blockchain as a tool for human coordination

For creatures that claim to have free will, humans are oddly robotic. Sure an individual will make a decision that surprises you every now and again, but even the most fair dice in the world will surprise you if you roll them enough times. At scale humans are robots. You can predict exactly what they will do if you have information of their incentive structure.

So, then the question becomes what is the human’s incentive structure?

The incentive structure is founded on the basic human needs and desires. We all have the drive to seek food, water, shelter, and a community. Then there are layers on top that dictate what actions one must take to secure those resources.

If we take food for example, there is a layer of food availability in society that is placed on top of my incentive structure. I am not incentivized to run into the jungle to hunt for rabbits and collect berries like my ancient ancestors, I am incentivized to walk to the grocery store once a week and purchase some food.

So now the question becomes where does this layer on top of the incentive structure come from? Human coordination.

Advances in human coordination are what allowed the growth of this society where I can participate as a member and reap the benefits of a grocery store. Think about it this way: if we lived in an ancient tribe together and I suggested one day that we open up a grocery store where we collect all of our food resources and sell them for money, I would be called crazy. Did money even exist yet? Would the stronger tribe just walk up to our ‘grocery store’ and steal all of our food? Who knows.

With human coordination we are able to have trust (coordination) with other participating parties in a new layer on top of our incentives. Trust that others will maintain and fairly transact with my local Trader Joe’s is the secret subconscious incentivize for me to rely on it for my food. Blockchains have the power to facilitate a new secret subconscious incentive.

Examples of human coordination are abundant in history, from language, to religion, to legislation, but still there are massive coordination failures that are limiting our advancement. In the era of covid-19 this is more obvious than ever. Even global health aside, there are prominent coordination failures in global markets and public goods.

The major advances in human coordination have come in 4 steps in history:

  • Hunter/gatherer societies
  • Agricultural revolution
  • Industrial revolution
  • Information revolution

The first 3 steps were similar in that they improved efficiency of resource production, which was necessary to continue stable human growth at the time, but the recent information revolution is unique. We have plenty of resources (in the first world country societies), so we no longer need to scale production. The increased coordination fueling this revolution does not facilitate the production of more resources, but rather it facilitates a higher efficiency of the economic market.

Imagine you are selling jelly beans and you have a supply of 100 jelly beans, but you have no information of how many others would like to buy jelly beans. This prevents you from pricing your jelly beans appropriately, and decreases the efficiency of the market. Those who have the most demand for the jelly beans aren’t guaranteed to have access to the supply.

Blockchain will be the key technology in the information revolution because of the ability to perfectly disperse information. No technology before now has been able to provide a global permission-less decentralized ledger. This ledger will allow the dissemination of market information without any corruption by bad actors or greedy centralized parties. The use cases for this technology are yet to be solidified, but fortunately us there is a massive amount of brain power being applied to solving these coordination failures in the global markets.

On top of that, blockchains have to ability to completely swap the incentive structure of a market towards public goods. Public goods (clean air, open-source software, etc) are non-excludable non-rivalrous goods that by definition are costly to exclude individuals and only efficiently provisioned for free, making it near impossible to recoup the costs of creation. Currently in a private market the only ways to finance public goods are:

Individual contributions (philanthropy) — At the whim of the wealthy individual and the direction they would like to steer the public good Commercialization (monetization of the public good) — At the whim of the commercial entity and how they can maximize profits with the public good. Funding pools (government programs & taxes) — At the whim of the individuals creating these funding pools. Enter blockchain. Because blockchains can disseminate perfect information we now have the ability to properly finance public goods. It is possible to produce a public good tied to the blockchain and receive retroactive funding based on the value provided by that public good.

Let’s take open-source software as the obvious example. Posting the open source software to a blockchain provides the ability to know exactly who contributed to the public good, how much value it provided, and the ability to retroactively compensate for it. Every interaction with the software is permanently and un-corruptibly tracked.

How other public goods can be tracked like this is a hard problem, but a solvable problem nonetheless.

Imagine a scenario: you live in a city where the air outside of your house is thick black smog. Your quality of life is drastically hurt and you can see no solution; certainly you as an individual do not have the means to solve this problem. Even though this smog is the biggest problem in your day-to-day life, your incentive is to put your limited resources into tackling lesser problems that you as an individual can meaningfully impact. Your friendly local billionaire could fund a machine to fix it, but hey, what’s in it for them. They’d sooner move to a different city and not go through the hassle.

Now, imagine the same scenario with the addition of a tool called Air-Solver 3000. Air-Solver 3000 (A3K as the cool kids call it) is a decentralized application on a blockchain that allows an individual to participate in solving the smog problem. Your contribution is tracked, your work is coordinated, and your impact on the smog can be retroactively compensated for the years to come. Your incentive structure looks a lot different now.

Building new incentive layers for humans at scale will shape the future of the world. The next step is to take an active role in steering the world by developing these use cases. It’s all coordination, it always has been.