Thursday, March 24, 2016

Blockchains and DAOs as the Modern Leviathan




In 1651, Thomas Hobbes published Leviathan. It is arguably the most influential work of political philosophy in the modern era. The distinguished political theorist Alan Ryan believes that Hobbes’s work marks the birth of liberalism. And since most of the Western world now lives under liberal democratic rule, there is a sense in which we are all living in the shadow of Leviathan.

The central idea in Hobbes’s book is nicely summed up in its opening passages:

Nature (the Art whereby God hath made and governes the World) is by the Art of man, as in many other things, so in this also imitated, that it can make an Artificial Animal… For by Art is created that great LEVIATHAN called a COMMON-WEALTH, or STATE (in latine CIVITAS) which is but an Artificiall Man; though of greater stature and strength than the Naturall, for whose protection it was intended.
(Leviathan, Introduction)

The gist of this passage is that the state (or the system of social governance) is an artificial being (an “artificiall man”), created through the will of natural human beings. This is represented metaphorically in the famous frontispiece to the book (pictured above). The giant man, overlooking the land, is the artificial man (the sovereign or the Leviathan). If you look closely you can see that this man is made up of lots of smaller people. So he is, in the picture, literally constructed out of the people themselves. In practice, this artificial being consists of all the laws and institutions of government. This being enforces the laws through its institutions thanks to its monopoly on violence. To Hobbes, giving the artificial being a monopoly on violence was essential because it enabled us to avoid the war of all against all that emerges in the ‘state of nature’.

Elements of Hobbes’s political philosophy are objectionable, but the central idea — that the state is an artificial being governing through laws and a threat of violence — rings true to me. And what is particularly interesting about this idea is how adaptable it is. Whereas Hobbes’s Leviathan ruled in an era of primitive weaponry and limited technological development, modern day Leviathans rule through a much more sophisticated technological arsenal.

What I want to consider in this post is how new technologies make possible new forms of the Leviathan. In particular, I want to consider the potential for Leviathans to emerge from novel uses of blockchain technology. I’ll explain the ideas as I go along. To start off, I want to go back in time to Hobbes’s Leviathan and consider the rationale and the moral underpinning to it. After that, I will consider how blockchain technology could develop a new form of Leviathan.


1. The Logical and Moral Structure of Hobbes’s Leviathan
Hobbes’s developed his conception of the Leviathan from a particular understanding the problems of social morality. He noted that, in their essence, all men (and women) were free and equal. They each had the natural freedom to pursue what they wanted; and they each had roughly equal natural capacity to achieve their aims (intelligence compensating for a lack of strength). On top of this, they all competed for scarce resources of time, food, wealth and so on. This gave rise to a ‘Trust Problem’, which Hobbes felt all successful forms of government needed to solve.

The Trust Problem can be illustrated using three simple thought experiments. Only one of these actually comes from Hobbes, but they each illuminate the problem that motivated him:

Two Farmers: This is taken from David Hume. Two farmers live side by side. Each year they must harvest their crops. Their crops become ready to harvest on different days. They need to harvest them before they rot. They are not physically capable of harvesting them all by themselves. They could do it if they worked together. But they cannot due to a lack of trust. If Farmer B agrees to help Farmer A out with his harvesting on Day 1, he knows that Farmer A is unlikely to return the favour on Day 2: there would be nothing in it for Farmer A — his crops are already harvested. They both work alone to their mutual deficit.

Tragedy of the Commons: This is taken from Garrett Hardin. In a village there is a common area where locals can graze their cattle. If the common area is overgrazed in any particular year, then the land becomes useless the following year. It would be for the benefit of all if everyone limited the number of cattle they grazed on the land. They agree to this in principle, but in practice things turn out badly. Individual villagers reason that if they graze a couple of extra cattle, they will get the benefit of extra, well-fed cattle, without damaging the land too much. But once one villager starts doing this, all villagers do the same and the land is ruined. The agreement breaks down.

The War of All Against All: This is from Hobbes. Anne and Bob live next to each other. They each have some stuff that the other would like to have, but they are able to survive by themselves. If they could agree to leave each other in peace they could get by okay. But they have no way of guaranteeing that the other party will live up to their end of the agreement. Indeed, they know the other party could use violence to steal everything they own. It consequently becomes logical for them each to cultivate a reputation for violence and to preempt the other’s potential attack. The result is a perpetual state of war.

These are thought experiments, not historically accurate vignettes. Nevertheless, they each illustrate the problem that Hobbes thought was fundamental to political morality. If you break down the logical structure of the stories, you see that they are all like the classic Prisoners’ Dilemma. In each of the stories it would benefit everyone if they could cooperate. But due to their particular circumstances, they have no way of guaranteeing that the other parties will cooperate. Consequently, it becomes rational for them to act selfishly and protect their own interests. The result is a state of affairs that is worse for all concerned.

Trust is the critical missing ingredient. If we cannot trust one another, cooperation breaks down. And one of Hobbes’s central claims was that we cannot — at least, not really, not for long. But although we cannot trust each other, Hobbes thought we might be able to trust someone else. The artificial man; the Leviathan. This is a being that we create out of our will via a social agreement. We give this being enormous power: a total monopoly on the use of force and violence. We give it the ability to create coercive laws and institutions. This enables us to enforce agreements and commitments. People can now be compelled to cooperate. Failure to do so will result in the full force of the state being brought down upon their heads. The Trust Problem is thereby solved (or dis-solved).

This is the essence of Hobbes’s political philosophy. It is broadly liberal insofar as it stems from the belief that we are all (naturally) free and equal; and that it is through exercising our freedom to contract that we get together and form the Leviathan. It is quite illiberal in other respects. Hobbes imagined a sovereign with extensive, borderline absolutist powers. Once created, there could be no going back. Later contributors to the liberal tradition softened some of Hobbes’s views. For example, Locke argued that the powers of the state were always contingent: the citizens had the right to remake their Leviathan if it stopped exercising its powers in legitimate ways. Nevertheless, there was still broad agreement that the state helped to ensure mutually beneficial cooperation through its coercive institutions.


2. Blockchains and Modern Leviathans
There is something very interesting about Hobbes’s conception of the state. Consider once more the trust problem and how the Leviathan supposedly resolved it. The trust problem stemmed from the inability of individuals to ensure that agreements were upheld. In order to solve this problem, Hobbes proposed that individuals form another agreement — the one that created the Leviathan. In other words, he held that one agreement could be used to solve the problem of agreements more generally.

This seems oddly paradoxical. How can one agreement solve the problem with other agreements? Surely we end up in a regress? But it is not paradoxical once you burrow down to its core. The agreement that creates the Leviathan is of a special kind. It is a once-in-lifetime agreement that involves the creation of an artificial being to whom we transfer our ‘natural’ rights and powers (to use Hobbesian language). This artificial being then becomes the ultimate enforcer of all remaining social agreements.

The resulting vision of the state is thus one of nested agreements. At the foundation there is a special agreement creating an artificial enforcer; at all remaining levels this artificial enforcer is used to oversee and implement more mundane agreements, e.g. agreements relating to the transfer and distribution of property. This is the conceptual essence of Hobbes’s Leviathan. To bring that conceptual essence to reality the Leviathan would be forged from the bodies and minds of individual human beings. These minds would create abstract institutions and laws. For most day-to-day business agreement on the existence of these abstract institutions would be sufficient for enforcement. But if anything went wrong, the state could have recourse to the grim and bloody reality of violent force. The critical question for us then becomes: is there any other technical infrastructure that can instantiate the conceptual essence of Hobbes’s Leviathan?

Blockchain technology seems like an obvious candidate. I have explained how this technology works on previous occasions. I’ll limit myself to a more brief exposition on this occasion. Blockchain technology is what underlies cryptocurrencies like Bitcoin. But the potential for Blockchain technology goes far beyond the cryptocurrency use-case. The blockchain is a distributed ledger for recording and verifying transactional data. The ledger is maintained by a network of computers. In theory, this network could be distributed across the entire globe. Every computer on the network maintains a copy of the ledger. Whenever two (or more) people enter into a transaction using the blockchain network, each computer records and verifies the transaction. The verification process involves a number of cryptographic tools such as public key encryption, hash functions, and proof of work. The transaction is only locked-in when the network completes the verification process.

This might not sound very exciting, but once you see its potential you begin to see it how it provides a possible infrastructure for Leviathan. For in essence the blockchain is an artificial entity that is capable of managing and enforcing agreements. How so? Well, let’s go back to basics. A contractual agreement is simply any agreement involving conditional commitments: I’ll do X for you if you do Y for me. Satisfaction of the conditions is essential to the completion of the contract. People won’t enter into contracts if they think there is no reasonable prospect of the other side satisfying their conditional commitments. Think back to the Two Farmers thought experiment. The problem facing Farmer B was that he couldn’t rely on Farmer A completing his side of the deal. He needed a Leviathan — a system of courts with enforcement powers — to guarantee that Farmer A would live up to the bargain.

The interesting thing about blockchain technology is that it provides a way to monitor and enforce conditional commitments of this sort. The blockchain can be used to record and verify whether certain conditions have been met. In the simple case of a bitcoin transaction, the condition being recorded and verified is whether (a) one person has the requisite bitcoin in their digital wallet to transfer to another person and (b) whether that person did, in fact, initiate that transfer. Only once those two conditions have been met are the bitcoin released. This process is automated via the network.

But that’s relatively boring: bitcoin are intrinsically digital in nature so it’s not surprising that their transfer can be managed using a digital platform. Where the blockchain becomes more interesting is when you realise that it can be used to verify and record any machine-to-machine communication. And the reality is that nowadays everything is becoming a machine. That’s the technological shift that’s at the heart of internet of things. Soon, it will be possible for virtually every ‘thing’ in the world to be become visible to machine-to-machine communication. Your dishwasher will be able to communicate with your thermostat. Your insulin pump will be able communicate with your local hospital. Your smart car will be able to communicate with your Fitbit, and so and so on.

The communicative interactions between all these things can be managed by the blockchain. Your smartcar could be released into your control only after it has been verified that you have paid your motor tax. The computer in the motor tax office and the onboard computer in your car can communicate with one another. The blockchain will record and verify the communication. Once it is satisfied that the relevant condition (“the payment of motor tax”) has been met, it will release the car. If everything becomes susceptible to this type of control, we have a technological platform for implementing Leviathan. We won’t need governments, laws and civil institutions anymore. Everything can be managed through the technological infrastructure.

Many people are aware of this potential. In their 2015 paper, Wright and De Filippi comment on the possibility of creating distributed autonomous organisations (DAOs) via blockchain technology. They describe the concept of a DAO like this:

Over time, as Internet-enabled devices become more autonomous, these machines can use decentralized organizations and the blockchain to coordinate their interactions with the outside world. We could thus witness the emergence of decentralized autonomous organizations that enter into contractual relationships with individuals or other machines in order to create a complex ecosystem of autonomous agents interacting with one another according to a set of pre-determined, hard-wired, and self-enforcing rules.
(Wright and de Filippi, 17)

The situation is analogous to what Hobbes imagined in the creation of Leviathan. An initial agreement between coders and (potentially) citizens is needed to set up the DAO. This agreement will prescribe the powers and conditions that will be enforced by the DAO. This initial set-up could involve something akin to Hobbes’s once-in-a-lifetime transfer of rights and powers. Then, once the DAO is created, it becomes an independent and autonomous entity, enforcing agreements according to its code. What’s more, in exercising its enforcement powers DAOs could be given control over the machinery of violence. Much of that machinery is being imbued with the kinds of connectivity and automation that is fodder for DAOs.


3. Should we welcome this modern Leviathan?
So we have a plausible infrastructure for Leviathan — one that does not rely so much on the minds and bodies of humans and the systems of laws and institutions to which they acquiesce, but instead upon a technological infrastructure, originally fashioned by humans, but capable of autonomously enforcing contractual agreements through a distributed network. Is this something we should welcome or fear? I won’t answer that question here, but I will highlight some relevant concerns.

In one sense it may be something to welcome. Cyber-libertarians see DAOs as a way to obviate the powers of the state. The Hobbesian Leviathan called for a massive centralisation of power. The state had to become an all-encompassing artificial being, watching over and protecting each and every one of us. DAOs allow for at least some decentralisation of authority. The network that maintains them will be decentralised and controlled by those who own the computer nodes on the network. And, at least in theory, there could be many different DAOs created by different communities to manage their own preferred set of agreements. This brings to reality the hopes and dreams of many early-adopters of the internet.

But the practical reality may be somewhat bleaker. First, there is concern about what happens once a DAO gets created. Once it has been set-up and its rules of enforcement have been encoded, can there be any going back? I mentioned earlier how Locke modified some of the Hobbesian ideals by insisting on a right to otherthrow or reform the state. That seems like a good thing to me. Can we build conditionality into DAOs? Can we avoid becoming locked-in to a DAO with outmoded rules of enforcement? That is something that needs to be developed. Second, I think there are legitimate concerns about inequality when it comes to a technological infrastructure of this sort. Bitcoin has turned out to be a relatively unequal cryptocurrency. It massively favours early adopters and those who can afford the advanced computing technology that maintains the blockchain. These people then get to control how the network operates. This may be the product of bitcoin’s idiosyncratic mining-competition and so could be avoided in other blockchain-based technologies. But it is something to consider nonetheless. Finally, those enamoured with the potential of DAOs must realise that the pre-existing Leviathans are unlikely to give up their powers so easily. There is already much discussion about how to make blockchain-based systems susceptible to government control and regulation. If DAOs take off, we can expect more confrontations with the state.

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