Part 1 of this series looked at the potential for voluntary transaction fees to fund network security. This post focuses on the idea that altruistic individuals might provide an adequate level of funding.

A million people donating $1 a day in hashing is enough to fund the network to roughly what we get today. That(or some configuration of people/corporations/and $) is not impossible.

~ GibbsSamplePlatter

Introduction

If voluntary transaction fees will not pay any premium for mining difficulty, could we instead rely upon altruistic individuals willing to donate to the network? After all, altruism is abundant in ordinary life, and Bitcoin itself is a product of Internet culture, a sibling to sites such as Reddit, where stories of personal hardship are commonly met by demonstrations of generosity ranging from modest to grandiose. Not to mention that altruism has already played an important role in the development of Bitcoin, motivating users to run nodes and mine uneconomically, to tip and donate coins to others, even to support those affected by hacking, theft and exchange failure. Could we not harness such a powerful force in aid of network security?

Because Bitcoin is a profoundly social experiment, whose exact fate will be determined by the decisions of billions of individual humans, it would be hubris to believe one could predict the exact future contribution of altruism to Bitcoin. Despite this, some basic logic suggests that altruism alone is most likely a fundamentally weak basis for network security.

Altruism depends upon its social context

The world is a large place, full of people with innumerable problems, wants and needs. Even the most altruistic person cannot possibly help everyone with all of their issues, so in altruism, as in all other areas of life, individuals face a scarcity problem: if you want to help others, how can you maximise whatever rewards and benefits you would like (impact upon the beneficiary’s life, pleasure of helping someone, increased self-esteem, increased social esteem, reciprocal acts, etc.) given limited resources?

Most individuals react to this scarcity problem by rationing and targeting their altruism fairly carefully. First come our loved ones, a mixture of spouses, parents, brothers and sisters, children, and closest friends. These are the people we would sacrifice almost anything for, perhaps even die for, the people whose happiness we can often scarcely distinguish from our own. Next come friends, colleagues, and neighbours, then members of our wider community, city, region and country. Lucky last, if they are considered at all, come members of other nations and ethnicities, and, for some people, animals and other living creatures, even environments and ecosystems as a whole.

As we move along this progression from “few and familiar” to “many and alien,” the incidence and strength of altruistic behaviour declines. At one end of the continuum, altruistic drive is effectively innate, encoded in fundamental biology, then for good measure enmeshed into the deepest roots of our culture. Further down the line, altruistic acts becomes spotty and erratic. While we unthinkingly lavish gifts and special treatment on those closest to us, vast sums must be spent on television advertising and door-to-door campaigns imploring us to donate measly sums (only $1 a day — just $365 a year!) to help people living in places most of us will never visit, whose lives, customs and experiences we can barely fathom. In different social contexts we can therefore observe a varying quality, that is strength, incidence, ubiquity, of altruistic behaviour, dependent upon the level of altruistic reward available to individuals in a given scenario.

Bitcoin offers a weak altruistic stimulus

With the likely size of the total funding requirement for Bitcoin completely dwarfing what even the most wealthy and charitable individuals would care to spend on altruism, the impact of any one individual’s altruism is likely to be minute, and even worse, spread imperceptibly thin across billions of network users. Because the psychological reward for acting altruistically is hardly likely to be any larger, Bitcoin bears a strong similarity to scenarios in which the weakest quality of altruism is present. No individual beneficiary will feel any particular improvement. No one person’s life will be dramatically overturned. The likelihood of being recognised or praised? Slim.

Furthermore, Bitcoin will always need funding. Every block needs a reward to keep the difficulty acceptably high. If we are already hoping that individuals will donate significant quantities, with little reward beyond an amorphous increase in the security of global transactions, how can we expect them to maintain their enthusiasm year-in, year-out? How can we prevent donors from not feeling in the long run exploited by network users who do not contribute? In the absence of compelling incentives to donate, a Bitcoin dependent upon charity is likely to devolve into relying upon the most aggravating and omnipresent style of beggary.

Bitcoin will become less exciting as it matures

Right now Bitcoin is still fringe, an upstart challenging the old-guard. Like the Internet in its early days, Bitcoin is terra nullius, a playground for utopian dreamings, unsullied by the ingressions of the Establishment. Enthusiasm and even quasi-religious devotion to Bitcoin is high in such an environment, and individuals caught up in these emotions, eager for the approval of their community, are naturally primed to impulsive, generous acts, abrupt breaks from the normal smoothly-delinated logic of the altruistic continuum.

But Bitcoin will, with luck, not stay this way forever. Just like with the Internet, popularity will bring the masses, and with them those most despised of intruders: advertisers, governments, the media, and other footsoldiers of the mainstream. Will we still be as passionate about Bitcoin when it is no longer an aberrant passion shared by a small community, but instead everyday and utilitarian, when everyone and their dog considers themself a blockchain pundit — when, in other words, Bitcoin is no longer a powerful secret? Unlikely, if Bitcoin follows the same emotional progressions of other fringe movements that have gone mainstream.

Conclusion

If Bitcoin did come to rely more upon altruism, we would undoubtedly see extensive and innovative efforts to encourage donation. But relying upon altruism is fighting uphill with human nature. In most systems which depend upon altruism for funding, the vast majority of participants free ride, some contributing not a single cent to those who produce the goods they consume. If this were the likely outcome for an altruistically-funded Bitcoin network, donating individuals would carry the weight of countless others. Resentment would be rife and with it constant pressure on any altruistic individual to stop donating. Such a dynamic is not a sustainable foundation for network security.

Instead of crossing our fingers for altruism to fix everything, we should ask ourselves, what systems would rise to the challenge if funding requirements were high? What systems would be resilient and adaptable? One of the reasons why Bitcoin is exciting is that it differs from other historical public goods. Bitcoin offers us tools to solve classic problems of economics, because users who might otherwise act selfishly, damaging the shared good, can rationally agree and adopt consensus requirements which constrain individual freedom for the ultimate benefit of all. The opportunity is to implement a robust, efficient, and sustainable funding system, where mandatory contributions are fairly and precisely based on usage of the network.

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Part 3: Inflation and demurrage.