Blockchains for collective action

Ethereum passed it’s “frontier” release this week, as the not-just-money successor to bitcoin. It’s the first of 4 functionality and stability releases in the next year (the timing isn’t important), before becoming generally usable for wide adoption.

A day earlier, Jeni posted her blockchains outside cryptocurrencies description of what blockchains can be used for. Read her version for the long and correct version, but to a first approximation, (ethereum) smart contracts (“to be valid, when X happens over here, Y must happen over there”) on a blockchain allow for entirely decentralised coordination and agreements: e.g. “When £450,000 appears in that account, transfer ownership of this one bed flat (or house) from them to me, and confirm that it’s happened or the money goes back”.

It also allows much smaller transactions, as every ethereum address can have an International Bank Account Number attached to it. It is designed to be extremely low friction ways of doing contracts and agreements (“when the house smart sensors confirm the chores have been done, transfer the allowance to the kids bank account”).

One of the things coming in a future release is the ability to hook into a communications mechanism, such as “join a mailing list”. This seems an odd thing to be looking for in a currency and institutional infrastructure, but it turns out to be vital for the reasons that democracy is important:

The friction involved in something like: “I’ll put £1 a month into a fund with the aim of lowering house prices*, if 5000 other people will too” only works if the handling cost is so low, that it’s effectively zero, in a way which allows people to hedge a relatively small amount each, in favour of countering the tragedy of the commons (other example: bottled water), but also knowing that everyone else is actually committed in the same way that they are (and, if too many people back out, then the contract stops being valid).

As a purely confidence based market, house prices keep going up as those who believe they will keep going up are involved, and those who aren’t so sure are excluded and massively disadvantaged as they have no mechanism for countering that narrative. Funding art (ie things that generate different thought and conversations) is probably the best way we have to do that.

I await ethereum Serenity (the fourth release) with interest. It will have the potential for a lot of things to change dramatically. If the world’s billionaires are using London property as a reserve currency, what happens when the assumptions that underlie that decision get challenged locally?

Do you think that there are 5000 people in London (or the UK, (and other countries), more generally) who’d give £1 a month to move house prices back towards 1991 prices adjusted for inflation?

posted: 25 Jul 2015