and if enforcement mechanisms can be coded in to create self-enforcing 'smart contracts', we have a system for building encoded law that bypasses states.

Which is super, on the face of it, until we get to the nub of what contracts actually do for you:

This, of course, appeals to those who believe that powerful institutions operate primarily by breaching property rights and contracts. Who really believes that though? For much of modern history, the key issue with powerful institutions has not been their willingness to break contracts. It has been their willingness to use seemingly unbreakable contracts to exert power. Contracts, in essence, resemble algorithms, coded expressions of what outcomes should happen under different circumstances. On average, they are written by technocrats and, on average, they reflect the interests of elite classes.

That is why liberation movements always seek to break contracts set in place by old regimes, whether it be peasant movements refusing to honour debt contracts to landlords, or the DRC challenging legacy mining concessions held by multinational companies, or SMEs contesting the terms of swap contracts written by Barclays lawyers. Political liberation is as much about contesting contracts as it is about enforcing them.

And, boom! Which pretty much destroys the case for contracts on the blockchain as they are currently envisaged, because once enslaved to them there is no breaking them. Now, people aren't so stupid, and once the first person falls badly, the word will spread - DON'T CONTRACT ON THE BLOCKCHAIN!

Building the techno-political vision 3.0

.... The concept of the decentralised blockchain is powerful. The cold, distrustful edge of cypherpunk, though, is only empowering when it is firmly in the service of creative warm-blooded human communities situated in the physical world of dirt and grime.

So far, relatively little attention has been paid to the question of returning the blockchain back to the service of warm-blooded humanity. There is a sense of multisig, but its promise is seen in its elegant cryptography not in the underlying need. To paraphrase someone, Bitcoinatics have never seen a societal problem that they couldn't solve with liberal dollops of cryptography, or by redefining the problem to be a non-problem.

Let's look at that underlying. The proof of a contract, pudding-wise, is not the completion of the machinery, the end of the game, but the willingness of the participants to enter again, to hit Play Again. This is predicated on two things, being the economic efficacy of the last round(s) and the fair treatment of any surprises.

Surprisal, the property of a contract to cause issues that are unexpected, have to be dealt with in a fair way, and by this the ultimate test is literally whether society moves on with new trades, new contracts, new business based on this contract, on this set of rules.

I speak of course of dispute resolution. So the challenge then for the blockchain is how to introduce the resolution of surprises into the machinery.

We do not want a future society free from people we have to trust, or one in which the most we can hope for is privacy. Rather, we want a world in which technology is used to dilute the power of those systems that cause us to doubt trust relationships. Screw escaping to Mars.

It's not really a technological imperative but a human one: people don't and won't trust a technology that screws them over. And the Ethereum / Bitcoin / etc smart contracts world are busily building their system in perfect form to do exactly that: let a savvy programmer screw over a stupid customer who perforce can't read computer code.

The good news is that this thing called smartcontracts will not get off the ground when or if it screws over the illiterate. The bad news is that a lot of energy will be wasted up to that point, and then a lot more as the hyperintelligent supernaivetes moan on why the mainstream users don't want a part of it.

We could probably short-circuit that - and ask, how we get some form of surprisal management into these things, before they get broken in the market of public opinion?

Posted by iang at January 17, 2015 03:20 PM