Internet Society & the Philosophy of Blockchains

tl;dr

You and I are players in “internet game,” where we accept the current mechanisms created by big tech companies. What is an internet society? What mechanisms and incentives shape our society? This post explains how asking the right questions brings us to realize that our internet society is destined to change. I will explain how game theory and blockchains answer philosophical questions about how our internet world will function in the future.

Protocols for Data This triangle below represents any technology that passes user information through, for example google, they pass our information through to whoever we want to send texts, emails, files and other information to. This triangle specifically (Decentralization, Security, and Scalability) is what cypherpunks refer to as the blockchain trilemma, which is a maximization equation that explains why blockchains are difficult to create a product that has high levels of security, scalability, and decentralization without sacrificing one of both other factors. I will expand on this theory throughout this post.

Social Technology Incentives Today Currently, in our societies mechanism of the internet, we have three parties, large entities, (corporations, boards, CEOs, or [plug sexy title here]) users (you and me) and sellers (companies looking to connect with the users through placing ads). In this game each player has different incentives that drive their actions, but ultimately, the large entities have the control and rights to almost all data that passes through. Let’s now look at how each player makes their decisions, and how if we can move the intercept up (move the google icon up towards decentralization), it will fundamentally change the dynamic of the internet game for the betterment of society.

What is the incentive of the large entity? (profit) Profit is earned when you give the two parties (users and sellers) what they want. Users want “what they want,” which is Social Media dopamine; everyone has different patterns that the algorithm will, most likely, figure out. There is a financial incentive to keep the users on the website, because they can sell “users' perspective” to ad buyers; the more time users spend on the site, the more ad buyers will spend. These Silicon Valley giants can scale this mechanism through leveraging millions of computer servers that create algorithms to maximize user attention. They also can create this security, because they control what goes in and what goes out, and they hand out paychecks to the best engineers in the world to protect this channel. The dual use of algorithms (instructions a computer program follows to keep users on the app), and financial incentives (sellers paying for user information and attention) produce a mechanism where both parties (users and sellers) can act in their own best interest; however, this mechanism sacrifices decentralization and credible neutrality, which are important components in any society.

What is the incentive of the seller party? (ads) The seller acts honestly as a free market player, because they pay for information on users as well as for time in front of users, which is great for business. A primitive argument might say, ‘business’ today is a pay to play system. Sound business always wins, but I would argue, if two seemingly identical companies, on paper and in appearance, the company who spends more money on internet ads (Facebook ads, google ads, SEO) will, most likely, get more client interactions. They are incentivized within the large entities mechanism because they need to get in front of users to grow their business.

What is the incentive for the users? (Good times) As I have said, the users, you and me are the product. This likely isn’t news to you, but at what point did it occur to you, “oh, I don’t pay anything for these internet apps, but these apps are the biggest companies in the world, I wonder how that works,” (hands phat stogie to next person in the roto).

To claim about why we, the users, use social media, is much more convoluted than how large entities and sellers use the technology. There are countless strings and chemicals to pull within user's neurochemistry and psychological states to achieve the algorithmic goal. As a member of Gen Z, I am in a sweet spot where I am lucky enough to have my baby pictures NOT on a smartphone; however, I am equally fucked, because I was introduced to Instagram and snapchat, when my minds were most malleable, during my teenage years. This was the time when these apps were elementary compared to today, but still, as young awkward kids we were primed for the chemical return of social media.

What is the alternative? In future posts, I might dive deeper into generational effects that have been created through social media, but for this post, there is no point. It is an ambiguous claim to state whether social media today is net positive or net negative. These binary claims are pointless, but rather we must ask the question of social media, are the positive incentives for users (connectivity between these users) and positive incentives for sellers (reaching customers) contingent on having large entities in between these players?

I argue no and would claim that there are other mechanisms that do not give large entities decision making power to decide what is put on user screens and what options sellers must reach customers. We can use a decentralized blockchain mechanism to produce positive outcomes of social media for users and sellers. Blockchains, when used correctly, produce credible nuetrality. Credible neutrality is an ideal that refers to a mechanism where there is transparent and verifiable proof that the system does not discriminate against any parties.

Decentralized Mechanism Example Credible Neutrality:

Anyone who does function (2+2) → gets result (4)

Not Credible Neutrality:

You get result (4) IF large entity says you get 4

Duh Math, but in an internet system that is credibly neutral, how is it decided what gets put in front of users? How do sellers pay for user information? How do they pay for ad spots? It is up to the large entities to decide these, rather than a credibly neutral process that does not have the chance to discriminate. Even if they have a mechanism that is neutral, it is not open source and verifiable, so it can not be credibly neutral by definition.

Here is a simple example of what a mechanism might look like for a Video media platform, like YouTube, that is credibly neutral.

Decentralized Social Technology Mechanism Let’s say that the following functions are performed by the Ethereum Virtual Machine (an open network of computers verified by ETH staking nodes) rather than computers owned by Google. The EVM is open source and verified by it’s users.

Consider the following function for how sellers with receive user information:

Any seller who does function (sends $1,000 to Video Platform) → gets result (user information)

Consider the following function for how sellers will buy ad spots:

Any user who does function (watches 20 hours PewDiePie) → gets result (ad {from $1,000 sent to platform for ad spot})

Let’s say Mr. Beast pays the $1,000 needed to produce the result of this ad

Let's now think about how the market will react to Mr. Beast buying this ad spot. One option is the users watch Mr. Beast because of the ad, which would make Mr. Beast want to buy more ads. The second option is users do NOT watch the Mr. Beast Videos, this would make Mr. Beast STOP paying for ads.

This mechanism is credibly neutral and does not rely on a third party to make the decisions, and rather the players are able to act in accordance with free market decision making.

Blockchain Trilemma and Ethereum In this simple example, all these functions would be run by a decentralized computer, the Ethereum Virtual Machine. If you are familiar with Ethereum, you realize that running this computation, with a high level of scale and security, is currently not attainable. Creating a mechanism that is completely decentralized is impossible with the current hashing power (the computational power it takes to verify transactions on the blockchain) that it takes to perform these mechanisms. Ethereum’s proof of stake was a small step for the scalability of the technology, but in the future, projects that produce high levels of scalability will disrupt current big tech business models.

Not anti-big tech, but pro individual These perspectives do not come out of a lack of trust in third party intermediaries (YouTube in the previous example), rather I believe, in most cases, the ethicality in which these parties act is justified. But in any societal system, a mechanism where there is verifiable proof that the mechanism does not discriminate against any parties (in this instance, users and sellers), will always increase trust, which is a foundational component in any healthy society. Blockchains allow for mechanisms and data to be open-source protocols, and once these blockchains scale they will disrupt the current business models of the largest companies in the world.

The Internet as a core pillar of society Using the internet as a tool for individual expression and freedom is the raison d'être of the internet. In the 1980s, people believed the internet would become a tool for greater democracy and free expression, while some believed it would lead to an increase in surveillance and government control. Regardless, there was a sense that the internet would revolutionize communication and information sharing. Companies like Google, Meta, or Twitter were able to take advantage and create intermediary platform mechanisms that incentivize users and sellers, which ultimately shape our society today.

A changing world order The public is blind to the mechanisms that we must see if we wish to classify these large entities as credibly neutral parties. These large entities are often publicly traded companies and much of their financial information must be shown to third party investors, but their servers, their data still are hidden. It is a web2 business decision to not be transparent with data, but because of this we cannot verify that these large entities act with credible neutrality.

Blockchains, to the core is a technology based on a philosophy that emphasizes the importance of decentralization, transparency, and individual freedoms. I don’t know if crypto will go up down or sideways tomorrow, but I am willing to bet that a technology that empowers individuals through a mechanism of transparency and verifiable proof will, at some point, be a powerful player in the financial markets.