Rebirth of P2P Economy

Today, smartphones are making Internet access more affordable and social networking services like Facebook are bringing back a networked social layer based on trust. Together these technologies are scaling peer-to-peer interactions like the P2P economy. If the Agricultural revolution began the Age of Centralization, the Digital revolution marks the Age of Decentralization, increasingly enabling anyone to self-organize information and resources. Sharing services like Airbnb let anyone rent their home to anyone else or Lyft, where anyone can use their car to drive a stranger around or Kickstarter, a crowdfunding service that allows anyone to fund projects of complete strangers. The P2P economy has introduced business models based on decentralization into established, traditionally centralized markets. This surplus of information and resources existed before but these technologies are lowering barriers to entry, reducing transaction costs, and providing new opportunities for peer to peer economies of scale.

Types of Networks

Social Physics and Data Sharing

The same technologies powering the P2P economy are being embedded in our daily lives through ubiquitous computing. Smart devices such as Nest, a smart thermostat; iBeacon, a GPS for indoors; Google’s self-driving cars; and wearable computers like Fitbit, collectively called the ‘Internet of Things’ are generating a plethora of data on people and the world like never before. Alex Pentland at MIT Media Lab and others are using computational social science or what Pentland calls Social physics to understand this data and how we can design better and more efficient systems from more walkable cities to reducing congestion and emissions to stopping diseases like H1N1 before they spread. This Social data enables us to reinvent how we organize society and our lives. For example, today Public health in the US is more like sickcare than healthcare. What this data sharing can enable is preventive measures for Public health which dramatically reduce costs and saves lives. Richard Hamming, who was a Researcher at Bell Labs, where he collaborated with Claude E. Shannon, said, “The purpose of computers is insight, not numbers.” We can apply these ideas to create smarter governance and policies as well. Imagine new policies A and B are proposed for Public service C. We can use social data to run digital experiments and test how these proposed implementations would work. This open data transparency would allow citizens to be informed about how existing and new policies will affect them both on a societal-level and on a personal-level. Are you saving X lives a year? Y dollars a month? By analyzing real social data we can increase the rate of political innovation where arguments are driven less by political affiliation and more by openness and data transparency.

“Everything that can be decentralized, will be decentralized.” -David A. Johnston

From Centralized to Decentralized

Despite the enormous benefits of data sharing, there are important societal questions to address: Who owns the data? Who has access? And how can we prevent Orwellian intrusions and abuse of power? We are at a critical point where we can decide to use Big Data to create a more democratic and open society or Big Brother. Recently, the Snowden revelations have highlighted the inherent danger of trusting data and sovereignty with a central authority. The solution to data security & privacy lies in individual sovereignty through decentralized & distributed technologies. The enabling innovation was provided in 2008 by Satoshi Nakamoto, in a whitepaper where he describes, Bitcoin: A Peer-to-Peer Electronic Cash System. The underlying mechanism Satoshi invented the “Blockchain” or what I call “democratic consensus” enables you to transact with peers without the need to trust a central authority like a Bank, thus creating the first practical solution to the Double-spending problem. Today, the Bank uses a Ledger to keep track of accounts & balances. With Bitcoin, everyone gets a copy of the Ledger. Thus, the Blockchain is a Distributed Network so, there is no central point of control and no single point of failure. As a result, this elegant solution is one of the most robust architectures, mirroring that of nature: from the structure of the Universe, to colonies of ants, to the neurons that make up your brain. Building on Satoshi’s democratic consensus, we can create a Distributed Operating System (DOS) where we can build any Decentralized Application (DApp) such as an electronic cash system, decentralized Twitter, or Digital Governance. The foundation for a DOS relies on four decentralized & distributed technologies: Identity (eg onename.io, Namecoin), Storage (eg Maidsafe, Bitcloud, Storj.io), Connectivity (eg OpenGarden, Commotion), and Computation (eg Ethereum). Today these new and emerging technologies can enable new types of Social contracts and Democracies.

Social Contracts and Digital Governance

During the Age of Enlightenment, Thomas Hobbes, John Locke and Jean-Jacques Rousseau popularized the concept of a “social contract.” They believed that in order to have a civil society citizens had to surrender a certain amount of Freedom to a central authority or third party. For Hobbes it was the “Leviathan”, for Locke the “State”, and for Rousseau the “Legislator”. These ideas, especially Locke’s inspired The Founding Fathers, leading to many of the Freedoms we enjoy today. So how do we balance the security & privacy with the functions of Governance? Now, we can realize Locke’s idea of a social contract without the need to rely on a central authority. Just as the United States Constitution was written in natural language on paper, using a turing-complete computer language we can write a Digital Constitution on a DOS. A Digital Constitution is a collection of cryptographically secure, social contracts between members in a network. This idea of a self-validating agreements or smart contracts was introduced by Nick Szabo in 1997. A simple use case is a betting system: Two people can place bets on a sporting event, where a smart contract holds $10 (or any Digital money) from each party in escrow. After the game, the system would check the final score and distribute the funds appropriately. Advanced applications of smart contracts enable Decentralized Autonomous Organizations like Digital governance.

Governance as a function of your social network

Freedom of Association & Quantum Democracies

In the case of Digital Governance, you create smart contracts between peers, thus Democracy is a function of your Social network rather than your GPS location. Furthermore, in the Economy of social networks and Trust: reputation becomes currency, property becomes data, and ownership becomes access rights. Consequently, a DOS removes the need for geographic borders. In these Digital societies, you join a number of individuals to form a Digital constitution, consisting of agreed upon social contracts. There is an important implementation detail for this to work: Freedom of Association, which guarantees any person can join and unjoin any network without privilege or prejudice. This means that each Digital network can have their own self-validating laws and by joining the network you agree to those laws. Thus we can use the Internet of Things and other smart property to implement Peer-to-peer law. If you want to change your laws you can voice your opinion, join another, or fork and create your own. This is a new solution to the scaling problem the Founding Fathers faced and enables Quantum democracies where anyone may express his or her beliefs, no matter how singular. This enables citizens to choose their model of democracy: you can vote on every issue (Direct democracy), or place your voting power in the hands of a career politician or political party, and a knowledgeable friend or colleague (Representative democracy). And control could be programmatic. As Matthew Sparkes notes, “if you’re a cyclist, you could hand over voting power on all road safety matters to a cycling charity that pushes for better infrastructure, but retain votes on economic matters and leave everything else in the hands of your local Liberal Democrat office.” Similarly, clauses can be implemented for arbitration, where the entire network or a random group of members reach judicial consensus. So what happens if a citizen breaks a law? Because a citizen’s access to shared goods & services is a function of their reputation, Game theory offers a solution for cooperation based on mathematics rather than coercion. Robert Axelrod demonstrated this principle in The Evolution of Cooperation with his Prisoner’s Dilemma experiments. This is the foundation of Liberty and allows people to freely interact knowing trustfully that their interactions will be mutually beneficial.