Programming "The Economy Computer"
07 May, 2021
Human beings have been programming for millennia. If you do anything without thinking, the programming in your brain is doing the work. Genes program the physiological computers that are our bodies. Societies are programmed by moral codes and rules of laws. Children are programmed by parents and schools.
Humanity made a great leap with the invention of the printing press. Suddenly, we had a tool for mass programming of thought and action. As a result, the enlightenment happened and the industrial revolution followed quickly. We started programming cities and a new kind of lifestyle emerged that revolved around the industry.
Another huge leap happened when computers metamorphosed from humans to machines and we started automating a lot of our work rapidly. Information attained its true status in society and soon it became second nature to our daily lives.
Finally, we calibrated information to take place on the world stage and we called it the “internet”. While we gained immense power in personal computing and infinite possibilities, something was always missing. We still couldn’t program something that runs the economy and modern life. We couldn’t program money.
We could program the simulation of subatomic particles, the genetic code, and the distant quasars but the most important primitive that determines the global economy was hidden in plain sight all this time. Until one-day money came crashing down in the year 2008. And soon after, a pseudonymous person released a paper that changed our idea of money forever. Cracking the age-old problem with such elegance.
The idea of cryptocurrency is still nascent with more non-believers than believers. Some see it as the answer to all of our current economic problems while some see it as the new bubble waiting to be burst. Some outright despise the very idea. There’s no end to the debate.
But I’m not here for the debate. What I’m interested in and excited about is the very idea of this new phenomenon called a blockchain. What can we explain using it about what we never thought before and what we can think now? What does it even mean to have programmable money? A global computer that can program new human values and consequently, the new world economy.
What was once Alan’s Dream
Alan Kay has an idea of programming and computers in general as follows:
I thought of objects [code capable of acting like a complete computer] being like biological cells and/or individual computers on a network, only able to communicate with messages.
The overarching thinking was that every computer connected to a network should be programmable by passing messages and it could readjust its behavior in the presence of new data. Smart contracts on a blockchain network are a vision that comes quite close with this idea to some extent. Smart contracts that are code scripts deployed on a blockchain do not just talk to each other on premeditated rules, they can instantiate new ones in presence of new information.
The most novel idea is that anyone with the internet can deploy smart contracts and they will be live and discoverable instantly. Any two individuals can agree on their smart contracts and start transacting immediately. Thanks to the abstraction provided by blockchain technology. We already have these kinds of systems but they are controlled by a few cloud computing giants. What makes blockchain novel is that it provides the same capability to individuals.
This makes it truly a living and breathing system. A system where programmers, miners, smart contracts, and the end-users enter and leave at their own will. The system will still be functioning as usual. Like biological cells who create copies of themselves before an end.
Programming Human Values
Human beings value many things, but they are still limited — constrained by the mechanisms of value exchange. Wealth is the accumulation of what society values. And money is a transfer mechanism for these values. Money is the proxy that captures this value of discrete fungible states.
Traditional money is slow due to various factors, ranging from its history of inception to whom it could provide the most benefit. Every incumbent method of holding and spending money has been carefully devised to prevent chaos, as well as, to further the benefits of specific portions of society. Because the creator is the ultimate controller.
Since traditional money is slow, it can only fulfill a limited set of human values. But as we head into the next stage of cultural evolutions, our primary mode of living is not mere survival. We have started creating a lot of new things and myths of value.
This is where cryptocurrency shines. It turns the idea of money on its head. Since money is just another myth or bubble that never got busted, why can’t it be purely digital? Digital is faster, cheaper, easier, and most importantly denomination-independent. As a result, it can fulfill our basic needs of money — without our being actively aware of it. Just like data on the internet, it can now work without any headaches.
But this is still not the main USP of cryptocurrency. It allows the programming of human values. Think about it for a second. Currently, the internet is largely used for fulfilling traditional human values — due to the slow and limited nature of traditional money. As a result, the varieties of exchanges of human values are bounded by the transfer mechanism of money — by old, messy, and decaying financial infra. How bad is that?
As I explained above, any two individuals can participate in any arbitrary form of value exchange — by programming new ones or agreeing on existing smart contracts. And since, every execution and transaction is visible to everyone on a public ledger, they don’t have to worry about trust issues.
Crypto frees you up from the usual headaches. This opens up the pandora box of new possibilities for human values. We could also call it on-demand value creation and consumption. This could be the living and breathing organism that Alan Kay had been talking about — what computers should be able to achieve.
This is a huge leap in human thought and evolution. Once we can independently own the assets to incentivize the creation and consumption of human values, we can quickly course-correct our moral, ethical and philosophical leanings together in a decentralized manner. This could free us from the influence of popular culture, big brands, social media giants, and black-boxed financial institutions. The possibilities are endless.
The sovereignty of the Creator
A “creator” is anyone who creates something that is of value to someone else. Best if it motivates the other person to start creating themselves.
With the rise of content-centric platforms, the friction of distribution from creators to consumers has reduced significantly. However, there is still a lot to be desired. There is still a lot of upfront investment required by a creator to validate their ideas and monetize them. Unfortunately, due to the nature of the current market, a few get successful in this endeavor.
Gone are the days when you put up content on the internet just because you are interested in something and are curious to see how other people might think about it. With so much possibility of leverage, everyone wants to earn from content.
Before crypto, hitherto was an easy and reliable mechanism to engage in this relationship without any intermediary. But, this is possible now. There are already real-world examples where you can create and trade personal tokens. You can give them to someone interested in investing in yourself — in the hope that you will be generating profits in near future.
As crypto allows micro-finance, why shouldn’t it allow micro-equity and micro-fundraising? This could provide creators motivation and security to focus on content and not on monetizing tactics. Not everyone can wait for years to build up their brand or go viral in a couple of months. Those are rare events. Most creators fall at the tail end where most never see the light of the day.
Now that the means are available, this should be changed. What’s in it for the investor you may ask? Well, to make substantial money from investing, you have to take risks and invest in unpredictable assets. Most people neither have the risk appetite nor the agency to keep constant tabs on the finance ecosystem and the money markets.
So, this could be a great opportunity for people having moderate sums of money lying around. They can invest in their friends’ projects or those who they admire in the creator community and see a lot of potential in them. It’s a win-win situation for both of them. They get to invest in someone trustworthy and reliable. The creator doesn’t have to spend time and energy in uncertainty and acquiring funds.
And since all the transactions are on the blockchain, creators can build their brand transparently and reliably. Coupled with smart contracts, this will provide a steady stream of micro-investments for the creator, content for the consumers, and profits for the investors.
Black-boxed Institutions vs Retail Investor Mobs
Current financial institutions act as black boxes with several layers of complexity. Some of it is due to legacy infrastructures and others due to the alignment of variable profits at those layers. It’s all a big ball of mud. Whether you are purchasing online or doing high-volume stock trading, unless you are a financial expert, there is no making much sense around it. We all have a gut feeling that they are not very reliable and trustworthy. We have to depend on them solely because there was no other option until recently.
Since it’s an opaque system, we don’t have much visibility of where our money is being spent, reinvested, etc. Also, due to the tight control of these few institutions on our money, its value is always dependent on the whims of these black boxes and their direct beneficiaries. The idea of Laissez-faire sounds great in hearing but we all know how much is applicable to reality.
The first use of the internet to bring together a large number of people came in the form of dance routines by flash mobs. Later, it was being used to organize large-scale protests, social movements, etc. We have had large-scale financial breaches on the internet but due to strict regulations around security, the financial infrastructure remained shielded most of the time. But you can only avoid the inevitable for so long. The recent Gamestop fiasco was the final nail in the coffin.
This raises the question. In the age of the internet, where a lot of people have some quanta of control over the value of a specific asset, are these closed source institutions capable of steering the value and stability of the traditional forms of money? Unfortunately, the costs always fall upon the average investor who has nothing to do with it.
The idea of Laissez-faire is to allow people the freedom to create things of value and trade them with minimum friction and intervention. But here’s the catch. The mechanisms and speed of money transfer are capped by select institutions. Ever wondered why companies like Stripe are valued so much. This is exactly the reason. Their market value is your ease of doing business.
The trust is eroding in traditional currencies. If you see the people who are the most enthusiastic about cryptocurrency, they are the average investors who have been constantly let down in the past. The idea of a blockchain-based decentralized financial system is not only to take the money out of these traditional systems but to also avoid a single point of failure like the financial crisis of the previous decade. When the trust in a federal currency gets low, all other currencies are affected.
Cryptocurrency allows people to program their currency structures. Since interest rates are changed on the public ledger, we don’t have to submit to the whims of black-boxed institutions who manipulate interest rates for their gains. This will also cause organizations to be more transparent since they can’t look up to tax havens to hide their money.
Overall, it will be a big shift from closed-source sorcery of asset values to open competition and meritocracy-based valuation of crypto-based assets.
Vendor-logout of the Economy
The read-between-the-lines effect of cryptocurrency and decentralized finance expands to so much more beyond finance and creativity. It also unlocks us from vendor monopolies from all kinds of markets. Monopolies exist in every aspect of our lives. Never before has there been a mechanism where you can break away from rigid structures like society, the industrial model of education and work, centers of capital, creativity, and technology. The implications could be profound.
For example, to have a strong credential of skill, you have to go to Ivy League universities, IITs, etc, to seek a career in acting, you have to move to LA, Bombay, etc. For global payments, you have to rely on Visa, MasterCard, etc.
These are all forms of network effects. Network effects act as brokers of strong credentials and trust. This makes people and data move in leaps and bounds and accumulate in high volumes. This leads to dense accumulation of capital and power which in turn creates gatekeepers and partisanship. This ultimately leads to opacity and at times abuse.
As soon as people have the means to directly incentivize each other and check for credentials on a public ledger, all of this happening in real-time, these incumbent models don’t make much sense. Of course, they are not going anywhere anytime soon but the adoption of decentralized finance can normalize these models.
Crypto has the potential to create interoperable micro-economies and micro-societies. People can live around their place of preference and choose to work nearby or far away. They will not have to depend on suboptimal services of the monopolies, even in the last-mile areas. Instead, they can reap the benefits of the tight-knit localized economy. This could change our ideas of cities, towns, and villages. This could be the purest version of remote work.
Also, more uniformity of economies and societies means more uniform government laws and policies. This also means that we don’t have to worry about things like geopolitical trade wars that are often caused by petty trifles between cross-country monopolies. Also, due to the nature of current capitalism, the governments have to involve in these zero-sum activities.
Crypto not only provides a way out, but it also compels us to rethink the idea of societies, economies, and maybe even countries.
From Streaming Videos to Streaming Money
Like the bit is the fundamental unit of computing, data, and the internet, money is the fundamental unit of value transfer. It’s as abstract as data, numbers, and language. Although we converted money from paper to digital a while back, it doesn’t truly leverage the streaming nature of data on the internet.
Due to its dependence on an intermediary to resolve conflicts in events like double-spending, there is an upper bound to the speed of its movement. On the other hand, the only limit in the movement of data is the speed of light. Since money is just another data on a blockchain, this should not be a concern anymore.
There’s another subtle limitation to current digital money. Due to its history of relying on integral objects for representation, we couldn’t stretch its meaning beyond 2 decimals digits, even in the digital realm. This limitation could be attributed to the unavailability of non-reversible transactions before cryptocurrency.
Crypto solves both these issues. Since the transactions on a blockchain are non-reversible, there is a huge jump in the speed of transfers. Coupled with the programmable nature of cryptocurrency, we can use the domain of real numbers to represent money. This could be used to avoid a lot of issues regarding an exponential increase in value, rapid inflations, and deflations, formula-based value transfer, etc. The ideas and opportunities are infinite.
This streaming nature of money opens a lot of new ways for work. Since we have a fine-grain control on the speed and value of the exchange, we can stretch and bend it to our needs. As a result, work can be more variable in range. Work can be requested and done on-demand. The steady non-reversible nature of crypto will reinforce this trend. This is the true essence of the remote work phenomenon. Asynchronous micro tasks enabled by micropayments.
A simple example would be an accountant who has to perform a complex numerical calculation can provide the input data in a file and a script deployed as a smart contract by a programmer returns the output instantly. The programmer also gets paid instantly via the accountant’s wallet linked with the smart contract. This is just a typical use case among infinite such use cases.
Note that this is not impossible without the blockchain but the property of instant settlement, micropayment, micro-tasks, time, and effort saved will have much more value in the coming future than the current mechanisms could fulfill.
Criticism and Challenges
Just like any radical technological innovation, cryptocurrency is also not spared by criticism. However, that has always been the case in history. Initially, with any breakthrough technology, there are good and bad actors in equal proportions. We don’t have to look much back in time. The internet faced the same kind of criticism after its inception. Everyone wanted to make a profit out of it. Without much understanding and adoption in the larger public. But, there were also firm believers who got rewarded.
Crypto is going through the same phase. In essence, criticisms are vital for any new technology to prove its endurance — what allows it to improve and evolve. Also, it acts as a good signal that it is not boring. That keeps the community building better tools to make it easy to try and adopt.
Most people miss the forest for the trees. Since the current dominating utility of cryptocurrency is in the matters of money, most people miss that it’s a completely new way of trade and exchange of human values with minimal trust issues. It’s a new way to program society with more individual power and social transparency.
There are other challenges like the high energy consumption of running a blockchain network and the resultant effects on the climate. On the same note, we could also argue about the potential effects of data centers that are running for more than two decades. If we have plans to curb their effects down to zero, I’m sure that we can use the same technology to curb the effects of running blockchain networks.
There is also this concern about how code can be trusted with money. But then, we have been trusting code with airplanes, spacecraft, nuclear reactors, etc. Human language is as complex as computer code. Code is the generalized script. It's one level above the abstraction ladder. Natural language is a special script. We trust natural language more than code because we learn it naturally since childhood and our whole worldview is bound by its scope. Natural language is no less fallible and erroneous than computer code. It's just that we accept its fallibility more generously than we accept the bugs in the code.
When a new technology emerges with the potential of disrupting our very conception of how society works, criticism is obvious. It’s hard to make sense of it at first. However, outright canceling it due to our lack of understanding is not what the human spirit is all about. I believe that blockchain has an infinite reach in reimagining how society works.