Cryptocurrency and The future of Governance.

An essay surrounding my first project build as a software engineer.

Cryptocurrency and blockchain are probably two of the most significant technological advances in modern history. In this essay, I aim to explain their capabilities, significance and present some possible ideas of where they could be heading in the future. I aim to imagine and build a more beautiful, empowering, just, and equitable world. I believe that Blockchain technology is a necessary aspect of such a future.

I have been interested in and invested in various blockchain companies for several years. I have followed the steady rise of these currencies, from humble beginnings, where they were an odd novelty of the internet. Today, the market cap or total amount of Bitcoin in circulation is worth over a trillion dollars. Anything that in aggregate is worth a trillion dollars is undoubtedly a significant force. Why is this technology worth so much? What makes it valuable? And how is this such a significant technological advancement that it could change civilization? Let’s explore these questions.

The myth of money.

Money is not real. Money is simply a representation of trust in the ability to acquire things. The things are real; food, clothing, technology, vehicles, services, etc., but the money used to obtain them is nothing more than a means of exchange. It allows people to trade their work, goods, or services for the trust that they will, in turn, be able to trade that trust for the goods, services, or work provided by others in the future. We hold on to money to which we assign value, and it allows the market of all possible goods and services to grow in unique and dynamic ways: any individual can do one thing for money and have access to all things through his money.

People exchanged using gold and silver throughout much of human history. These precious metals held unique properties such as low melting points and high purity degrees, meaning they could not mix well with other metals. Most importantly, these resources were scarce. There was only so much gold and silver available globally, and the mining process was difficult, often treacherous, and always time-consuming.

Until 1971, all money in the United States was backed by gold, meaning any dollar was worth a certain amount of gold, and you could hypothetically exchange it for that gold at any time. Of course, the gold was just a store of trust like any other currency; if you held a piece, you could be sure that someone, somewhere, would want to buy it from you in exchange for money, goods, or services.

All civilizational history and technological advancement have progressed through complex exchange, and money is simply an abstraction of that exchange. We often forget this and focus on the accumulation of money. What we truly want is the accumulation of things, access to services, and experiences. Money confers the ability to get these things that we truly want. We use it to exchange one type of thing, say giving a haircut, for a different kind of thing; buying a hamburger. Money is the intermediator of this exchange. Unless you were cutting the hair of a chef in exchange for free burgers, this exchange could not take place without the intermediating money.

So what’s different about blockchain?

The US federal reserve mints and distributes money into the economy. It assigns every dollar a unique id and keeps track of all the money in circulation- at least in theory. It does this through a complex system of banks, which receive money from the fed, invest it in corporations, philanthropic endeavors, employing workers for various projects, etc.

The purpose of banking is to keep track of all the money in circulation by keeping track of how much money flows into and out of the bank in any given year. This record-keeping happens through physical, or computer-empowered counting, and there is an entire profession dedicated to counting and keeping tabs on the circulation of money for the government; accounting. Complicated models are used to estimate and understand who spent what where. Often, significant and influential portions of the economy go unaccounted for.

This mis-accounting is what precipitated the financial crash of 2008. Through credit, banks were lending money to people who could not pay it back properly. As these people defaulted on their loans, the bank’s ledgers began to show that they had far less money coming in than going out. The crash was a failure of many systems at once; of creditors, accountants, and reliance on a system of banks to prop up the economy and regulate the inflow and outflow of currency.

Blockchain is different because it keeps a perfect and precise account of the exact amount of money in circulation on a given blockchain. The blockchain does not require human intervention to keep track of where money, or trust, is allocated. If a blockchain service was able to lend money — a service provided by companies like Compound- it could ensure that it never lent more than it was capable of lending or more than its borrowers were able to pay back.

This certainty is made possible because the blockchain keeps a detailed account of the amount of cryptocurrency held by the lender and the amount held by the borrower, who can stake their currency as collateral. This precise accounting takes place through the manipulation and movement of data on a distributed ledger- which is essentially a public list that anyone can read. The ledger keeps a record of every transaction made with a given coin, or piece of cryptocurrency, traced back to the point when it was minted.

The second reason blockchain technology, and more precisely, cryptocurrency, is different is its creation process. Coins, or the pieces of currency circulating on the ledger mentioned above, are created through a novel cryptographic process that conveys uniqueness upon the individual coins. Like gold, these coins hold unique properties that make them valuable on the internet and in real life.

Chief among these properties is the fact that each currency is non-fungible or unique. Until the advent of cryptocurrency, there was no way to maintain uniqueness on the internet. Post an image, video, document, or series of numbers, and others could copy them thousands of times; nothing was proving or stating which copy was real, and therefore there was no such thing as the ‘real’ thing over the internet.

Prior to cryptocurrency, the best alternative was to provide users private accounts with passwords where they stored information that was ‘theirs.’ In the context of banking, this meant storing bits of information on a screen as data: money stored as numbers held in a specific account under a user profile. Like the dollar bills that came before them, these numbers were simply a representation of our ability to exchange. We trusted these banks to back our accounts with real dollars; we could go to an ATM and withdraw this money or use a debit card to transfer the numbers in our account into someone else’s account. Where the federal reserve backed physical dollars, virtual dollars are generally the domain of whichever bank keeps track of them. There is nothing intrinsically unique about the numbers we see when we log into our online bank accounts.

They are simply representations of the information accounted for by the bank that we use. The bank must keep this account because, until recently, there was no other way to verify that the dollar that we had in virtual space was, in fact, a real dollar. If the bank did not keep track of all the dollars people had in their accounts; the monetary system would have been in chaos. People could just say that they had a certain amount of money and we would have no way to verify the legitimacy of their claims. There would be no certainty or clarity. People would have been trading fools gold for gold, and there would have been no possibility of internet banking.

Until now, the banks have been a vital aspect of the internet economic system because there was no other way of assigning uniqueness and keeping track of virtual dollars. All of that changed with cryptocurrency; it uses a method of cryptography, or encryption, which enables a coin, or a piece of currency, to be unique. Each coin is a unique code: a hidden string of numbers that is statistically impossible to replicate by any computational method. This code is a series of numbers arrived at through complex computational calculations.

The uniqueness of the coin and the distributed ledger that it creates and is traded upon mean a record of each unique coin throughout its entire transaction history is kept. A new version of this leger is created every few minutes. The ledger is updated with legitimate transactions each time. Updating the ledger through illicit means: the crypto equivalent of a bank robbery is next to impossible as it would not only require the same amount of computing power necessary to create the original coin but would require a high degree of luck, as the unique code of each coin is a 256 digit number that is computationally complex to arrive at even under the best circumstances.

The ledger keeps records over long periods of time, and the code behind the leger always defaults to the longest-maintained leger. Anyone trying to steal a cryptocurrency would need to put in the computing power required to maintain this leger indefinitely. Each coin is paired with a key that ascribes ownership, and a would-be thief would need to copy the creation of that unique key, which is also statistically highly unlikely.

Banking without the banks.

All of this is to say that the original blockchain whitepaper penned by the infamous Satoshi Nakamoto provided a means to do internet and online banking without the banks. It allows for a system that cuts out the need for accountants and can maintain a precise ledger of trust in one’s ability to exchange. This trust, paired with coin non-fungibility and scarcity, means that the individual coins traded over the blockchain carry a uniqueness that one cannot find even in today’s dollars.

Cryptocurrency is compared to gold because it has intrinsic properties that render it valuable. Nobody can copy it. It provides a framework upon which organizations and individuals can build all sorts of other technologies. Ethereum does this in terms of smart contracts. The recent NFT boom has extended this framework to digital artwork, enabling artists to create and sell unique, non-copyable, and traceable-to-source versions of their artwork online. These intrinsic properties make the online currencies carry real value and have already begun to revolutionize the way we think about money and how traditional banking is done.

Over time, these currencies could precipitate a complete decline and fall of the banking industry. These institutions would no longer be necessary to maintain and execute a record of transactions. We would not need banks to instill value by way of trust in any individual’s stored currency. A person can simply carry a ‘wallet’ that stores the unique keys that link their account to a cryptocurrency piece maintained by the distributed ledger. Paying someone means updating the ledger, and only this is necessary to keep a clear and precise record of transactions throughout history.

One can imagine applications in taxation, corporate ownership, governmental regulation, credit, and social activism, to name a few. The applications of this technology are potentially endless, and I aim to explore and engage this new technology through understanding it intimately and applying it to the areas of social governance of both the internet and the real world.

The future of governance.

Many blockchain organizations are already experimenting with the decentralized governance of their unique platforms. The power of the decentralized ledger allows individuals who hold a stake in a given blockchain -those who own a coin on that chain — to vote on protocols regarding the chain if a majority of stakeholders vote in favor of a given change. These changes could be an update to code or a fork of the blockchain.

I have oversimplified on-chain governance protocols used by blockchains such as tezos, which aims to build an open consensus on all changes made to their blockchain. I am interested in this concept and in working at the cutting-edge of this field. I want to engage with the blockchain, develop on it, and communicate with those who are continuing to explore it in novel ways.

What if we were able to encode democratic governing principles onto the internet itself? What if we could use data to regulate e-commerce and a blockchain to tax that commerce in novel ways? Could we create the decentralized economy that is the true promise of blockchain? If we achieved this kind of economy, what would it mean for politics and government?

The internet has already radically transformed the way we do politics and government. Movements can pop up overnight and enrapture hundreds of thousands, if not millions of people. Divisive figures can monopolize attention by understanding and manipulating the algorithms that govern social media. The new world that we now inhabit has rendered the best opinions on government incompetent and outdated.

Division is the enemy of progress, but it is only through progress that we will ever solve division. There is no going backward in life- particularly not in the field of technology. Too many lives and dollars are at stake to seriously regulate the technologies that now service every aspect of our world. Further, these marvelous technologies have caused at least as much good as they have harmed. If we can’t get rid of them, then they are here to stay. This means that we must continue to innovate and create better ways of integrating these technologies into our daily activities.

We must use the internet and its related technologies to govern the internet. We must discover ways of empowering every individual to be as complete a part of the world’s progress as any other. In the beginning, what we need are technological solutions, ones that can give rise to a new type of politics and a new kind of government.

The beauty of the internet is that we can start small, scale over time, move from local governance on websites and platforms, to internet governance, and possibly eventually govern people and activities in the real world. None of the solutions in this domain are apparent yet, and I aim to discover them alongside the others in the field who are interested in doing so. It is for this reason that I have begun my journey to become a software engineer. I am still at the beginning of this journey, but it is one I intend to finish.

First Project

For my first application build as a software developer, I decided to follow my interests and become familiar with an elementary application of cryptocurrency data. My application is more of a user interface with the endpoint data of cryptocurrencies than anything having to do with the blockchain itself. Still, beginning to familiarize myself with nomics, a popular crypto-data API, allowed me to practice my new skills as a ruby developer by building a CLI cryptocurrency portfolio and tracker. My application will enable you to store a portfolio, receive real-time data for many cryptocurrencies, and query different information about each of these currencies.

Building this simple application taught me a great deal about software engineering and cryptocurrencies. I had to research and deepen my understanding of many core concepts central to the data I was collecting. I chose this project to empower myself to gain a deeper understanding of the world of crypto and begin to be able to write code that interfaces with this world. I look forward to building several more projects in my pursuit of discovering the technology that will lead our world towards a better system of collective decision-making in the quest for harmony, equity, and abundance for all people.