Money, block chain and social scalability (1)

Editor’s note: This article from the blue fox notes (ID:lanhubiji), the author: Nick Szabo, intelligent contract concept, one of the pioneers of the blockchain, articles from nakamotoinstitute, compiled: Li Xi and the daily planet, unauthorized release.

The basic block chain on the Internet to further promote social scalability. To put it plainly, is to achieve a more greater connection. Before the connection is now connected to the information value, through information, and trust is minimized, the ultimate realization of the social scalability.

Block chain become fashionable for a time. One of the biggest and oldest block chain project is bitcoin, it has a history of 8 years, the price from 10000 bitcoin a pizza, to more than $1000 a bitcoin. By the time of this writing bitcoin market is already $16 billion. This growth lasted 8 years, and the chain almost no loss of funds, in many important aspects, it is currently the world’s most reliable and secure financial network. (Note: Blue Fox currently has 10 years of history, now the market value of nearly $70 billion, market capitalization was climbed to $about 300000000000)

Bitcoin is certainly not the secret of success of its computational efficiency or energy consumption scalability. People spend high price to hire experts to developed uses highly specific hardware, only one job: to solve a deliberately designed highly cost mathematical problem of computing resources. This kind of problem is called that because of the answer to the questions of the equivalent computer calculation prove expensive enough. Bitcoin puzzle about hardware, a total of more than 500 megawatts of electricity.

Among the many characteristics of bitcoin, this is not only for engineers and businessmen battered, they are concerned about minimizing the consumption of resources, which is highly unrealistic.

Not only will the protocol information is reduced to as little as possible, each run bitcoin full node computer will be a large number of “stock vector” packet redundantly on the network, “sprinkling” to ensure that all messages accurately delivered to other nodes as much as possible. Thus, the block chain cannot bitcoin like traditional payment networks such as PayPal or Visa that handle a large number of transactions per second. Bitcoin offended sensitivities to those who seek effective utilization of resources and maximizing the performance of engineers and businessmen.

On the contrary, the secret of bitcoin’s success is the scalability for a more valuable characteristics calculated by large consumption of resources and poor scalability of the society. Scalability is a kind of social system, is a kind of relation or joint efforts, which many people repeatedly participate, establish customs and rules, make some restrictions or encourage participants to be objective is to overcome the defects of human thinking and incentive and constraint system, some shortcomings: it is not for any person or how many people participate in limit.

Social scalability concerns participants to the participation and response degree and mode of system, and the growth of rich degree and number of participants. It is about human limitations, rather than technical or physical resource limitations. The latter has independent engineering principles, such as computer science for the assessment of the physical limitations of the technology itself, it will be needed to assess how to deal with the use of more users or greater rate of resource capacity.

In addition to social scalability compared, these engineering scalability, not the scope of this article.

Although the social scalability is about cognitive limitations and thinking behavior tendency, but not on the physical resource constraints, but the machine, thinking and discussion can promote the system of social technology scalability is very meaningful and important. The system of social technology related to scalability depends on how the technology restriction or incentive system under participation, including the protection of participants and the system itself is not affected by the damage and attack of malicious participants.

An assessment of its social and scalable approach is through the assessment can be beneficial to the system involved in the number of people. Another is the benefits and harms of additional evaluation system for participants to bring. Before, for reasons of cognition or behavior, the expected cost of participation in the system or other hazards is growing faster than its benefits. In the context of the global network, to participate in the cultural system of people and judicial diversity is also very important. The system is dependent on local laws, customs and language, system scalability is poor.

If there is no past innovation system and technology, the scale of the cooperation of people up to 150 people: the famous Dunbar number. In the Internet era, innovation continue to expand our social skills. In this article I will discuss the blockchain, especially those public encryption monetary chain integration is how to improve the scalability of the society, even paid the price: greatly reduces the computational efficiency and scalability.

 Money, block chain and social scalability (1)

Cognitive ability: here to the relative size of a species of the cerebral cortex show the form: it limits the size of primate animal groups. Maintain close animal or human populations need lots of emotional communication and interpersonal relationship of investment, such as mutual grooming, chat, jokes, stories, songs, games and so on. To overcome the cognitive limitations of human beings, which is what or how many people can participate in a system (to limit Dunbar number of about 150 people, see above), it requires the innovation system or technology.

The improvement of social extension innovation involves system and technology, these improvements can be thought in the brain function written on paper, enter into the machine, to reduce the cognitive costs at the same time, improve the flow of information between different ideas of value, improve reliability, and find new benefit participants. Alfred North Whitehead said: “we are thinking we should cultivate the habit of doing the things’ in all textbooks and celebrities lectures will be repeated mention of this statement, it is wrong to a commonplace talk of an old scholar. The opposite is the case. A civilization is because we don’t need to think more in action to progress.”

Friedrich Hayek said: “we continue to use those we do not understand the symbols, formulas, rules, and through the use of the knowledge we do not have the help. We prove that in their own field through the establishment of successful practices and institutions, to develop these practices and institutions, in turn, these habits and system has become the foundation of our civilization construction.”

A wide range of innovation so that we are less affected by the other participants, intermediary, outsider damage, thereby reducing the cost of our limited cognitive ability to worry about all the increasing population will be how to act. Another kind of promote the accurate collection and transmission of information between different participants in the value of increasing. However, other improvements can lead to more different people can find mutual benefit participants.

All these innovations in the historical process of human society to enhance scalability, sometimes so great that it is feasible to enhance, make our whole modern civilization with the global population. Modern information technology (IT), especially in computer science by using modern appearance, can usually find more mutual matching, improve the quality of information, and can reduce the transaction trust on demand in the specific system, especially in the background of the current population and diversity increased, which further improve the social scalability.

The flow of information in the thought: I called the intersubjective agreement (intersubjective protocols): both oral and written text, traditional customs, laws (rules and cases), a series of other symbols (such as online star rating system, market price and so on).

Trust to minimize the whole system of participants is more difficult to each other or from the middle and external injury. Most system has undergone a long evolution of culture, such as the law (reduced violence, theft, fraud), security technology, and so on, and these are essentially reduce the need to trust others. By fully trust system in most cases (such as a market) depends on its default participants trust another full confidence in the system (such as contract law).

These are the trust system in turn to perform a series of legislation, security audit, or other control means, these means can usually be reduced to participants (such as accountants, lawyers, managers, researchers) the possibility of injury. This is easily affected by the nature of the other participants injury called vulnerability (vulnerability to other participants). An innovation usually only remove some vulnerability, such as reduced demand or risk to trust others. To fully trust system or technology does not exist.

This is not to completely trust the existence, even in our strongest security technology field of cryptography is correct. Although some cryptographic protocols indeed ensure specific data even if there is a relationship between the astronomical level is also only a very low probability of crack, but considering all possible behaviors of all participants, they can not provide 100% security.

For example, encryption can be well protected from direct mail hacking third party, but still need to trust the sender receiver will not forward this email to others or directly or indirectly leakage mail to third party content. For example, in our most powerful consensus protocols, even malicious actors accounted for the proportion of total participants or middleman is far lower than the 100% (by force, rights, individual number or count) can also damage the integrity of the transaction information or flow between participants, and harm to the participants. Recent breakthroughs in computer science can greatly reduce vulnerabilities, but is not to eliminate any potential attacker harmful behavior vulnerability point.

To promote mutual benefit that matched participants. Pairing is a kind of social Internet most good scalability. Like Usenet News, Facebook and Twitter such a social network to promote mutual entertainment or similar thinking can exchange information (or even future spouse) people find each other.

When they allow people more likely to find each other and mutual benefit, social network of relationships of different levels, from casual to frequent to crush. Christopher Allen has done some interesting and very specific analysis, the analysis mainly on the number of online games or related social network team scale and people in the interaction time spent.

EBay, Uber, AirBnB and the online financial trading platform will improve social extensibility through great progress in business matching: search, search, collection and promote mutual commercial or retail trade negotiation. These or related services also promotes other industries, such as payment and transportation, as well as strangers in the implementation of compulsory verification protocol to communicate, and to perform these results (such as “review” system, Yelp etc.).

The main social scalability of the Internet is the advantage of matching, and the main social blockchain scalability advantages is the minimization of trust. Block chain by locking in some important properties (such as the creation of money and payment) and the integrity of the important information flow to reduce vulnerabilities in reducing the integrity of the important function of the vulnerability, the future may also be. Private computing is secret and can be tampered with, the public trust can be not tampered with verifiable calculation of trust replaced. This article will mainly discuss the reduction of this vulnerability, and it gives participants the benefits in promoting the standard of performance, that is the minimization of money trust.

Money and the market

Money and the market directly to the participants of the transactions of income, it is the way through the matching of two parties, the widely accepted and standardized to the price (currency). The market here refers to the market definition of Adam Smith said: not to say that both parties put things together in a particular place or service together (although involved), but the broader trading portfolio, which is the product of supply chain coordination. (blue fox notes: that is to say, the market is an invisible hand in command of the production and circulation of products.)

Money and the market also inspired the birth of more accurate price signals, these signals can reduce the error in the transaction cost and negotiation. Therefore, the combination of strong currencies and markets prompted far more massive than before different participants to coordinate their economic activities, and before the market is more like a bilateral monopoly and non free competition market.

Market and money involved, (collection of buyers and sellers), less trust (trust self-interest rather than altruism, strangers or acquaintances) scalable performance (through the currency is widely accepted and reusable media), and the quality of information flow (market price).

About the early’s most outstanding thinkers of money and the market is Adam Smith. At the beginning of the industrial revolution in Britain, Smith pointed out in “the wealth of the nations”, even the most simple products, but also directly or indirectly with a number of different people work:

Observation of a civilized and prosperous country in the most ordinary workers living accommodation, you will find that this one involved in the industry, and the industry in the number of employment is very huge. For example: an ordinary workers wear wool coat, may be very rough, but the product is the number of workers to work together. The shepherd, wool sorters, hair dyeing, weaving industry, textile industry, garment industry and so on, all of them must be added to the different industries to accomplish this seemingly simple products. In addition, many businessmen must also hire these workers and porters will produce transport materials to different parts of the nation in the hands of the people! Especially in commerce and navigation, how many shipbuilders, seaman, yacht manufacturers, rope manufacturers must hire to make dye can be brought together different materials, these materials tend to come from the world’s most remote corners!

In order to produce these workers to work with the tools involved and how rich kinds of labor! Let us put aside like boats, with seaman mills fuller with the textile workers for textile machine etc. these complex machines, and only consider the production of simple machines, such as the shepherd wool with scissors, it involves how rich kinds of labor.

The miners, smelting furnace manufacturers, lumberjacks, charcoal industry, brick producers, bricklayers, kotelshchik, millwright, forging, blacksmith, all of them contributed to manufacturing skills and labor, a pair of scissors. If we take the method of observation, the same will find their clothes on different parts, or house furniture, linen shirts, he wore the shoes to wear in the feet, he slept in a bed, and some of these items are all composed, cooking, cooking grate coal, coal may be through long-distance sea and land to come, and he used in the appliance, kitchen table, cutlery, clay or tin plate, these devices can be used to separate food, also need help to prepare bread and beer, the glass window can let the sunshine and heat come, and can cover the wind and rain. These are to worship the intellectual and artistic gift, let these beautiful and happy invention possible, if not these, north area almost never have a comfortable living environment, there will be different types of workers, the use of these different tools provide convenience.

If we want to sort out, in my opinion, all these things, and considering it contains how rich labor type, we should be aware of, not tens of thousands of people’s cooperation and help, even in civilized society the most ordinary people can not be providing basic necessities, even though we may think of his mistake life is very simple.

And this is before the successive industrial revolution and globalization occurred between 1776 years and modern, this division has greatly been more thorough refinement and expansion. Compared to the trust so many strangers altruism, market and money to create more mutual matching, and prompting people in this large network do not know each other to act according to their own interests:

In a civilized society, a person needs a lot of cooperation and assistance in life, and compared his life under node friendship may be scanty. Compared with other animal, people almost always help their brothers and sisters, and do not for altruistic. In exchange, we can get the whole system when you need help (system). Our dinner is not from the butchers, brewers, or baker’s kindness, but simply because they benefit us from acting in their own interests.

Smith went on to describe the division of labor, and the developed level of productivity depends on pair trading network: “because the transaction power provides an opportunity for division of labor, so that the degree of division of labor is always affected by the power constraints, in other words, by the degree of market development limited”. Along with the national and worldwide trading network increasingly developed, more species and number of producers to join in, thus further division of labor and labor productivity growth.

By increasing the transaction opportunity, money and promote social scalability. By reducing the coincidence problem (including transaction demand and transfer to unilateral coincidence and event coincidence), as a widely accepted and reusable storage and transfer of wealth, currency has greatly reduced the transaction cost, make a lot more wider range of transactions become possible, and so more people can participate in.

Various forms of media, from the oral to itself, clay, paper, telegraph, radio, computer network, are used to initiate a proposal and accept the proposal, and to facilitate transactions and pricing, and performance monitoring and other commercial communication.

One of the “observation of the market and currency price generation network” most knowledgeable is Friedrich Hayek paper, “the use of knowledge in society”:

In fact related knowledge is dispersed in the crowd in the system, the price can be used to coordinate the different people of different behavior… In any multi person cooperative society, this kind of planning, regardless of who it is, will to some extent depends on the knowledge, but these knowledge is often not the start but also belongs to the planners some people, in a way that needs to be communicated to the planners.

People planning based on knowledge, and give knowledge to them in a variety of ways to explain any theory of economic process, is a key problem, and how best to use those beginning in the population distribution of knowledge is the core issue of economic policy to solve one, is one of the core issues of how to design an efficient the economic system faces.

In fact, any commodity has a price, or that the local price is related with transportation costs — a fact that brings (this is only theoretically possible) an all information from a single individual has (in fact, information is scattered in participating in this process in the crowd) the surprising solution… Is, in a rare case of raw materials, even if there is no order, not many people know about the cause, the random population can be more thrifty tens of thousands of using this kind of materials or products made of this material.

That is to say, they are in the right direction. The price system is… People stumble but did not fully understand the situation must be a way to learn to use (though it can be a good use of the distance). In this way, not only can realize the division of labor, but also based on the equal division of the knowledge resources through the coordinated use of…… their mastery of different parts of the knowledge of the interaction between the generated solutions.

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