If Libussa had a Blockchain

The hesitant Austrian writer Franz Grillparzer and his drama “Libussa” from 1848 inspired Herbert Hrachovec and Walter Seitter at the end of a podcast to diagnose contemporary democracies and the role of money. That diagnosis could benefit from a reference to recent developments in monetary systems by bitcoin and blockchain. And the other way around: The “elimination of middlemen” through cryptography and peer to peer networks is an idea that can benefit from hesitation.

 


I am summarizing the relevant part of the podcast:

  • Within modern democracies there is no single central power. The place that was before occupied by absolute rulers like kings, is empty.
  • Democracy is acting around that empty space. The idea is that multiple forces determine the direction within a state, but no single force can determine all free variables.
  • What we found after a while is that, step by step, this empty space got stuffed with an alternative form of power: money.
  • How could it be that the central space remained empty for a while? People believed that democracy brings a better life, and money is just a necessary means towards it. The balance between productivity and stability in a society was a commonly believed outlook.
  • That promise was fulfilled for a while. But the power of money has gone beyond it’s boundaries and beyond it’s purpose.

Now, a lot of material can be added to test and confirm the above diagnosis. For now, I will attempt to explicate the term “power of money” with my limited knowledge in national economy.

Money is a medium for exchange, the possibility to delay and re-arrange the “give and take” situation. I take something, and give you nothing for now except a tokenized promise that is accepted by others in a community to give you what you want (and what they have). It accelerated the production and trade of goods, because I did not have to bring concrete commodities in exchange, in order to get something that I need.

But that medium money has a life on it’s own. The monetary system has central operators, for practical reasons. You need one (and only one) institution that issues the tokens to guarantee that it represents a promise with a particular value. A central bank is required, which needs to act based on an interpretation of it’s political and economic environment of a nation (or a group of nations that agreed to issue one currency, like the Euro). There are multiple currencies, so there is foreign currency exchange. Agencies make sure that this exchange works and that there is a translation between those two currencies; in other words a translation of value between communities. To make this work, a market between currencies is required which leads to traders who do trades in currencies for the whole day. If I have z tokens of Currency A, will you give me y tokens of Currency B? Ultimately, the foreign exchange market regulates the degree in which promises of countries with currency X can be fulfilled in countries of currency Y. If Currency A is stronger than Currency B, the people who earn tokens of A (while trading goods with their peers who pay them in currency A) can realize more of their wishes when trading with people that have tokens of B.

This is another instance of the Matthew effect, but not just on individual level, but on a level that affects communities. An individual in a community has thus limited power to influence their relation with an individual from another community, except if they have a lot of tokens. Wealthy people with a lot of A-tokens can influence the relations of the whole community that trades in B-tokens when they convert their tokens to B-tokens. If someone has only a small amount of A-tokens and the foreign exchange rate suddenly gets changed, exchanging A-tokens for goods produced in a country ofB-tokens gets a lot more difficult. This is just the entry level of interdependence. Wealthy individuals can bet on the future of a community by getting structured products (dealt with in another blog post). Middle men create the conditions and offers to speculate on future developments. These games in the monetary system keep the ball rolling but also influence the material relationships between communities. Sometimes central banks balance this out by adjusting the number of currency-A that it issues to the population, influencing the exchange rate between token and real commodities, and as well the exchange rate between two currencies.

With the emergence of global corporations, supported by global data processing, private interests get formed much faster, and the public interests cannot catch up. Hence global companies have an increasingly bigger stake when shaping the relationship between communities. They influence the conditions under which wishes can be fulfilled.

Since majority of governments are in great debt, the idea of a sovereign nation state is mostly invalid by now. Anti-globalization efforts within states will not help, they will even shrink the power to pursue public interests. Corporations and wealthy private investors continue to grow their impact on the lives of people.

The praise of the principle of subsidiarity is just trying to make the powerlessness more tolerable within a group of nations, but ignores the global influences that – if we go by some politicians and media – seem to come and go for no reason, like the weather and other natural phenomena. 

Is the layer of diplomacy and treaties really efficient enough to form international opinion? I would say that the speed and power to organize public interest is currently insufficient and unable to act on a global scale. Organizations like the European Union and United Nations are mostly far away from the thoughts and interests of the people of the member states that they represent. Even then, forming consensus and enforcing it is difficult.


At the times of Grillparzer, a new order was required. The nation states formed in the areas of the Habsburg monarchy, which in the end led to the disaster of second world war, very much condensed in a visionary statement by Grillparzer:

”The course of modern education leads from humanism via nationalism to bestiality.”

Also today a new order is desired; people vote for change without knowing what to change. Does the blockchain has something to offer to renew the social contract and the way governance works?

The technologist Vinay Gupta in his talk “Unrecognizable Capitalism” starts sketching the history from Second World War – basically where Grillparzer stopped his vision:

  • During the time of bestiality, the computer was invented and used to decypher the radio messages of the Germans. The Enigma project (with significant contributions from Alan Turing) brought the end of the war faster.
  • Then between 1970 and 1990, computing was centered around data and the emergence of relational databases: the representation of data on magnetic bands into tables and spreadsheets.
  • From 1990 until 1995 the non-commercialized World Wide Web started with the basic protocols and a new era of document-centered computing with all it’s difficulties to map it towards data.
  • 1995-2010 encryption between client and server via SSL was well established so companies entered the world wide web to offer clients to conduct business. Here comes the era of The Dot Com Bubble, Search Engines, Amazon, and other technology companies.
  • Around 2010, Bitcoin was published by an anonymous person or collective called Satoshi. The underlying technology is basically a peer-to-peer network with the aim to create a shared view of reality: a distributed ledger that stores records of data with no need of a central authority. Database and Networks come together to form the blockchain technology. This – according to predominant advertisements – allows to erode the silo organizations within each company, establish a shared story of reality spread across all participating machines and erase the need of reconciliation for business transactions, because the data is shared and can only be modified with something called “smart contracts”, little programs that are stored in the blockchain and that get triggered after pre-defined events happen. Bitcoin, a global digital currency, is the first application of Blockchain technology.

Vinay Gupta mentions that there are currently two competing visions by whom society should be governed, either…

“by charming politicians who look good on TV, or by technologists who spend their live in front of computers and control the world with numbers”

He claims that the mainstream society lacks a myth that allows them to get an intuition about technology and to form an opinion. He advocates that people read more cyberpunk literature to be able to judge on recent technology development and in which direction it can go:

The dialogue about how technology will fit into our society is about class… by lawyers or by technologists? Both are the wrong answer, it has to be run by the people. But in order to understand what’s going on and to decide on the direction, we need a re-awakening of science and technology on a general level and reclaim Science-Fiction as a fundamental literacy for the present that we are in. Otherwise we are going to make our decisions relatively random based on the stories of charming persons on TV. Start reading Cyberpunk. If you share the myth that the techno-class had when creating these things, you can begin to understand the technology in a mythic way, which is how we understand it.

I’m a bit alarmed by this idea, and need to see what to do with it. It is like enlightenment did go too far, because it erased the utilization of a mythos that keeps people believing in science and technology and to create the inspiration to stay engaged.

Will distributed ledgers like the Blockchain bring about a rigid order that can help to pursue the public interest and keep the central space empty (or at least less polluted) which is currently dominated by central monetary systems, financial markets and private interests? Vinay Gupta spoke about it in front of the EU parliament and seem to believe that the decentral nature of the technology could bring about opportunities but the outcome is unclear:

Bitcoin is frankly insane. It’s one of the most mad things that ever happen and I mean it in a very literal sense. A piece of software issues currencies and makes payments, people already invested 25 billion € in it, and nobody knows the original authors of the software. This is something out of science fiction. This is completely unreasonable, but it’s the world that we live in and we should get used to seeing unreasonable things. Our model of how the world works is based on our own past, based on previous rates of change. As the rate of technological change accelerates we will see more and more things which are unprecedented. With this rate of change we have two strategies:

(1) We can figure out some way of pulling the utopian potential out of these technologies. We can fail to do that and get a mixed bag which will tend towards dystopia, or

(2) we can knock the technologies back as far as we can and hope that we can get some kind of stability and stasis in the face of this change.

Obviously I prefer the utopian potential, but if it’s a choice between utopia or dystopia, maybe we prefer stagnation and that choice is really the heart of regulation of these kind of technologies. Can we avoid the dystopian future by anything other than stagnation?  The future is a foreign country and is our largest trading partner: The present has an offer of real estate. The future has an offer of technology. And we have this trade between the present and the future.


“We live, irrevocably, in the world of the modern sciences, where nature is number: there will be no re-enchantment.”
Peter Dews

That a myth will save us, is highly questionable. That it can influence people to accept technological change and to make this change their own is more likely. And if a collective narrative on the use of technology helps to move away from oil, introduce a currency transaction tax, find a way to benefit from drones and robots, and balance out the huge difference in wealth distribution, it would at least be a vision that politicians can propose as an alternative to nationalism.

Libussa is the female ruler in the mythos from Franz Grillparzer. She represents the maternal, natural order before civilization started to create it’s structures.

If Libussa – had the blockchain technology, would she had been able to keep a beautiful (female?) order of wisdom? Probably quite the opposite, blockchain is even more legalistic and brings law enforcement to a new, maybe frightening level. It will force institutions to open up in the sake of cost efficiency and might reduce the options for humans to be indulgent, prudent, hesitant during their professional lives. It might create other opportunities in turn, but it is not yet clear to me how. Is this reduction in individual choices in some crucial areas the price to pay for a civilization that transitions towards global collaboration and organize themselves to pursue goals that are important for the material survival of humanity?

Definitely it is worth a few more thoughts if it is an alternative to plutocracy, kleptocracy, or technocracy. Will this technology not be end up in technocracy? How to prevent it? Legislative, Executive and Technology will form unprecedented bonds. How to decide which smart contracts shall be issued?

We can’t be spared from collective human engagement, negotiations, and reconciliation in general. At the same time we can’t afford excessive hesitancy and let-go-attitude in the light of rapid change and threatening dystopia. When our actions and articles reach the whole world, there is a demand for institutions that are capable to orchestrate cross-regional opinions and aim towards global consensus in the public’s interest. Facebook might be a failure for this purpose because it tries to please the user and keep him in it’s data-driven and advertisement-influenced bubble.

The amount of hesitancy needed is to evaluate the proposed forms of new technology-driven institutions and governance models before praising them. There is hardly any critical (in the full sense) examination about blockchain technology and distributed ledger, to my knowledge. The high expectations and high investments are “frankly insane.”