There are actually free-riders in the cryptocurrency ecosystem. At least, that is the contention of one new paper, which was shared on Monday, written by the founder of Ethereum, named Vitalik Buterin, as well as by the researcher of Microsoft, named Glen Weyl, and the Ph.D. of economics at Harvard named Zoë Hitzig.
Free-riders represent a problem
As Buterin and Weyl described in the paper, the free-riders are people or businesses which profit from the under-provision of public goods. The more people these public goods benefit, the more they are going to be under-provided. It is a problem that plagues development even outside the cryptocurrency space, but the Buterin and Weyl are primarily concentrated on how the idea produces harmful incentives for funding of blockchain projects.
But currently, crypto development teams rely mostly on donations, the altruistic whims of their creators, as well as ICOs – the paper details a new financing method in order to support a self-organizing ecosystem of public goods.
The method described by Vitalik Buterin, which was titled “Liberal Radicalism: Formal Rules for a Society Neutral among Communities,” seeks to permit groups to allocate funds for the maintenance of public goods, as well as services without becoming vulnerable to the free-rider issue.
The mechanism is actually similar in principle to Quadratic Voting, which is a form of stake-based voting championed by Weyl.
While Quadratic Voting permits participants to vote with crypto tokens according to how much they care about some problem, the Liberal Radicalism or LR actually expands the same concept to how communities contribute to public goods like software development, cryptocurrencies, as well as journalism.
It actually works by improving the funding of projects incrementally, depending on the number of cooperators, just as much they care about the problem they have.
The paper states that individuals make contributions of public goods to projects of value to them. The amount which is received by the project is the square of the sum of the square roots of contributions received.
While the authors have some ambitions for the technology that are far-reaching, cryptocurrency communities, with their open-minded attitudes towards experimentation are an appropriate testing ground for the technology.
The co-author of the paper Hitzig has said that interest is already building between many different groups. That currently includes about a half dozen cryptocurrency communities which are looking to implement the technology potentially, and other innovations and philanthropists.
Hitzig said that once they circulate the paper, they expect that experimentation is going to start in earnest shortly thereafter.
The crisis about liberalism
The new paper is actually part of an ongoing collaboration between Buterin and Weyl, since the publication of the book “Radical Markets.”
The duo co-authored a blog post in May this year, in which the authors discussed their shared interest to harness markets, as well as technology, to radically decentralize the power of all kinds and shift their reliance from authority and to formal rules.
Hitzig also said that the critical focus for this collaboration is on the use of technological insights to solve growing political tensions.
Hitzig also states that this set of ideas goes from the ground up – they are offering solutions to localized, as well as real-world problems, and then they demonstrate how these proposals fit into a coherent political philosophy which solves essential aspects of the crisis of modern liberalism.
The authors who defended liberalism as the guiding principle underlying The Enlightenment era summarize the trend as an anti-authoritarian commitment to neutrality across ways of living and valuing.
Hitzig, who is also a poet and economist that was drawn the idea of Quadratic Voting, continued saying that such tensions are increasingly manifesting in discontent with some existing liberal democratic systems and the rise of authoritarian populist alternatives on both the left and right.
Indeed, the paper looks to solve those problems, as well as create a more cooperative society.
Additionally to the incremental funding mechanism that LR proposes, there are also some additional characteristics which the authors think are significantly going to benefit the crypto ecosystem.
For instance, small contributions are heavily subsidized, while substantial contributions are not. According to the authors, under the standard selfish, as well as independent, private value, quasi-linear utility framework, their mechanism leads to the utilitarian optimal provision of a self-organizing ecosystem of public goods.
The paper also noted that this could actually have an immediate effect on projects such as Ethereum, ZCash, as well as other projects which rely on non-profits to distribute funding to the development of the network.
The publishing of the paper will encourage people to think about issues
This process of grant-making is reasonably centralized, and it relies on the curatorial judgment of a selected group of individuals and is, therefore, both poorly attuned to the needs of the communities and maybe more importantly, antithetical to the principles of decentralized authority on which they are founded.
On the other hand, LR hopes that it will create a form of financing that will help better leverage the wisdom of the crowds, and align financing better with the ethos of crypto enthusiasts.
While it probably looks strange to have such a highly interdisciplinary science, which combines technology, economics, and politics, Hitzig said that it is an essential combination.
However, LR is still not a mechanism which can be deployed and widely adopted right away.
However, it was not thoroughly tested in the wild and may be vulnerable to unanticipated attacks or economic quirks. The mechanism relies heavily on identity systems, which means that for now, it cannot coexist with anonymity, which is very important to a lot of people in the space. Also, several kinds of public vote attacks could probably mean that LR might need some people to use trusted hardware, which some people warn comes with their own security trade-offs.
As such, Hitzig also said that there is some more work to be done to make the technology usable to a vast number of people – potentially working with designers and artists who can actually describe the method in different ways.
But, above everything else, Hitzig hopes that with the publishing of the paper – although it is imperfect – it is going to encourage some other people to think about these issues and to build on top of LR or experiment with their own solutions.
She said that nothing would thrill them more than to see some other collaboration which poses original, alternative visions for solving what they see as the crisis of liberal order.