Preface to the series

Technology is not neutral and its purpose is exclusive. To achieve the goal through technology is a specific value choice. Technology is reshaping our society as well as achieving its goals. This is especially true of blockchain technology.

In addition to exploring the issue of “for whom, how and where to develop”, the social science research on blockchain is of greater significance: different from the technologies focusing on productivity such as internal combustion engine and electric, blockchain, as an information technology with consensus as its core, has had many connections with social sciences since its birth: different ways to obtain consensus seem to be It is a metaphor for the competition of ideology, even related to the security and efficiency of the whole system. Social science research can in turn inspire us to design the basic principles of blockchain.

The question is starting to get interesting. What about decentralized politics in the future? What are the differences of modernization under different consensus mechanisms? Is the governance of blockchain reasonable? Can the thinking experiment of buying tickets for election and mobile democracy be realized on the blockchain?

This field is of great significance, but few people have explored it. Therefore, I launched the topic “the social significance of blockchain” to translate, collate and learn these interesting views with you.

Hope to have more friends to participate in translation collation. Blockpunk (boundless community)

1. For more than 30 years

Economists and cryptographers are actually studying the same problem, and neither of them is aware of the important impact they have on another.

In fact, how to coordinate a society and how to ensure that communication can be trusted seems irrelevant, but it is actually the same problem in different contexts.

The viewpoint of this article is very simple: the “Byzantine fault tolerance” studied by cryptologists is the same as what economists call “robust political economy”.

Robust Political Economy: in the context of political economy, “robustness” refers to the ability of a political and economic design to improve social welfare when rational motivation and information acquisition deviate from ideal assumptions. Austrian economists’ criticism of socialism has established the foundation of robust research.

This cognition is of great significance to understand the history of world economics and the future development of crypto economic system. To explain why, let’s take a quick look at one of the most important debates in the history of economics.

2. The information problem of planned economy

Since Adam Smith, economists have been trying to explain where wealth comes from: why some countries prosper and others do not. By the 20th century, the question had become about which of the two economic systems, the socialist planned economy or the capitalist free market, was more likely to bring prosperity.

Adam Smith thinks that the characteristic of market economy is to produce order spontaneously, and social order comes from market incentive.

On the contrary, Marx believed that the state or the central coordinating body can produce better results than the free market through conscious and well thought out plans.

At first, liberalists questioned the planned economy mainly on the issue of incentives: if the fruits of labor are redistributed and there is not enough incentive, how can socialism persuade people to work hard? (see the discussion of socialism in liberty and liberalism, 1887.)

In 1920, Hayek’s respected teacher Ludwig von Mises published the economic calculation of socialist countries. In this article, Mises’s query on the socialist planned economy is to the point. He accurately recognizes the key to the planned economy – the information problem.

Mises believes that in the market economy, price constitutes the signal of the highest value utility of goods or services, which provides guidance for production.

But how does a central planner decide whether to send rubber to a tire factory or to a hose factory? In a market economy, the factories most in need of rubber are willing to offer the highest price, but there is no natural price system in the planned economy – consumer prices are determined by planners, and rubber is distributed according to their orders.

After that, Hayek expanded his teacher’s theory. He published one of the greatest papers in the history of Economics: the application of knowledge in society. In the book, he described the price mechanism as a distributed “knowledge network”.

Central planners try to acquire some kind of general “knowledge” about the economy through sampling statistics, and set the prices and supply and demand of goods and materials in a trial and error way. Such a centralized “knowledge” can not be compared with the sum of the distributed “knowledge” of the market, because the central planner can never obtain all the information about the market.

3. Central computing socialism

The history of the second half of the 20th century seems to have proved the superiority of market-oriented economy. In contrast, the planned economy seems to fade out of people’s vision.

Polish economist Oscar Langer acknowledged the importance of price in economic activities, but he thought that the price system could be simulated mathematically.

We can think of the price system as a computer. In his book “the theory of socialist economy” published in 1936, Langer thought that the socialist economy could “simulate” the price system through repeated experiments.

And 30 years later, with the development of computer science, Langer reexamined his view. “If I rewrote my paper today, my task would be much simpler,” Langer wrote. “My answer to Hayek is that we put complex equations on a computer, and we can get solutions in less than a second. The cumbersome marketing process is out of date. In fact, it can be regarded as a computing device before the digital age. “

There is a natural affinity between the socialist ideal and computing technology, and there is a growing belief that computers can simulate market mechanisms, and they can make long-term plans and implement plans that markets can never achieve. In China, “Ai building socialism” has been mentioned many times, and a “new infrastructure” campaign to build a new communication base, more data centers, wider data collection systems and stronger AI is being prepared.

4. How decentralized is Hayek’s free market?

Generally speaking, Langer’s centrally planned economy is often compared with Hayek’s decentralized market.

But there are still many centers in Hayek’s so-called decentralization.

Marxists are right on one point, and many countries have indeed intervened in the free market. Although the property is private, it relies heavily on the enforcement of government authorities – courts, prosecutors and the police.

However, both Hayek school and Marxists have neglected one point, that is, property right is not only a matter of law enforcement, but also lies in the identification and verification of property right, and the state undertakes most of the work here.

The main duty of a modern state is to recognize, manage and verify the account books of social relations. The state manages a huge account book, which includes property rights, social security rights, citizenship, and who can participate in political activities and so on.

This is a very important and largely undetected power. The state can manage these important books because it is a large “trusted” entity. Of course, our trust in it can not stand up to scrutiny.

The invention of blockchain provides us with a new institutional choice.

5. New types of political economy

In Langer’s computer socialism, the economic operation is centralized and the account book is centralized. The state is a planning machine, which manages the books and implements all plans.

In communalism before Marxism, such as the utopian socialist Robert Owen’s design, although economic planning is central, the implementation of relevant jurisdiction, that is, accounting, is carried out by distributed communes with voluntary nature and below the national level.

Hayek’s distributed capitalism has a decentralised Economy: plans are done by individuals, not by the state, yet the state maintains, records, verifies, and updates ledgers of identity, rights, obligations, and licenses.

In contrast, in the crypto economic system of blockchain, economic decision-making and bookkeeping power are decentralized. Blockchain no longer gives the state the power to plan and verify. This is a new branch of political economy.

6. The dual problems of information and motivation

The market is effective because it combines incentives with production and makes effective use of distributed information.

In the second half of the 20th century, the public choice school extended the study of motivation to include the planner’s own incentive. How can a socialist country ensure that planners work for the benefit of society, not just for their own?

Today, what economists call “robust political economy” is an economic system designed to solve the dual problems of information and incentives. In a world of opaque information and rent-seeking, how can we coordinate economic behavior, exchange, and establish social relations and organizations?

Interestingly, cryptographers and computer scientists have been studying these two issues.

7. Byzantine Generals

The Byzantine general problem is a key problem in distributed computing systems.

Leslie Lambert put forward a thought experiment in 1982. He imagined such a scene: Byzantium was the capital of the Eastern Roman Empire. Many generals were going to attack a city together. They were distributed throughout the Eastern Roman Empire. Only more than half of the troops could attack the city at the same time.

The emperors of Eastern Rome could not concentrate on commanding the army, and the generals could only communicate with each other through messengers. So we need a system, an algorithm, to reach a consensus. But Byzantium has too many traitors, who will try to undermine the consensus, which makes the problem more complicated.

So the Byzantine general problem has these challenges:

·Reach consensus in Distributed Systems

·Incomplete information flow

·There are traitors

Blockchain regards Byzantine problem as an incentive problem, so it can realize fault tolerance. Bitcoin’s workload proof mechanism can stimulate the behavior of favorable system, which makes the cost of attacking network extremely high and reduces the possible benefits of attack.

8. Integration of economic system and algorithm

The problem of Byzantine Generals has important implications for the economic system. How to coordinate economic activities when information is incomplete, communication is not perfect, opportunism is prevalent, and people may be lazy or selfish?

Computer scientists have been trying to solve the same problem technically, while economists have been trying to solve it institutionally.

Cryptography has found a solution in asymmetric encryption and workload proof mechanism, and economists have found a solution in the market and regulatory agencies.

The blockchain combines these two fields, which turns the institutional problem into an algorithm problem and an algorithm problem into an institutional problem.

9. Byzantine political economy

In the past, some people always thought that computer science and economics were two disciplines that could not match each other at all. But now, to some extent, both of them deal with a similar structure problem (i.e., distributed coordination) and reach similar solutions (consensus algorithm and market institutions). This is a strange Era.

More interestingly, blockchain technology is actually bringing the world together. Blockchain can provide reliable decentralized ledger for property right information, and verify and update it when information changes. Smart contract also has the ability to execute property rights.

It may not be realistic for Socialists to hope that centralized computers will replace the market. In fact, blockchain technology has the opportunity to replace both market and government functions.

No matter how much emphasis is placed on freedom, markets always need to be governed. The limitation of free market is that the ability to record, verify and verify property rights transactions always belongs to the state, no matter how developed the market. The state provides a ledger service, and in return, it needs to be financed by taxation.

Blockchain is a new fault-tolerant governance technology, which can provide governance support for market economy and planned economy. Algorithm and system are constantly changing and blending, which gives us a glimpse of the remote Wuyou village.

This is what we call Byzantine political economy.
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