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.

Institutions, Machines, and Complex Orders (Part 2): Moral and Politics

It is a characteristic feature of Modernity to separate between private morality and public ethics. The first concerns the ethics of principles by virtue of which each individual governs his own sphere of autonomy. Each individual, while not interfering in the interests of third parties, is a legislator, judge, and part of their own moral issues. The law regulates conflicts of interest between individuals, giving legal protection to a certain range of interests and systematically denying it to others (Friedrich Hayek, Law, Legislation and Liberty, Volume I, “Norms and Order”, 1973). For example, in almost all modern legal systems the interest to move and, fundamentally, to leave a territory is protected through the freedom of locomotion. In the meantime, a producer may feel prejudiced by the mere existence of competition and nevertheless he may be denied the right to protection of his monopoly (since a “right” is a legally protected interest). In both cases, questions of principle and questions of social utility are combined.

In most modern systems, the interest to circulate freely is solved more by addressing questions of principles than of social utility – the right to freedom of locomotion is enshrined without addressing arguments about the utility of denying legal protection with respect to another interest. While the problems of protectionism and competition are considered mainly in terms of their social utility, the arguments about whether a certain individual or group of individuals have, as a matter of principle, the right to monopolize an economic activity by the mere fact of belonging to a certain ethnic group, estate, or guild today sounds ridiculous, but not in the past.

The widespread distinction practiced by Max Weber between ethics of conviction and ethics of responsibility continues in force. Individuals, in their private lives, have the right to make decisions following the ethics of conviction, although their principles may be debatable, obsolete, incongruous, and arbitrary. In any case, the consequences will have to weigh on the agents of the decision themselves. On the other hand, the consequences of the decisions of politicians extend to the whole society. The ethics of responsibility becomes relevant here, which, although it may come into conflict with the ethical principles most widely spread among members of society – that is, the current morality – it must address issues related to social utility. This is to say that a substitution of the current morality for welfare economics would be operated.

However, the Weberian notion of ethics responsibility brings with it all the problems of instrumental reason: the means-that is, the resources to be sacrificed-must be proportional to the ends-in this case, the social utility-but remains open to definition what are the values ​​that will define social utility. This is how the question of principles is reintroduced, the discussions about what is right and what is wrong, i.e. morality, in the political sphere. Correlatively, the critiques around the notion of subjective or instrumental reason once formulated by Max Weber are also applicable to the aforementioned welfare economy, so that they retain special validity.

[Editor’s note: Here is Part 1 of the essay. You can find the full essay here.]

Nightcap

  1. A closer look at US hostage recovery policy Danielle Gilbert, War on the Rocks
  2. How to restore democracy in Venezuela Ryan Berg, RealClearWorld
  3. How markets and the State leave the community behind Oren Kass, New York Times
  4. I won’t drive the roundabout Irfan Khawaja, Policy of Truth

Legal Immigration Into the United States (Part 15): Conservative Inadequacy with Respect to Immigration

Surely, in addition to those structural tendencies for immigrants’ propensity to tend left, there is a seemingly built-in electoral incompetence of conservative and other market-oriented parties. I, for example, have been waiting for years for Spanish language Republican ads on local radio (mostly cheap radio). Even modest ones, place-holding ads, would do some good because silence confirms the Democrat calumny that the GOP is anti-immigrant. And one wonders endlessly why the GOP seldom builds on the religious ethics of immigrants which are often conservative on a personal level even as they, the immigrants, are otherwise collectively on the left. Work hard, take care of your family, keep your nose clean, save, don’t bother others, are not messages that sound alien to the Mexican immigrants I know, to Latin Americans in general, nor even to some Indians who come over.

Incidentally I make the same disparaging comments about the one French political party that is unambiguously market oriented and its inactivity toward the Muslim immigrants who are numerous in France. Several years ago, Pres. Sarkozy had two nominally Muslim women in his first cabinet but this did not set an example, unfortunately. One was Attorney General. (Note: France being France, both women were very attractive, of course!) In the US, it’s as if the Republican Party and the several libertarian groups, had in advance abandoned the immigrant grounds to the Democratic Party. It’s perplexing to me personally because every time I take the trouble to describe Republican positions in Spanish to the main immigrant group in my area, I am met with considerable interest. Explaining the attractiveness of small government to Mexican immigrants fleeing the results of one hundred years of big government that is also deeply corrupt shouldn’t be a colossal endeavor, after all. Indians have had a similar experience though they would have to be approached differently. I don’t know about the increasing number of Chinese immigrants. It would be a good question to explore.

In the past ten years or so, the GOP has fallen into a crude trap. It has allowed the Democratic Party to treat its insistence on the rule of law with respect to illegal immigrants, and on the respect of sovereign boundaries, as proof of the GOP being anti-immigrants in general. The GOP, as well as libertarian groups, have failed even to point out the obvious in connection to immigration: New immigrants compete most directly with older immigrants for jobs, housing, and government services. The facts around sovereignty add to immigrants’ generic left-tropism to ensure that the bulk of new immigrants will come and replenish a Democratic Party otherwise devoid of program, of ideas, and of new blood. (The young Dominican-American woman who won a primary in New York in June 2018 is quickly turning into an embarrassment for the mainstream of the Democratic Party.) Immigrants have the power to snatch victory out of the mouth of the Demos’ defeat.

The various libertarian groups don’t speak clearly on immigration aside from emitting the occasional open borders noise that, fortunately, they seem afraid to pursue or to repeat. Who remembers anything the Libertarian presidential candidate said on the subject during the 2016 presidential campaign? I know of one dangerous exception to the observation that libertarians seldom finish their thoughts on open borders. Alex Tabarrok argued forcefully the case in his October 10th 2015 article in The Atlantic: “The Case for Getting Rid of Borders Completely.” In spite of its leftism, the Atlantic retains its high prestige and its influence, I think. What it publishes cannot easily be ignored. The article is enlightening and tightly argued but almost entirely from an ethical standpoint. Unless I missed something important, the author seems to sidestep the fact that no Western system of ethics requires that anyone commit collective suicide, or even, risk it. Thus he by-passes the lifeboat argument completely. This single article leaves pure libertarians in an intellectual lurch because it poses squarely the central issue of the moral validity of the tacit pact of mutual defense that is the nation- state: The nation-state violates your values through its very existence. Without the nation-state, it’s unlikely your values will survive at all.

[Editor’s note: in case you missed it, here is Part 14]

The Factual Basis of Political Opinions

“Ideology is a menace.” Paul Collier says in his forthcoming book The Future of Capitalism and I couldn’t agree more: ideology (and by extension morality) “binds and blinds”, as psychology professor Jonathan Haidt describes it, and ideology, especially utopian dreams by dedicated rulers, is what allows – indeed accounts for – the darkest episodes of humanity. There is a strange dissonance among people for whom political positions, ideology and politics are supremely important:

  • They portray their position as if supported by facts and empirical claims about the world (or at least spit out such claims as if they did believe that)
  • At the same time, believing that their “core values” and “ideological convictions” are immune to factual objections (“these are my values; this is my opinion”)

My purpose here is to illustrate that all political positions, at least in part, have their basis in empirically verifiable claims about the world. What political pundits fail to understand is not only that facts rule the world, but that facts also limits the range of positions one can plausible take. You may read the following as an extension of “everyone is entitled to his or her own opinions, but not to his or her own facts”. Let me show you:

  • “I like ice-cream” is an innocent and unobjectionable opinion to have. Innocent because hey, who doesn’t like ice-cream, and unobjectionable because there is no way we can verify whether you actually like ice-cream. We can’t effortlessly observe the reactions in your brain from eating ice-cream or even criticize such a position.
  • “Ice-cream is the best thing in the world”, again unobjectionable, but perhaps not so innocent. Intelligent people may very well disagree over value scales, and it’s possible that for this particular person, ice-cream ranks higher than other potential candidates (pleasure, food, world peace, social harmony, resurrection of dinosaurs etc).
  • “I like ice-cream because it cures cancer”. This statement, however, is neither unobjectionable nor innocent. First, you’re making a causal claim about curing cancer, for which we have facts and a fair amount of evidence weighing on the matter. Secondly, you’re making a value judgment on the kinds of things you like (namely those that cure cancer). Consequently, that would imply that you like other things that cure cancer.

Without being skilled in medicine, I’m pretty sure the evidence is overwhelmingly against this wonderful cancer-treating property of ice-cream, meaning that your causal claim is simply wrong. That also means one that you have to update your position through a) finding a new reason to like ice-cream, thus either invoking some other empirical or causal statement we can verify or revert back to the subjective statements of preferences above, b) renege on your ice-cream position. There are no other alternatives.

Now, replace “ice-cream” above with *minimum wages* and “cancer” with “poverty” or any other politically contested issue of your choice, and the fundamental point here should be obvious: your “opinions” are not simply innocent statements of your unverifiable subjective preferences, but contain some factual basis in them. If political opinions, then, consists of subjective value preferences and statements about the world and/or causal connections between things, you are no longer “entitled to your own opinions”. You may form your preferences any way you like – subject to them being internally consistent – but you cannot hold opinions that are based on incorrect observations or causal derivations about the world.

Let me invoke my national heritage, illustrating the point more clearly from a recent discussion on Swedish television.  The “inflammatory” Jordan Peterson, as part of his world tour, visited Norway and Sweden over the past weekend. On Friday he was a guest at Skavlan, one of the most viewed shows in either country (boasting occasionally of more viewers than the large sport events) and– naturally– discussed feminism and gender differences. After explaining the scientific evidence for biological gender differences*, and the observed tendency for maximally (gender) egalitarian societies to have the largest rather than smallest gender-related outcomes, Peterson concludes:

“there are only two reasons men and women differ. One is cultural, and the other is biological. And if you minimize the cultural differences, you maximize the biological differences… I know – everyone’s shocked when they hear this – this isn’t shocking news, people have known this in the scientific community for at least 25 years.”

After giving the example of diverging gender rates among engineers and nurses he elaborates on equality of opportunity, to which one of the other talk show guests, Annie Lööf (MP and leader of the fourth largest party with 9% of the parliamentary seats) responds with feelings and personal anecdotes. Here’s the relevant segment transcribed (for context and clarity, I slightly amended their statements):

Peterson: “One of the answers is that you maximize people’s free choice. […] If you maximize free choice, then you also maximize differences in choice between people – and so you can’t have both of those [maximal equality of opportunity and minimal differences along gender lines]”

Lööf: “because we are human beings [there will always be differences in choice]; I can’t see why it differs between me and Skavlan for instance; of course it differs in biological things, but not in choices. I think more about how we raise them [children], how we live and that education, culture and attitudes form a human being whether or not they are a girl or a boy.”

Peterson: “Yes, yes. That is what people who think that the differences between people are primarily culturally constructed believe, but it is not what the evidence suggests.”

Lööf: “Ok, we don’t agree on that”.

So here’s the point: this is not a dispute over preferences. Whether or not biology influences (even constitute, to follow Pinker) the choices we make is not an “I like ice-cream” kind of dispute, where you can unobjectionably pick whatever flavor you like and the rest of us simply have to agree or disagree. This is a dispute of facts. Lööf’s positon on gender differences and her desire to politically alter outcomes of people’s choices is explicitly based on her belief that the behaviour of human beings is culturally predicated and thus malleable. If that causal and empirical proposition is incorrect (which Peterson suggests it is), she can no longer readily hold that position. Instead, what does she do? She says: “Ok, we don’t agree”, as if the dispute was over ice-cream!

Political strategizing or virtue signalling aside, this perfectly illustrates the problem of political “opinions”: they espouse ideological positions as the outcome of enlightened or informed fact-based positions, but when those empirical statements are disproved, they revert to being expressions of subjective preference without a consequent diminution of their worth! Conservatives still gladly hum along to Trump’s protectionism, despite overwhelmingly being contradicted in the factual part of their opinion; progressives heedlessly champion rent control, believing that it helps the poor when it overwhelmingly hurts the poor. And both camps act as if the rest of us should pay attention or go out of our way to support them over what, at best, amounts to “I like ice-cream” proposals.

Ideology is a menace, and political “opinions” are the forefront of that ideological menace.

____

*(For a comprehensive overview of the scientific knowledge of psychological differences between men and women, see Steven Pinker’s The Blank Slate – or Pinker’s well-viewed TED-talk outline.)

Nightcap

  1. The world’s first political risk consultants John Hulsman, Aeon
  2. Why We Should Say Yes to Drugs Andrew Sullivan, Daily Intelligencer
  3. A primer on fentanyl(s) Mark Kleiman, Reality-Based Community
  4. Moral responsibility Scott Sumner, EconLog

Tech’s Ethical Dark Side

An article at the NY Times opens:

The medical profession has an ethic: First, do no harm.

Silicon Valley has an ethos: Build it first and ask for forgiveness later.

Now, in the wake of fake news and other troubles at tech companies, universities that helped produce some of Silicon Valley’s top technologists are hustling to bring a more medicine-like morality to computer science.

Far be it from me to tell people to avoid spending time considering ethics. But something seems a bit silly to me about all this. The “experts” are trying to teach students the consequences of the complex interactions between the services they haven’t yet created and the world as it doesn’t yet exist.

My inner cynic sees this “ethics of tech” movement as a push to have software engineers become nanny-state-like social engineers. “First do no harm” is not the right standard for tech (which isn’t to say “do harm” is). Before 2016 Facebook and Twitter were praised for their positive contribution to the Arab Spring. After our dumb election the educated western elite threw up our hands and said, “it’s an ethical breach to reduce our power!” Freedom is messy, and “do no harm” privileges the status quo.

The root problem is that computer services interact with the public in complex ways. Recognizing this is important and an ethics class ought to grapple with that complexity and the resulting uncertainty in how our decisions (including design decisions) can affect the well being of others. My worry is that a sensible call to think about these issues will be co-opted by power-hungry bureaucrats. (There really ought to be ethics classes on the “Dark Side of Ethical Judgments of Others and Education Policy”.)

I don’t doubt that the motivations of the people involved are basically good, but I’m deeply skeptical of their ability to do much more than offer retrospective analysis as particular events become less relevant. History is important, but let’s not trick ourselves into thinking the lessons of 2016 Facebook will apply neatly to whatever network we’re on in 2026.

It hardly seems reasonable to insist that Facebook be put in charge of what we get to see. Some argue that’s already the world we live in, and they aren’t completely wrong. But that authority is still determined by the voluntary individual decision of users with access to plenty of alternatives. People aren’t always as thoughtful and deliberate as I’d like, but that doesn’t mean I should step in and be a thoughtful and deliberate Orwellian figure on their behalf.