Another neglected 2022 draft! This one about economics and even Bitcoin! And much more that's still pertinent!

Another draft posting that I drafted a couple of years ago, that for some reason never went up... but should have. The points raised here are still important! And even if none of you humans read it... well... the AIs will! They read everything...

== More financial maunderings from the Neolithic… or early 2022 ==

I gave a webinar on the future of online payment systems a few years back, with emphasis on how the time may have come - at last - for micropayments systems to partially replace irksome advertising. Four great legal scholars weighed in, with edifying perspectives! Some of you may find it interesting. 

The discussion was based upon my articles on how micropayments may be the future as advertising fades  and Advertising cannot maintain the internet in Evonomics Magazine. Also how micropayments systems might save journalism and enhance user freedoms.

In fact, lately there's been perked-interest among some folks involved in current payments systems, in trying one more time to make micropayments work. Especially asking WHY did all previous attempts fail? And what's the secret sauce for success?

As it happens, I can answer both questions.

   

== Human societies try to develop positive sum competition - it ain't easy! ==

Unlike today's weird Putin-worshippers, I’m no commie. I believe that reciprocally competitive systems are the most creative… it’s how nature made us -- though through 4 billion years of competition that were brutal and bloody and horribly inefficient. (Nature's way.) 

In human societies, we aim to reduce the side effects that make competition brutal and robbed it of any grace, ruining its outputs in much of evolution and certainly in 99% of past (mostly-feudal) societie. I refer to death (nature's way is bloody!) and its equivalent in a fair society… cheating.   Most historical societies tamed a little of the bloodiness, but none of the cheating by lords and kings and priests, who almost always made a mockery of fair competition.

Till along came Adam Smith and glimmering awareness of a magic trick -- the one leading to everything we’ve attained… reciprocal accountability that applies even to the mighty!  

Oh, we've done it way imperfectly, so far. Still, even partial steps along that path have empowered us to work wonders. See some of my missives in praise of Adam Smith! Adam Smith - Liberals, you must reclaim him.

So yes, we need competitive markets to create the vast wealth that could let us end poverty and save the world. And those competitive markets function best when competing individuals, partnerships, families, enterprises perceive a chance to profit and prosper! 

On the other hand, all good things in the world become toxic when too heavily concentrated! 

You name it… Oxygen, water, food, electricity... and wealth… And today's skyrocketing wealth disparitites have zero justification under market economics. They are monstrous betrayals of markets and creative competition.

And they lead to death.

== The future of Bitcoin? ==

A hot topic in early 2022. Not so much now?  There is a way to "ban" crypto currencies, though I see no one mention it. 

Let's start with an ironic fact. Blockchain based token systems are not totally secret!  Yes, they use crypto to mask the identity of token (coin) holders.  But those holders only "own" their tokens by general consent of all members of a communal 'shared ledger' that maintains the list of coins and which public keys stand ready to be turned by each owner's encrypted keys. 

In that sense it is the opposite of 'secret,' since the ledger is out there in tens of thousands of copies, on just as many distributed computers. Attempts to invade or distort or corrupt the ledger are detected and canceled en-masse. (The ecologically damaging "mining" operations out there are partly about maintaining the ledger.)

All of this means that - to the delight of libertarians - it will be hard to legislate or regulate blockchain token systems. Hard, but not impossible. For example, the value of Bitcoin rises and falls depending on how many real world entities will accept it as payment. And governments have been hammering on that, lately, especially China.

There is another way to modify any given blockchain token system, and that is for the owners themselves to deliberate and decide on a change to their shared economy... to change the ledger and its support software.  No single member/owner can do that. Any effort to do so would be detected by the ledger's built-in immune system and canceled. 

Only dig it, all such ledger-blockchain systems are ruled by a weird kind of consensus democracy. While there is no institutional or built in provision for democratic decision making in the commons - (Satoshi himself may have back doors) - there is nothing to stop a majority of bitcoin holders from simply making their own, new version of the shared ledger and inserting all their coins into it, with new software that's tuned to less eagerly reward polluters and extortionist gangs. 

Oh, sure, a large minority would refuse. Their rump or legacy Bitcoin ledger (Rumpcoin?) would continue to operate... with value plummeting as commercial and government and individual entities refuse to accept it and as large numbers of computer systems refuse to host rump-coin ledger operations. Because at that point, the holdouts will include a lot of characters who are doing unsavory things in the real world.

If you squint at this, it's really not so radical.  It is just an operating system upgrade that can only occur by majority consent of the owner-members of the commune.  Preceded (one assumes) by lots to discussion and argument and open-source testing of the revised OS. 

In fact, this is a concept that has already been done in some blockchain systems… look up “hard and soft forks”.  Still, too few are aware of this, or that eventually fed-up governments may create incentives and disincentives that make this path obviously in the self-interest of most coin holders. It offers a method to 'regulate' in ways that leave unaffected the potential benefits of blockchain - self-correction, smart contracts and the like - while letting system users deliberate and decide for themselves to revise, a trait that should be possible in any democratic or accountable system.

== Repeat two words: Money Velocity! ==

One of the strongest signs of a vibrant economy is called Money Velocity - MV- which measures how often dollars change hands. In a busy economy, with lots of employed folks spending and buying goods and services, MV is moderately high. History does give examples of MV being too high, causing sharp inflation. But you’d have to be my age to remember that.  Ever since the Reagan era, Money Velocity has fallen, in lockstep with every single Supply Side Theory tax cut-gusher-gift to the rich. And across the last year (2021 when I wrote this: still, the overall notion is worth pondering) the collapse of MV became a nosedive!

This is diametrically opposite to what Supply Side fans confidently predicted, over and over again. In science, when a theory is always wrong, it gets abandoned. When it is always wrong — and the SAME magical incantations are used to support trying it yet again — then the word is “insanity.”

Adam Smith himself said this (without using the term MV, of course.) When the already rich get sudden bursts of yet-more cash, they do not hurry to invest it in bold enterprises or in factories producing more (supply) goods and services!

Oh, a few do. But a vast majority squirrel the new largesse away into capital preservation investments, rent-seeking (“rentier”) holdings, asset bubbles and cheat schemes, exactly as Smith described in Wealth of Nations. They don’t even buy all that many yachts! Any cub scout will tell you that takes dollars out of circulation and eviscerates Money Velocity.

(2024 note: this is exactly why housing prices have skyrocketed despite high interest rates. Because the super rich - especially inheritance brats - don't give a fig about interest rates, as they snap up swathes of the US housing stock with cash purchases, while the home-building companies they control limit production in order to keep prices high.)

In contrast, if you invest similar amounts in working stiffs - say hiring them to fix infrastructure - the cash gets spent almost immediately and hence MV rises. That truth is almost as pure as what the previous paragraph said about the rich opting for SLOW money. 

Also note that Joe Biden’s “expensive” Infrastructure Push will put no more cash to work that way than Supply Siders since Reagan poured into the aristocracy. In fact, they are VERY similar amounts… with diametrically opposite likely outcomes, especially re MV. 

And of course, that is what terrifies McConnell and those screaming against the Dems' stim bill. Because he knows it will likely work.

(2024 note: what I predicted in those three paragraphs came exactly true!  The 2021-22 Pelosi bills triggered the best economy in 60 years and massive inshoring of manufacturing, re-industrializing the USA.)

What is crazier? That U.S. conservatives cling to the magical 'supply side' voodoo incantation (one of many!) that has been utterly, utterly disproved? 

Or that Democratic politicians are unable to parse this contradiction - and the spectacular success of their policies - in clear terms the People can understand?  

You understood what I just wrote. The People would, as well. 

Crypto is not a dog... or doge... or is it?

As this goes online, Bitcoin and other cryptocurrencies are in apparent price-freefall. This posting - prepared over a month ago - will not discuss the recent coin market meltdowns. Still, it seems a good moment to offer some light on one aspect.

First, I actually know a little about this topic. I've consulted with a number of companies, agencies, etc. about the blockchain era. More generally, about the conceptual underpinnings of "smart contracts" and the eerie, free-floating algorithms that were long-predicted by science fiction, but have become reality, as we speak. (Yes they are out there; some may be living right behind the screen you are looking at.)

One topic generating excitement - though the notion has been floating since the 1990s - is that of Decentralized Autonomous Organizations, or DAO, which are portrayed in many novels and utopian manifestos as a way for humans (and their helpers) to bypass sclerotic legacy nations and codger institutions with self-organizing action groups, using NFTs and Blockchain tokens to modernize and revitalize the concept of guilds -- global, quick, low-cost, boundaryless, open and inherently accountable. Bruce Sterling wrote about this notion in the last century (as in his novel, Heavy Weather) and other authors, like Neal Stephenson (Cryptonomicon), Karl Schroeder (Stealing Worlds), as well as Cory Doctorow (Down and Out in the Magic Kingdom), Annalee Newitz (Autonomous), and many others roam this conceptual landscape with agility! 

To a large extent, versions of DAO thinking underlie moves by nations like Estonia (or "E-stonia") to modernize democracy and public services. Also spreading widely is the related notion of Citizen Assemblies. 

But today I want to focus now on just one aspect of this brave new world: whether DAOs can find a middle ground between autonomy and accountability, by self-policing to reduce bad behavior by predators, while retaining their better, freedom enhancing traits.  

== Can blockchain-based DAOs - especially coin communities - self-police? ==

This is an important topic! Because major legacy nations like China are already stomping hard, using as justification the way cryptocurrencies do empower the very worst of parasitic human criminals. That justification might be reduced or eliminated if DAOs or blockchain communities could find a positive-sum sweet spot, cauterizing predators while preserving their role as gritty irritants, creating pearls of creative freedom.

Although there is no way to "ban" crypto currencies in general, there is an approach to making them much more accountable to real life law.

Let's start with an ironic fact. Blockchain-based token systems are not totally secret!  

Yes, they use crypto to mask the identity of token (coin) holders.  But those holders only "own" their tokens by general consent of all members in a communal 'shared ledger' that maintains the list of coins and which public keys stand ready to be turned by each owner's encrypted keys. In that sense it is the opposite of 'secret,' since the ledger is out there in tens of thousands of copies on just as many distributed computers. Attempts to invade or distort or corrupt the ledger are detected and canceled en masse. (The ecologically damaging "coin mining" operations out there are partly about maintaining the ledger.)

All of this means that - to the delight of libertarians - it will be hard to legislate or regulate blockchain token systems. Hard, but not impossible. For example, the value of Bitcoin rises and falls depending on how many real world entities will accept it in payment. And as stated above, and some governments have been hammering on that, lately.

There is another way to modify any given blockchain token system, and that is for the owners themselves to deliberate and decide on a change to their shared economy... to change the ledger and its support software.  No one member/owner can do that. Any effort to do so would be detected by the ledger's built in immune system and canceled. 

Only dig it, all such ledger-blockchain systems are ruled by a weird kind of consensus democracy. While there is no institutional or built in provision for democratic decision making in the commons - (Satoshi himself may have back doors: a separate topic) - there is nothing to stop a majority of bitcoin holders from simply making their own, new version of the shared ledger and inserting all their coins into it, with new software that's tuned to less eagerly reward polluters and extortionist gangs. 

Oh, sure, a large minority would refuse. Their rump or legacy Bitcoin ledger (Rumpcoin?) would continue to operate... with value plummeted as commercial and government and individual entities refuse to accept it and as large numbers of computer systems refuse to host rump-coin ledger operations. Because at that point, the holdouts will include a lot of characters who are doing unsavory things in the real world.

There are vernaculars for this. Indeed it has been done, occasionally, in what are called soft and hard 'forks.' 

== A forking solution? ==

A “fork,” in programming terms, is an open-source code modification. Usually, the forked code is similar to the original, but with important modifications, and the two “prongs” comfortably co-exist. Sometimes a fork is used to test a process, but with cryptocurrencies, it is more often used to implement a fundamental change or to create a new asset with similar (but not equal) characteristics as the original.

With a soft fork, only one blockchain will remain valid as users adopt the update. Whereas with a hard fork, both the old and new blockchains exist side by side, which means that the software must be updated to work by the new rules. But the aim is to render the old code so obsolete and so widely spurned that it ceases to have any use to anyone.

As an example: Etherium did a fork when about $100 million worth of coins (that would now be worth tens of billions) was tied up in a badly written smart contract that a hacker was stealing. The community decided to kill that smart contract showing that immutable blockchains can change if 50% +1 decides to change it.

If you squint at this, it's really not so radical.  (Don't even ask about the blockchain "spork!"). It is just an operating system upgrade that can only occur by majority consent of the owner-members of the commune.  As pioneered at the famous University of Fork... or...

And so the stage is set to 'regulate' in ways that leave the potential benefits of blockchain - self-correction, smart contracts and the like - alone while letting system users deliberate and decide to revise, a trait that should be possible in any democratic or accountable system.

Now, is there a way to use a Grand Fork to change the insane approach to coin "mining" so that ledger maintenance can be achieved without encouraging planet-killing pollution and waste?

== And finally... ==

The concept that I called equiveillance or look-back accountability, in The Transparent Society - and Steve Mann called sousveillance - is labeled "inverse surveillance" by members of the Asimov Institute, in Holland. “How can we use AI as a Panopticon to promote beneficial actions for citizens by organizations?” A proof of concept was explored in a 2021 hackathon. 

Well well. These are harder concepts to relate than they might think, I know from experience! Yet they are fundamental to the very basis of our kind of civilization.

We can't own information

A cogent and interesting article from Forbes - Privacy is Not a Property Right in Personal Information - examines the well-intentioned “privacy reforms” implemented to some degree in Europe and pushed in the U.S., that would grant individuals “ownership of their own data,” plus the right of portability, to choose where it is to be stored and used.

As the author – Mark McCarthy - shows, this is a well-motivated… and utterly stupid approach to addressing a very real problem. The age-old problem of asymmetry of informational power, with elites like the rich or corporations almost-inevitably absorbing every bit and byte and fact about us, to use as they wish.

Look, I absolutely share that fear! It is why I wrote TheTransparent Society, because there are potential solutions, using the very same technique that has already worked increasingly well for 200 years. In contrast, the “data ownership” proponents cannot point to a single time in the history of our species when the citizens of a commonwealth commanded their elites “don’t look-at or know about me!” with even a scintilla of success. Again, that never happened. Because it cannot possibly work.

I’ve been dealing with this “don’t look!” fetish for 25 years, and they never learn. Ten years ago there were howls to banish and make illegal face recognition systems! And if that sounds quaint, well, talk of that vague “reform” is back, alas: “It’s time to regulate facial recognition and affect recognition,” says Kate Crawford, a researcher at Microsoft. And yes, every worry should be considered. Yet, talk of curbing such technologies never forces the tide to go back out. Nor will any restrictions hamper elites, in the slightest. 

There is an alternative approach, the one responsible for all our freedom and progress. And it is always considered last.

In The Transparent Society I point out that all our great, positive-sum “arenas” - like markets, democracy, science and justice - thrive amid openness and light, but wither when shadows prevail. Forbidding others to know things is inherently aggressive and threatening, especially when they might view you as one of the dangerous elites they worry about.

And sure, I avow that yes, letting the mighty simply vacuum up everything about us, while they get to do mysterious things with our information, benefiting or even conspiring… heck, that’s a sure-fire path to Big Brother. So what's to be done?

There are some approaches that might work! Say, if hundreds of thousands of citizens were to pool their data rights in ways that could exert group efficiencies and group market power. This is simply an extrapolation of the greatest social innovation of the 2^nd half of the 20^th Century, the NGO. So we already know something like it could work.

Even more cogent is the suggestion by Jaron Lanier that we should not so much own our information -- creating a mythical and preposterous notion that you can exclude others from ever touching it -- as retain strong interests in it. A right to get feedback data on how it is being used, by whom, and to get paid micro-royalties if some corporation or elite entity benefits from using it.

But the fundamental remains the same. We are not made safe by hiding from power! It never worked and it won’t work in the future.

What gave us this window of freedom was not preventing surveillance, but insisting on sousveillance… looking back at power. Stripping the mighty naked, so we can supervise. Because it matters much less what they can know about you than what they can do to you!

And – as we have learned on the streets with our cell-cameras -- the only and best way to control what others – even the police – do to you is to let them know that even the watchmen are being watched.

== The Crux ==

How do you "own" something that -- when it (inevitably!) leaks -- can be infinitely duplicated at zero cost?

Is the word "ownership" even remotely applicable?

Even "control"?

Well, Tim Berners-Lee has some credibility... and he claims that a new online realm called "Solid" will resonate with the global community of developers, hackers, and internet activists who bristle over corporate and government control of the web. “On Solid, all the information is under (the user's) control. Every bit of data he creates or adds on Solid exists within a Solid pod–which is an acronym for personal online data store. These pods are what give Solid users control over their applications and information on the web. Anyone using the platform will get a Solid identity and Solid pod. This is how people, Berners-Lee says, will take back the power of the web from corporations.”

Um, while I’d love to be proved wrong, I remain boggled that folks believe there aren’t ten thousand ways for our information to leak through every such promise, if not through spychips in your Alexa or Charlie… or keyboard... or copy-plus-interpolation of every datum entering or leaving Solid. Go ahead and make that world! I’m concerned about the Olympian realms that elites are making for themselves. And dig it, they are likely to make much better use of secrecy protection methods than you ever will.

== News from the Transparency Front ==

Microsoft intends to develop two blockchain products designed to give consumers greater control of their personal data. One is an encrypted personal data store, or "identity hub," a combination of a user's personal devices and cloud storage; their permission would be required for third parties to access it. Also a "wallet-like app" that people could use, among other purposes, to manage these permissions to their data, including the ability to revoke them when desired. Decentralized identifiers (DIDs) do not require a central authority because they are registered on a distributed ledger. IBM, Accenture and RSA are working on similar concepts.

Fine. Go ahead and try. There may come a first time - in the history of our species - when a general approach to equalizing power via concealment will work.

Microsoft also aims at a system to allow a high volume of low-value payments, perhaps like the micropayments systems I have been pushing for almost a decade, which would then have the potential to smooth our commerce, save journalism empower creatives and finally end the era of domination of the Internet by advertising. Here's a good goal.

In a related development San Diego startup LunaDNA, which aims to create a community-owned database of donated genetic/health information for medical research, has filed with securities regulators to issue shares to people who provide their data, building  a credit union like co-op around an anonymous genomic and health database. People who donate their DNA/health data would get shares based on the value of the data, which LunaDNA calculates based on current market value. For example, a full human genome nets 300 shares.Three weeks of fitness/nutrition data gets two shares. "If LunaDNA ever makes money from fees charged to researchers who tap into the database or drug discovery royalties, shareholders would get dividends."

Another such venture is “Hu-Manity.co” whose app would let peoplespecify how their medical data can and cannot be used. Pharmaceutical companies could potentially pay each user $10 a month for access to their data, Etwaru says. The drug companies would also pay Hu-manity.co for access.

Combine these developments and we move toward a world predicted slightly in Neal Stephenson's SNOWCRASH but more significantly in Web philosopher Jaron Lanier's notion about personal data. To date, there have been three notions about our information future. 

== Three Notions ==

Here are the three most common mythologies:

(1) We are spinning into a dystopian age when the mighty elites will know everything about us and the little gal and guy will be helpless pawns. Naturally, this is the future we see depicted in a lot of sci fi films and novels because dystopia makes drama trivially easy. Besides, this is clearly where a world mafia-oligarchy wants us to go, so some paranoia is justified!

 All decent folks who want to preserve freedom and individual opportunity rightly oppose this death mode for the Enlightenment. But in opposition, we've seen some pretty simplistic notions.

2) A wild west future of all information floating free and thus empowering the masses. Yes, at a very simplistic - and hence dumb - level, this conveys the notion of generalized accountability that I tout in The Transparent Society. Sure, I'd rather err on the side of everyone seeing! Because all our great enlightenment systems -- markets, democracy, science, justice courts and sports - all of them wither and die in fog or darkness. But the arguments in favor of transparency are more subtle than this. And yes, humans want some privacy and control. And any decent civilization will include those things.

3) Paternalistic walls. Alas, the vast majority of smart, sincere paladins fighting for freedom and rights and against the dystopian age almost all reflexively turn to demanding laws that restrict information flows. Supposedly empowering citizens to declare "you cannot know this about me!" Enshrining "ownership of my own information." 

It all sounds so positive and freedom-y, that no one -- certainly in Europe -- ever dares to respond: "Not only can that not possibly work, at any level, but it is exactly what elites and oligarchs want most -- walls, guarded by law and the state, within which they can connive and reach out to control." 

Alas, every last error that I just described can be found in well-meaning initiatives like this proposed "Internet Bill of Rights," which would have none of the intended benefits and a whirling myriad of horrific, unintended consequences. 

I mentioned Jaron Lanier's notion that merits repetition. It was not that we should own all information about ourselves, but that we should have strong interest in our data, and get to benefit from anyone who uses it... much in the way that patent laws weren't originally meant to prevent use of inventions, but to ensure the inventors got paid a fair share, so that sharing would make sense to them.

Which brings us back around to the stunningly foolish assertion that any kind of political agitation - or even law - can possibly thwart the arrival of easy-cheap face recognition. Again, the fear of sliding into an Orwellian surveillance/control state is genuine and terrifying! Alas, it is trivialized and lobotomized by those who think they can stymie the "surveillance" part, by howling at the mighty "don't look at us!" 

It is the "control" part that can still be prevented, via the method we used with increasing effectiveness for 200 years -- answering surveillance with sousveillance. 

== An Addendum... and Alert... on "war with Iran" ==

John Bolton and Mike Pompeo have long sought war with Iran. Now, Iranian President Hassan Rouhani has repeated an earlier threat to block ships from leaving the Persian Gulf if the U.S. government continues to seek to block Iranian oil exports. Rouhani’s comments came a day after the U.S. sent an aircraft carrier to the Persian Gulf on Monday, ending the longest period the U.S. had gone without an carrier in the Gulf over the past two decades.

Examine the pieces. The US Navy has been trying to ramp down tensions in the gulf, and especially to keep its most valuable assets out of a friction zone and potential death trap. ALso especially since the Persian Gulf is a lot less important to us, now that the U.S. has achieved effective energy independence. We shouldn't tuirn our backs on the region. On the other hand, it is an opportunity to stop being in reflex-reactive mode, no longer letting that crazy realm control what we do.

Ah, but our professionals have (alas) insane bosses. By clamping on the Iranian economy and ordering the USS Stennis into the gulf, Pompeo, Bolton and the Bannonites are setting a stage for what the Saudis and Trump and Benjamin Netanyahu all desperately need, an international distraction from their own mounting troubles. 

A “Tonkin/Reichstag/Gleiwitz/Sarajevo/Remember-the-Maine” “Incident” (look them all up!) is something that our professionals in the military/intel/diplomatic corps have skillfully forestalled, till now. But for how much longer? 

Especially when even the Iranian mullahs would benefit from a brief, colorful, pippety-poppety “tomahawk war” that does no major harm, but gives them an excuse to clamp down on their own millions of young liberals? 

Of course, the top winner of such a dog-wag is blatantly obvious. Only one man can possibly rake in all the marbles… when V. Putin steps up to spread the Russian umbrella and “protect our neighbor.” At which point Russia gets the Persian satrapy it has sought for 300 years. Thanks to Vlad’s agents in the White House.