Using bitcoin is like living in caveman times
Like you, and your brother in law, and your older kid, and your neighbor down the street, and your Uber driver, I’ve been learning about the blockchain lately.
My deep dive coincided with my reading of an important book by Steven Pinker called The Better Angels of our Nature. For a summary of that book, see Bill Gate’s blog. A light summary is that Pinker very thoroughly describes that these are the least violent times in history and that there has been a general trend downwards from our most violent times as hunter gatherers to our current, very peaceful — though it might not seem intuitive — times.
I’m going to get back to the blockchain, but I have to mention a couple more things from Pinker’s book first. Two things he talks about that were causal to reduced violence in history were 1) the formation of governments and 2) well functioning democracies. Governments themselves are really important to reducing violence because they help people avoid something called a Hobbesian Trap wherein it’s safer to engage in a preemptive strike than it is to attempt cooperation. Once governments are in place to protect citizens from committing violent acts on each other, they tend to get carried away and commit a great deal of violence on their citizens, so along came well-functioning democracies to check the power of the governments.
With these ideas floating around in my mind at the same time as the libertarian and sometimes anarchist views of many cryptocurrency enthusiasts I had an “aha moment”. Crytocurrencies and the internet are a new layer of society. They are a virtual place where people can hang out and interact and exchange value with one another just like they can in the real world. But this cyber world has been referred to as a wild west. It’s a hunter-gatherer world of violence and lawlessness.
Rogue bands of hackers are looking to prey on anyone who is vulnerable just exactly like roving bands of humans used to ambush and kill vulnerable small groups back in the days before history. Just last week $32MM of Ether was stolen by hackers. The rogue hackers want money or LOLs just like the cave people wanted some fruit or access to hunting grounds. Looking at the risk reward profile of those times vs the risk reward profile of today’s modern hackers on the blockchain it’s exactly the same. The reward is tangible — it’s money. The risk? Almost zero. And even if it’s these hackers are only a few bad apples, they can cause damage to the whole group.
In prehistoric times this was solved with the advent of monarchies and rulers. In today’s times we can skip through a bunch of history straight to functioning democracies. But there’s still a piece missing. In order to create a governing body that controls what happens in the world of cryptocurrencies, it needs to have some power. Significant power. It needs to be seen as the sole authority to commit violence against the citizens of the community. And the violence it commits (the risk it creates for citizens contemplating violence of their own) must be a real deterrent. It’s not enough to say “if you try to steal from the crypto wallets of people on this blockchain we’ll take the money back”. It needs to be “if you try to steal from the crypto-wallets of people on the block chain we can mess up your life” (eg send you to jail).
Therein lies a problem. Cryptocurrencies currently lie outside of any system of government, so no governing body of a cryptocurrency can possibly have the power to jail someone. And even if some governments, for example the US government, put rules on cryptocurrencies that could jail thieves, it wouldn’t be sufficient. Thieves would just move to another country who’s government wasn’t as enlightened.
I believe this problem is surmountable, and maybe it can be done with the help of software that metes out punishments (for every $1 we catch you stealing, we’ll take $2 from you). Or maybe it can be done with software that’s so robust that it becomes impossible to steal. Transparency seems to help. “We see that you, Stealy McStealface stole and you are hereby ostracized on the blockchain and in real life.” Proof of stake models for cryptocurrency governance also seem to help because they prevent the owners of the currency protocol from committing violence (stealing) from the participants, and thereby mirror representative government.
All in all I don’t know the answer, but I feel certain that the rampant theft and cowboy times in the cryptocurrency world have the same underlying causes, and potentially some of the same available solutions that rampant violence had in the history of the real world.
