The Philosophy and Ethics behind Blockchain (smart talk)

I have recently given a 7-minute smart talk on “the Philosophy and Ethics behind Blockchain” at the Saxion Smart Solutions Festival. The talk is intended for laymen who are interested in the intersection of Philosophy and Blockchain.

What follows is a video and transcript of the talk.

Purpose of my Smart Talk

The purpose of this smart talk is four-fold:

  1. Firstly, I contend that philosophy matters if we would like to understand the practical and social implications of Blockchain;
  2. I then give a brief description of Crypto-Anarchism, a philosophy that together with the Cypherpunk movement have deeply influenced the Blockchain space from its early beginnings;
  3. This is then followed by a description of the essence of the Bitcoin Blockchain. I also make a comparative analysis between the Bitcoin Blockchain and Crypto-Anarchism;
  4. Finally, I will conclude that the Blockchain space is moving towards the development of products that are very well in line with its initial philosophy. These products are Distributed Autonomous Organizations or DAOs in short.

Why Philosophy Matters

I believe that in order to understand something, and to understand where it’s going to we have to understand where it’s coming from. In other words, if we want to understand the practical and social implications of Blockchain, we cannot dismiss the philosophy that has given birth to it.

What is the Crypto-Anarchist and Cypherpunk philosophy?

The invention of Blockchain has a long and very intriguing history. Blockchain was invented in 2008 by Satoshi Nakamoto, a mysterious person or group of people whose real identity until this day has always been concealed. Although Blockchain was invented in 2008, we also know that Satoshi was heavily influenced by crypto-anarchists and cypherpunks.

In 1992, a crypto-anarchist called Timothy May invited a group of cryptographers, mathematicians, engineers, and others concerned with our liberties for a meeting. Their goal was to think of ways to protect

  1. their privacy,
  2. their political freedom,
  3. and their economic freedom through the use of cryptography.

Cryptography is the science or practice of making information unintelligible. It is a means to protect your communication. For example, if you make a purchase on a webshop you actually don’t send a message to the payment service provider that includes your name, your product Y, the amount X and the time Z. What you send is a message that is scrambled into something unintelligible so that whenever a person intercepts the message – for example a malicious hacker – will not be able to understand it.

Crypto-anarchists and cypherpunks are practical idealists so they developed real-life applications that supported their ideals. They developed such things as untraceable e-mail, untraceable payments. They discussed ideas of anonymous markets, self-enforcing smart contracts, secure messaging etc. Most of the technical elements that form the foundation of Bitcoin and the Bitcoin Blockchain were already developed by this group of people.

This group of people that came together in 1992 are known as Cypherpunks. I am sure that most people know at least one person from that group. The Dutchman Robert Gonggrijp (founder of XS4ALL) was part of this group as well as Julian Assange (founder of Wikileaks).

An important question we have to raise here is:

“What are Crypto-anarchists and Cypherpunks and what do they want?”

In the words of Timothy May (1994),

“Crypto-anarchy is the cyberspatial realization of anarcho-capitalism (libertarian anarchism)… Digital cash, untraceable and anonymous (like real cash), is also coming, though various technical and practical hurdles remain… For libertarians, strong crypto provides the means by which government will be avoided.”

Working in the same philosophical tradition as John Locke. The crypto-anarchists are also strict contractarians. They believe that two parties should be allowed to engage in any social and economic activity as long as both parties agree on the said activity. In other words, they believe that every social interaction should be legitimate as long as it happens voluntarily and without coercion. They are very skeptical of centralized institutions, such as governments as – according to them – governments are monopolistic coercive institutions. They want governments to be limited, and preferably non-existent. Crypto-anarchists don’t equate anarchism with disorder. They believe that within an anarchist society – thus one without a government – rules and regulations will emerge naturally from the ground up.

“And what are cypherpunks?”

Cypherpunks are activists who are also very skeptical of centralized institutions like governments. They use cryptography as the means to preserve the freedoms they deem important.

Let’s sum up what they want.

Crypto-anarchists/Cypherpunks
Transparency: Transparency of governments
Voluntaryism: Voluntaryist social and economic interactions
Privacy: Privacy for everyone
Propertarian: Strict property rights
Free markets: No institutional monopoly of money production
Decentralization: Decentralization of power. Social order happens from the bottom-up

Overview of the workings of the Bitcoin Blockchain

Now, let’s take a look at what a Blockchain is and see how it’s related to Crypto-anarchism and Cypherpunk. The most basic explanation of Blockchain is that it is a database, distributed among a network of computers so that every computer has an exact copy of this database. Every computer on the network – also called a node – verifies every mutation of the database. When someone tries to insert malicious data into the Blockchain, the network will easily discover it. In order to hijack the database, you need to be able to hijack a majority of the nodes on the network.

This is in stark contrast with traditional, centralized networks that contain a central server. The relationship between the central server and the connected devices is called a client-server relationship. However, one could also refer to it as a master-slave relationship. The central server has an administrator. This administrator can determine who Is adding what content to the database, he stores your password, your username etc. In such a network, you have to trust the administrator that he acts properly. These type of networks are very prone for corruption, censorship and attacks. In order to attack this centralized network, all you have to do is attack this central server. Therefore, we also say that it has a single point of failure (SPOF).

This is the most basic explanation of what Blockchain is and how its contrasts with centralized networks – but it’s also a boring explanation. A question I’d like us to explore is:

“What is the essence of Blockchain?”

The essence of Blockchain, I beleive, is that it creates trust in a network of unknown participants. It is an elegant solution to the possible corruption of digital networks. In its essence, it is a technology against censorship and corruption of digital networks. There is no need to appeal to authority, because rules are set by consensus, reached through active discussions and persuasion instead of coercion.

In this sense, the Bitcoin Blockchain perfectly matches the philosophy of Crypto-anarchism and Cypherpunk.

Comparison between Crypto-Anarchism and the Bitcoin Blockchain

Crypto-anarchists/Cypherpunks Bitcoin Blockchain
Transparency: Transparency of governments Transparency: Blockchain is open source and transparent. Everyone can look into the source code and follow every transaction.
Voluntaryism: Voluntaryist social and economic interactions Voluntaryism: Everyone is free to join and leave the network. Everyone is allowed to use Bitcoin, and not coerced into using it.
Privacy: Privacy for everyone Privacy: Anyone, anywhere can create a Bitcoin wallet without having to provide private information. Bitcoin addresses are pseudonymous and its encouraged to use a different Bitcoin address for every transaction.
Propertarian: Strict property rights Propertarian: When you own your private key of your wallet, no one can take it away from you.
Free markets: No institutional monopoly of money production Free markets: Introduces competition in money production.
Decentralization: Decentralization of power. Social order happens from the bottom-up Decentralization: Blockchain is copied and distributed over a large network of computers. There’s no need to appeal to authority to participate or to make transactions. In that sense, it is radically neutral. Everyone on the network, no matter whether you are a king or humble civil servant, is treated the same and according to pre-specified consensus rules.

What types of applications can we look forward to

Knowing where Blockchain came from. What can we say about the types of applications they would like to build? What types of applications can we look forward to in the future that hold true to this anti-censorship/anti-corruption philosophy of the Crypto-anarchists and Cypherpunks?

The ultimate types of application for them are Distributed Autonomous Organizations or DAOs for short. These are organizations, that don’t have a single point of decision-making. They have no board of directors, no select group of owners that have exclusive ownership rights, no one executive that directs the organization. These organizations, instead, are open and inclusive for anyone. They are ruled by machine consensus and not by the whims of a small group of people.

There are already DAOs. Bitcoin was the first DAO. There is no Bitcoin company, no Bitcoin executive. If you think about DAOs, imagine a Facebook without a Facebook CEO, a YouTube without a YouTube company, and an investment fund without a fund manager.

Timothy C. May, crypto-anarchist hero (1951 – December 15, 2018)

Tim May
Timothy C. May

News has arrived that Timothy May, the founder of the crypto-anarchist movement has died on December 15th, 2018. He has been a hero and inspiration for many in the crypto-anarchist/anarcho-capitalist community for his ideas to spread freedom and privacy through the use of cryptography.

Once an Intel senior engineer, he has written extensively about privacy, cryptography, and internet freedom. Without a doubt, he has been a great influence on the likes of John Perry Barlow (declaration of independence for cyberspace), Nick Szabo (smart contracts and Bitgold), Wei Dai (B-money), and Satoshi Nakamoto – the inventor of Bitcoin and blockchain. He has also contributed extensively to the Cypherpunks electronic mailing list, the same list that Satoshi initially used to spread his Bitcoin whitepaper and to invite cryptographers to join further developments of Bitcoin.

In his Crypto Anarchy and Virtual Communities (1994) paper, May describes Crypto anarchy as

the cyberspatial realization of anarcho-capitalism, transcending national boundaries and freeing individuals to make the economic arrangements they wish to make consensually.

He furthermore writes that

Digital cash, untraceable and anonymous (like real cash), is also coming, though various technical and practical hurdles remain. “Swiss banks in cyberspace” will make economic transactions much more liquid and much less subject to local rules and regulations.

Acknowledging the possible negative sides of crypto anarchism, May sees the development of crypto anarchism as mostly good. He believes that criminal activity within a crypto anarchist community are mostly exceptions and not the rule. He writes,

Is this a Good Thing? Mostly yes. Crypto anarchy has some messy aspects, of this there can be little doubt. From relatively unimportant things like price-fixing and insider trading to more serious things like economic espionage, the undermining of corporate knowledge ownership, to extremely dark things like anonymous markets for killings.

But let’s not forget that nation-states have, under the guise of protecting us from others, killed more than 100 million people in this century alone. Mao, Stalin, Hitler, and Pol Pot, just to name the most extreme examples. It is hard to imagine any level of digital contract killings ever coming close to nationstate barbarism.

Few mainstream news outlets today will write about Timothy May’s death and impact on our world, but for us who aspire to uphold Bitcoin’s initial principle to make (financial) freedom and privacy absolute, he will always be remembered for his inspiring contributions to secure our rights to life, liberty, and property.