Decentralized 2017

I spoke at the Decentralized 2017 conference yesterday (Australian time). My slides are here.

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28 Responses to Decentralized 2017

  1. stackja

    Correction, now getting file. Thank you.

  2. stackja

    Instantaneous bankruptcy.

    Debts forgiven?

  3. stackja

    Enter a physical key, one you can attach to your home and car keys (and another that you keep locked away as a backup). These two keyfob-like devices, about $20 each, are at the heart of Google’s so-called Advanced Protection Program, which the company is betting on to keep its email accounts as secure as possible from hackers.

  4. Sinclair Davidson

    Debts forgiven?

    No. Liquidation of insolvent companies. A smart contract determines if your liabilities are greater than assets and liquidates the firm in real time and distributes assets.

  5. stackja

    Sinclair Davidson
    #2541459, posted on November 3, 2017 at 6:36 am
    Debts forgiven?

    No. Liquidation of insolvent companies. A smart contract determines if your liabilities are greater than assets and liquidates the firm in real time and distributes assets.

    I hope the smart contract helps me get my money.

  6. feelthebern

    Sinc, I’ve been reading Ray Dalio’s “Principles”.
    I’ve also been listening to all the pre-release hoopla by Niall Ferguson for “The Square & the Tower”.
    Putting it all together, if you add:
    1) Ray Dalio’s radical transparency;
    2) Niall Ferguson’s the power of networks over hierarchy;
    3) And the inevitable impact of a blockchain economy,
    We will see the greatest leap forward in free markets & meritocracy in human history.

  7. RobK

    It’s a brave new world.
    Interesting links on slideshow. Well laid out.
    Thanks.

  8. Sinclair Davidson

    We will see the greatest leap forward in free markets & meritocracy in human history.

    Yes, I think so. That’s why I’m so excited by this.

    There is a possible downside too. But I think the upside is more likely.

  9. JohnA

    stackja #2541477, posted on November 3, 2017 at 7:06 am

    Sinclair Davidson #2541459, posted on November 3, 2017 at 6:36 am

    Debts forgiven?

    No. Liquidation of insolvent companies. A smart contract determines if your liabilities are greater than assets and liquidates the firm in real time and distributes assets.

    I hope the smart contract helps me get my money.

    That sounds like instantaneous, automated, ex-communication. Sudden death. No room for mercy, nor for the possibility of error. (“Error? What error?” – Pirates of Penzance)

  10. Mak Siccar

    We will see the greatest leap forward in free markets & meritocracy in human history.

    Yes, I think so. That’s why I’m so excited by this.

    There is a possible downside too.

    Prof, what do you see as the possible downside?

  11. RobK

    There is a possible downside too. But I think the upside is more likely.
    It’s shaping up to be a powerful tool enabled by the now fairly ubiquitous internet and computer capacity. It’s important to learn to utilize it to it’s full capacity.
    The up or down side is largely at the whim of human nature. History of change suggests we can expect some turbulence in the unstoppable passage of time.

  12. Alex Davidson

    The welfare system could be operated as a smart contract.
    – Track assets, liabilities, and income in real time and adjust welfare payments in real time.

    Orwellian indeed.

    We should be focussing on ways to dismantle the welfare system, not facilitate it. How about:
    – Track assets, liabilities, and income in real time and put an end to theft, whether by government or others.

  13. RobK

    One of the dangers stems from the fact that the word “sophisticated” stems from the root “sophistry”.
    A verbal agreement kept between two individuals will always be a precious thing.

  14. Tel

    No. Liquidation of insolvent companies. A smart contract determines if your liabilities are greater than assets and liquidates the firm in real time and distributes assets.

    There’s an assumption of perfect information built into that, which is to say that the corporation is running completely open book accounting. Currently, no one does that (they could do but choose not to), not even governments have completely open books and that’s when they are using other people’s money right in front of the other people who provided said money… seems almost like everyone has something they would prefer to hide.

    Maybe a future generation will come to accept the complete lack of privacy, but I’m not so sure if perhaps there’s good reasons to have some degree of compartmentalisation.

    It gets worse though… let’s suppose a retail company has a warehouse full of goods, purchased at various times, and is continually in the process of selling goods out of that warehouse and purchasing new goods into the warehouse. What is the instantaneous valuation of the warehouse full of goods? There’s no market price, because the whole stack of goods together never goes up for sale. There’s a theoretical retail price of those goods, but they haven’t sold yet and we can be completely sure not all of them ever will sell at full RRP, many will be discounted, some will not sell at all. There’s a cost price, but the manufacturer won’t take the goods back at cost price so accounting by this price is effectively “sunk cost fallacy”, and anyway cost prices vary so the price you paid to fill up that warehouse is not equal to the price your competitor might pay to fill their warehouse with exactly the same goods.

    This gets even worse again, consider your corporation is a bank, and you don’t have a warehouse instead you have title to lots of houses via mortgage arrangements, and the value of those houses on the books depends on the market for houses, which in turn depends on liquidity in the mortgage industry. Fully circular valuation system.

    The whole “fair value accounting” thing is not a problem suitable for simplistic robots to solve.

    There’s a guy J Edward Ketz who has written about fair value accounting, and why it gets more complex than it looks.

    If you want to know how bad it can really get… consider that someone has demonstrated Godel’s theorem can be mapped onto financial derivative contracts, resulting in a situation where valuation is quite literally undecidable even when you do have full open book accounting. There may be ways to structure contracts in such a way as to block Godel’s theorem, but that’s at a high cost in terms of computational capability (which is to say, those type of contracts will be limited in what you can do with them). The IT industry decided that it was better to live with the problem. Largely the financial industry has come to the same conclusion… just deal with it when it happens.

    https://freedom-to-tinker.com/2009/10/15/intractability-financial-derivatives/

  15. Tel

    We should be focussing on ways to dismantle the welfare system, not facilitate it.

    I agree but perhaps the imposition of non-financial penalties on welfare recipients would be one possible incentive to work… loss of personal privacy and thus potential social stigma might be both politically acceptable (won’t result in starving kids dead in the streets like they have in New Zealand) and also sufficiently “nudgy” to get at least some people moving in the direction of pulling their own weight.

  16. RobK

    “….resulting in a situation where valuation is quite literally undecidable even when you do have full open book accounting.”
    Yes, Tel. Well said. So often the circle is completed by an accredited valuer or “adjuster” of some kind.

  17. Alex Davidson

    @Tel
    #2541547

    But doesn’t the problem go much deeper? Wouldn’t fully accounting for the assets, liabilities and income of welfare recipients also provide enough information to deduce the assets, liabilities and income of everyone else? Or if it didn’t, wouldn’t it soon lead to calls for everyone to become part of this Orwellian scheme?

    For a long time socialists have dreamed of a utopia they believe would be possible if only they had sufficient data. Until recently, this idea has manifested itself in efforts at building large centralised databases, but there’s no reason why such efforts couldn’t also utilise decentralised databases, such as blockchains. However, as Mises and others have shown, the task is not only futile, it denies us our most basic birthright of freedom.

  18. Tim Neilson

    Instantaneous bankruptcy.

    Great idea.

    Just like Midford Shirts, only done on an industrial scale by machines, operating by GIGO.

    Tel is right. This is a terrible idea.

  19. RobK

    Alex,
    it denies us our most basic birthright of freedom.
    I think historically that concept has always been up for contest and will remain so in the future. It is paramount.

  20. Tel

    Wouldn’t fully accounting for the assets, liabilities and income of welfare recipients also provide enough information to deduce the assets, liabilities and income of everyone else?

    Maybe. Depends on the density of welfare recipients and how much information they need to disclose. Also depends on the contentedness between welfare people and non-welfare people.

    Clearly it is possible to maintain largish business networks and remain invisible to state surveillance … after all criminal enterprises do this type of thing all the time. Some are more successful than others, but it’s tautological to point out that all the criminals currently operating have been successful so far.

    However, as Mises and others have shown, the task is not only futile, it denies us our most basic birthright of freedom.

    Although the socialist calculation problem does pose a theoretical limit, I suspect that in practice the corruption and pocket stuffing happens much sooner… gradually all kleptocracy starts to operate the same way, regardless of their public facing ideology. Information destruction is valuable to the wealthy and the powerful, and these are the exact people who decide which information gets destroyed. Just follow the incentives.

  21. Sinclair Davidson

    Prof, what do you see as the possible downside?

    There is a lot of downside. If this goes badly – for example the government issues digital currency – this could go very badly.

  22. Speedbox

    There is a lot of downside. If this goes badly – for example the government issues digital currency – this could go very badly.

    Interesting comment Sinc.

    My crystal ball tells me that Government issued digital currencies will become the norm in the very long term (20+ years). Electronic currency, coupled with blockchain technology, will allow, at least in theory, the certification of assets and recording of payments made/received by every citizen being monitored by Government. No more pesky cash/black economy.

    There is much work to be done and some huge national and international hurdles, but even so, I think the potential for blockchain, coupled with a Government issued and mandated digital currency, is a highly likely (eventual) outcome.

  23. RobK

    There maybe unforseen interruptors. As dependency on the internet and digital technologies escalates, seemingly minor issues now may become more problematic. I speculate: a Carrington event, file corruption due to cosmic radiation and the need for multiple redundancy, the opposing concepts of openness and security, the nodal nature of the net is a strength and a weakness. Ultimately, the individual is a node.

  24. RobK

    for example the government issues digital currency – this could go very badly.

    Given time, could they resist?

  25. True Aussie

    Does the hypocrisy off parasiting of a centralised government while mouth platitudes about the joys of decentralisation never occur to you?

  26. RobK

    TA,
    I don’t see that as hypocrisy so much as perhaps irony. That said, the centralist state could still harness decentralized technologies.

  27. Sinclair Davidson

    For liquidations I’m thinking more of financial institutions and not retail per se.

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