Vitalik: "Recognition" is the most important scarce resource

Source | vitalik.ca

Author | Vitalik Buterin

Source | vitalik.ca

Author | Vitalik Buterin

Special thanks to Karl Floersch, Aya Miyaguchi, and Mr Silly for their suggestions and comments.

Legitimacy is the most important scarce resource.

The Bitcoin and Ethereum blockchain ecosystem spends far more on network security (for proof-of-work purposes) than all of our other efforts combined. Since the day it was born, the Bitcoin blockchain has paid miners an average of $38 million in block rewards per day, plus about $5 million in transaction fees per day. In terms of this expense, Ethereum ranks second, averaging $19.5 million in block rewards per day plus $18 million in transaction fees per day.

At the same time, the annual budget of the Ethereum Foundation, including research, protocol development expenditures, sponsorships, and various other expenses, is only 30 million US dollars per year. Although there are also sponsorships from non-foundations, there are only a few times more than foundation sponsorships. The R&D expenditure of the Bitcoin ecosystem should be lower. Most of the R&D funding for the Bitcoin ecosystem comes from companies (a total of $250 million to date, according to this website), and the report also states that there are about 57 employers. If you don't count high-paid developers, the research and development expenditure of the Bitcoin ecosystem is about 20 million US dollars per year.

The standard answer to this conundrum requires the use of concepts like "public choice theory" and "Schelling fences": although we can easily identify some valuable public goods and transfer some funds to these public goods all at once, But establishing a routine institutionalized model for such decision-making would create political chaos and capture that would not be worth it in the long run. But whatever the reason, we are faced with the interesting fact that the Bitcoin and Ethereum ecosystems, as organisms capable of raising billions of dollars, have very strange and incomprehensible constraints in determining how the funds are spent.

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Social contracts can own tokens

To better understand this power, an important example is the legendary story between Steem and Hive. In early 2020, Justin Sun bought the Steem company, which is not the same thing as the Steem blockchain, but he does hold around 20% of the STEEM token supply. The Steem community naturally does not trust Justin Sun. Therefore, they formalized what they believe to be a long-term "gentleman's agreement" with an on-chain vote, deciding that coins held by Steem Corporation are held for the common good of the Steem blockchain and should therefore not be used for voting . With the help of STEEM tokens held by exchanges, Justin Sun fought back and won enough voting power to unilaterally control the Steem blockchain. The community sees no more options for on-chain governance. Therefore, they forked the Steem blockchain, called the forked chain Hive, and copied all STEEM token balance data to the new chain, except those who participated in the attack, including Sun Yuchen's.

They also launched a lot of applications. If they don't fork, most users either stay on Steem or migrate to other projects entirely.

The lesson we learned from this is: Steem Corporation never actually "owns" these tokens. If they have, they can use, enjoy, and abuse these tokens in any way they want. But in reality, when companies want to enjoy and abuse these tokens in ways that the community disapproves of, they can be successfully prevented. The underlying principle is a similar type of model to Bitcoin and Ethereum's yet-to-be-issued token rewards: the tokens are ultimately not owned by cryptographic keys, but rather some kind of social contract.

What follows goes beyond the smart contract structure. Why can Elon Musk sell his tweets as NFTs, but Jeff Bezos has a hard time doing the same? Elon and Jeff have the same ability to screenshot Elon's Twitter and put the picture into the NFT dapp, so what's the difference? For anyone with a basic intuitive understanding of human social psychology (or the phenomenon of art forgery), the answer is obvious: Elon selling Elon's tweet is genuine, while Jeff doing the same thing is not. Again, the control or distribution of millions of dollars of value is not in the hands of individuals or encryption keys, but in society's understanding of acceptance.

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What is receptivity?

See also my previous article on blockchain governance

To better understand the mechanism of acceptance, we need to understand some game theory knowledge in depth. There are many situations in life that require coordinated action: If you do something alone, you probably can't do anything (or worse): but if everyone acts together, the goal may be achieved.

This is an abstraction of a coordination game. You profit the most when you do the same thing as everyone else

Now, let's talk about the definition of recognition.

Acceptability is a pattern of high-level acceptance. In a certain social context, if the majority of people accept a certain outcome and act in accordance with that outcome in their social roles, and everyone does so because they expect others to do the same, then This result has "acceptance".

Receptivity is a phenomenon that arises naturally in coordination games. If you're not in a coordination game, there's no reason you need to adjust your actions to what you expect other people to do, and recognition doesn't matter. But as we have seen, coordination games are ubiquitous in society, which makes acceptance extraordinarily important. In almost any environment where coordination games go on long enough, some mechanism for decision-making inevitably emerges. These mechanisms are empowered by a mature culture, everyone in the culture pays attention to these mechanisms, and these mechanisms execute according to their will.

Everyone thinks this way: because everyone else abides by these mechanisms, if they did something different, they would just create conflict and suffer loss, or at least be left in a place alone, alone, and passive. In a bifurcated ecology. If a mechanism has these capabilities and can successfully make these choices, then the mechanism has acceptance.

In any case, as long as the coordination game exists long enough, acceptance is likely to arise. The blockchain is a coordination game everywhere. What client software are you running? Which DDR do you want, and which .eth name does the address correspond to? Which version of the Uniswap contract do you accept to represent the Uniswap exchange? Even NFTs are coordination games.

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receptive theory

Recognition arises in many ways. In general, acceptability arises because the things that earn acceptability are attractive to most people. But of course, people's psychological intuitions can be very complex. It's impossible for me to come up with a complete list of theories of acceptance, but here are a few that we can start with:

➤ Recognition through power: It is very difficult for someone to convince everyone that they are powerful enough to impose their will on everyone and resist. This drives many to submission, because everyone expects everyone else to be too intimidated to fight.

➤ Recognition through continuity: If something is recognizable at time T, then by default it is also recognizable at time T+1.

➤ Acceptability brought about by fairness: something can become acceptable because it satisfies an intuitive concept of fairness. See my article on reliable neutrality, but note that this is not the only kind of fairness.

➤ Legitimacy through process: If a process is legitimized, the output of that process also gains legitimacy (for example, laws passed in democracies sometimes gain legitimacy in this way).

➤ Validation from participation: If people participated in choosing an outcome, they were more likely to perceive it as valid. This is similar to fairness, but not quite the same: it is based on a psychological desire to be consistent with previous actions.

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Recognition is a powerful social technology, and we should harness it

Funding public goods in the cryptocurrency ecosystem is pretty bleak. There are hundreds of billions of dollars in circulation in the cryptocurrency ecosystem, but the public goods that these capitals depend on to continue to exist are only funded by tens of millions of dollars every year.

Funding core development with the personal self-sacrifice of a team is certainly admirable, but so is Eliud Kipchoge's marathon run in under two hours: it's an impressive display of human tenacity, but it won't be the case for a human transportation system The future (or in the case of cryptocurrencies, funding of public goods). Just as we already have much better technology that allows humans to move 42 kilometers in an hour without incredible perseverance and years of training, we should focus on building better social technologies to obtain public goods at the scale we need Funding, and making it a systemic part of our economic ecosystem, rather than a one-off philanthropic initiative.

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Acceptability of Bitshares

In the early days of cryptocurrency, there was a long forgotten but in my opinion very innovative idea, and that was the Bitshares social consensus model. Essentially, Bitshares describes itself as a community of PTS and AGS holders who are willing to collectively support the ecology of a new project, but for a project to enter the ecology, it needs to share 10% of its token supply To existing PTS and AGS holders.

You can't force anyone to do anything, but the market is governed by network effects. If someone comes up with a very attractive implementation, then you can make the entire PTS community pay the cost of generating a new genesis block. Otherwise, individuals who want to start from scratch will need to build an entirely new community around its system. Considering the network effects, I think the project that will distribute tokens to ProtoShare will win.

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Extending this model to Ethereum

The blockchain ecology including Ethereum attaches great importance to freedom and decentralization. But unfortunately, the public goods ecology of most blockchains is still authoritatively dominated and centralized: whether it is Ethereum, Zcash, or other large blockchains, there is usually one (or at most 2 to 3) entities in the Public goods spend far more than everyone else, leaving independent teams that want to build public goods with few options. I refer to this public goods financing model as "Central Capital Coordinators for Public-goods (CCCPs).

This situation is not the fault of the organizers themselves, they are very brave and try their best to support this ecology. On the contrary, it is the rules of this ecology that are unfair to the organization, because they set very unfair and high standards for the organization. Any single centralized organization will inevitably have blind spots, and at least some categories or teams of value that the organization cannot understand; The capacity of small groups of people. It is therefore valuable to create a more diverse and resilient approach to funding public goods that takes the pressure off any single organization.

Fortunately, we already have the seeds of such an alternative. The application layer ecology of Ethereum not only exists, but is also growing day by day, and has demonstrated its public spirit. Companies like Gnosis have been funding Ethereum client development, and various Ethereum DeFi projects have donated hundreds of thousands of dollars to the Gitcoin Grants matching pool.

Gitcoin Grants has already achieved a fairly high level of acceptance: its public goods funding mechanism, quadratic funding, has proven to be reliably neutral and effective in reflecting community priorities and values, as well as filling existing There are deficiencies in funding mechanisms. Sometimes, projects receiving the highest Gitcoin Grants matching funding even attract funding from other or more centralized funding entities. The Ethereum Foundation itself plays a key role in supporting this experimental and diverse practice, incubating initiatives like Gitcoin Grants with MolochDAO and others, which then find their way into the community and gain wider support.

By improving the Bitshares model, we can make this nascent public goods funding ecosystem grow: instead of giving the greatest community support to projects that distribute tokens to small oligarchy groups that bought PTS or AGS in 2013, we support The most important are those projects that provide small donations to public goods that support both the project and the ecosystem on which the project depends. And, crucially, we can not give these benefits to projects that fork existing projects and do not give back to the wider ecosystem.

There are many ways to support public goods: committing to long-term support for Gitcoin Grants’ matching pool, supporting Ethereum client development (which is also an effort with reasonable, reliable neutrality, since Ethereum clients are well-defined), or Or even run a funded project of its own, and its scope is beyond the application layer project itself. The easiest way to come to a consensus on how much counts as adequate support is - for example, 5% of project spending goes to support the wider ecosystem, and another 1% goes to public goods outside the blockchain space, And rely on goodwill to determine the whereabouts of funds.

Does the community really have that much influence?

Of course, there are limits to the value this community support can provide. If a competing project (or a fork of an existing project) offers something significantly better to its users, users will flock to follow, no matter how many people clamor that they should use another, more socially valuable option.

But these limits are different in different situations: sometimes, the influence of a community is tiny, but at other times it can be quite strong. Tether vs DAI makes for an interesting case study. Tether has had a lot of bad press, but despite this traders have been holding Tether and using Tether to move dollars. And although DAI has the advantages of being more decentralized and more transparent, it cannot take away most of Tether's market share as far as traders are concerned. But DAI's strength lies in applications: Augur, xDai, PoolTogether are all using DAI, zk.money plans to use DAI, and many others. Which dapps use USDT? much less.

Thus, while community-driven forces have limited acceptance effects, there is considerable scope to exploit them enough to encourage projects to allocate a portion of their budgets to the wider ecosystem. There's even a selfish reason to get involved in this public-private balance: if you're a developer of an Ethereum wallet, or a podcast host or a newsletter writer, when you see two competing projects, one for the ecosystem If you make a significant contribution to a higher-level public good that you yourself benefit from, and the other project does not, which project will you try to help gain more market share?

NFTs supporting public goods beyond the Ethereum field

The idea of ​​supporting public goods with the value generated by ETH originated from the concept of public support recognition, and the value generated by it can go far beyond the Ethereum ecosystem. An important and imminent challenge and opportunity is NFT. NFTs have great potential to help many types of public goods, especially creative ones, at least partially solve their chronic and systemic underfunding problems.

That's really a very commendable first step

But they may be an opportunity that was missed: helping Elon Musk make another million dollars by selling his tweets has little social value, as things stand, the money will go to him personally (kudos for it Unfortunately, he ultimately decided not to sell). It would be less interesting if NFTs ended up being just a casino that largely benefited already wealthy celebrities.

Fortunately, we have the power to change this outcome. Which NFTs people find attractive and want to buy, and which ones they don't, is a matter of acceptance: if everyone thinks one NFT is fun and another sucks, people will have a strong preference to buy the first one, because It brings higher bragging value, pride in owning it, and because everyone thinks so, it can be resold for a higher price. If the acceptance of NFT can be steered in a good direction, there is an opportunity to establish a solid funding channel for artists, charities and other groups.

Here are two possible ideas:

There are definitely more ideas, but this is certainly an area worth investing in more active coordination of work and ideas.

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Summarize

➤ Acceptance (high levels of acceptance) is very powerful. Recognition occurs wherever coordination is needed, especially on the Internet, where coordination is everywhere.

➤ Acceptance arises in many ways: strength, continuity, fairness, process, performance, and participation are all important sources.

➤ Cryptocurrency is powerful because it allows us to amass large amounts of capital through collective economic will that is not controlled by anyone in the first place. More precisely, these funds are directly controlled by the accreditation.

➤ It is very risky to issue tokens at the base layer when starting to make public goods. However, fortunately, Ethereum has a very rich application layer ecology, which gives us more flexibility. Part of this is the opportunity to influence not just existing projects, but new projects in the future.

➤ But this goes way beyond Ethereum itself. NFTs are an example of acceptance attracting large amounts of money. The NFT industry could be a major boon to artists, charities, and other providers of public goods. This impact may reach far beyond the virtual corners of our world, but this outcome is not guaranteed to happen. It depends on positive coordination and support.

Original link:https://vitalik.ca/general/2021/03/23/legitimacy.html

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