Blockchains, Rules, and Reciprocity

The base level of human society functions due to the principle of reciprocity: acting benevolently towards others without any direct expectation of a reward with the understanding that the favor will be returned by someone, someday. Alexis de Tocqueville, within his 1835 study of American Democracy, referred to this as “self-interest, properly understood”. When reciprocity is applied broadly, everyone benefits.

For various reasons, the social fabric of the western world has worn thin over the last century. Warm reciprocity has been replaced by cool trust mediated ever more strongly by lawyers and governments. The costs of engaging lawyers and lobbyists, however, are so high as to be primarily available to large corporations, financial institutions, and other special interest groups.

The key and initial appeal of blockchains is democratizing and distributing access to rules and binding them to economic value. Anyone can minimize a required level of trust for any particular transaction.

Regardless, it’s not possible to cover every possible interaction or event with a system of rules. This is one of the primary weaknesses of civil, statutory law systems, which attempt to do exactly that.

We should not forget that blockchains are embedded in a broader social context, and involve a broad social contract of running nodes and respecting the rules. Beyond the rules of the chain, there is a collective of participants in the network. The rules of the chain themselves are always secondary the network they govern.

For any sufficiently large social organization to function, it must acknowledge the paradox of rules vs. discretion and employ a mechanism for representative human decision making. Discretion, when wisely exercised, can counteract societal forces that place disintegrative pressure on the organization. This means having a human constitution and human governance, with norms and checks and balances and representation of interests.

Computers and automation aren’t an escape hatch. They lead only to a labyrinth. There is an unfortunate appeal of automation, and in particular economic automation, that leads us to believe we can remove the human element entirely. This is a very dangerous line of thinking. They say the devil is in the details. A fractal carpet of rules will never cover all the surface area. It will leave us only with darker, deeper pitfalls. Technology exists as a tool to augment and extend our human capabilities, not to replace them.

Much more important for societal progress than the rules of a system are the mindset and values that the participants embody. Historically, the most successful societies have been those which had a high capability for social coordination. Social coordination arises naturally from a shared faith and kinship: a collective understanding that we are united in one way or another.

Lastly, I’d like to leave you with the basic thought that one incredibly important, unique, and powerful ability of humans is to punch through paradoxes and encounter reality. Explicit procedures for human governance are a pre-requisite for building an organization capable of expressing faith in humanity and building a collective of people who are empowered to care for each other.