Sovereignty vs Society The Contradictory Relationship Between Individual Freedom and Social Dependence

Individual Freedom vs Social Dependence

Author: Jameson Lopp, Co-founder & CTO of Casa; Translator: LianGuaixiaozou

Bitcoin supporters often discuss the concept of sovereignty, which is a value we cherish. In the Bitcoin economy, operating as a sovereign entity, holding your own keys, auditing the blockchain history, and enforcing rules you agree with, is a right that individuals grant themselves.

However, since the scalability debate six years ago, we have delved deeper into the governance of the Bitcoin protocol, and the subtle differences in the sovereignty perspective have become clearer to me. Consider the following:

“For privacy to be widespread, it must be part of a social contract. People must come together and deploy systems in the public’s interest. Privacy cannot be extended outside the realm of cooperatively working fellow citizens.” – Eric Hughes, “A Cypherpunk’s Manifesto.”

• How to Prove a Secret A Guide to Zero-Knowledge Proofs from Magicians
• Dune SQL and Ethereum Data Analysis Advanced Guide
• The Core Function of Data Availability in Layer2

You may be struck by the term “social contract,” but we will explore this later. I think it is necessary to quote Eric above because it involves an issue related to network effects. Although we are all independent individuals, if we are to live in a way that interacts with others, we must rely on some degree of cooperation. This applies to economic interactions and communication, and of course, to any other similar network activities, such as protocol-dependent activities.

I believe that if we replace “privacy” with “sovereignty,” Eric’s words also apply. You will agree after reading this article.

No man is an island,

Entire of itself;

Every man is a piece of the continent,

A part of the main.

If a clod be washed away by the sea,

Europe is the less,

As well as if a promontory were,

As well as if a manor of thy friend’s

Or of thine own were.

Any man’s death diminishes me,

Because I am involved in mankind.

And therefore never send to know for whom the bell tolls;

It tolls for thee.

– John Donne

If you are reading this article, you are unlikely to be an “island” that does not interact with anyone, as it is part of your daily life.

1. What is sovereignty?

Sovereignty means independence; the freedom to operate without permission. It is commonly thought that sovereignty belongs to nations, but an individual can also be a sovereign entity with certain abilities.

An individual can become a sovereign entity in many aspects of life. Of course, what Bitcoin supporters are concerned about is financial sovereignty.

Due to the interconnection of our economy and society, complete sovereignty at the individual level is almost impossible today. This is because of specialization: when we need to do something specific, individuals are more efficient. Therefore, we outsource many aspects of our lives to third-party experts who are very good at providing specific goods and services.

Even if you live in a remote and isolated place, it is unlikely that you will live a primitive lifestyle. Most of these people still rely on supply chains to occasionally provide them with raw materials and high-tech products, and they cannot create everything from scratch. Their human “islands” still have bridges to society, although they may be fragile.

2. Achieving Sovereignty through Mathematics and Game Theory

From a practical perspective, how can financial sovereignty be achieved? Of course, we have to start from scratch.

What is blockchain? Blockchain is like a string of building blocks.

I am a technology person. When people talk about “blockchain,” what I hear is “database.” When people talk about “solving problems using blockchain,” they often overlook many important details about the system architecture.

When you create a blockchain, what you are doing is creating a connected list of data, which is a new type of data structure bundled together through encryption. This data structure provides us with tamper-evident properties. This is what you really get besides ordered historical events. You can say “this happened after that.” However, precisely speaking, you cannot determine whether the ordered history you see is the true history from a certain blockchain data structure.

When people talk about blockchain, most of the other things they think of are not actually guaranteed by the blockchain itself. The next question is, what isn’t blockchain?

• It is not a node network.

• It is not a consensus protocol.

• It is not an immutable record of history.

• It is certainly not a truth arbitrator.

• It is not even a trusted timestamp service.

Blockchain itself only provides you with tamper-evident properties. You need something else, such as proof of work, proof of stake, or some other consensus mechanism, to make it costly for someone to rewrite the blockchain. You need a node network to ensure the accuracy of the historical records. You also need specific consensus rules to ensure that blocks are timestamped within a certain range.

How does a blockchain-based system enhance individual sovereignty? Cryptography allows its users to create an asymmetric shield for self-defense. In other words, the cost of attacking a user who protects data using encryption technology is orders of magnitude higher than the cost of defense for the user.

Similarly, by running software that verifies that no one violates the rules of the system, we gain a certain degree of sovereignty because we do not need to trust that third parties are honest.

In these networks, consensus is achieved by each of us executing rules that we collectively agree on, determining which data can be accepted and propagated to our peers, and which data can be rejected. When participants have disagreements about the rules and data reception, the network automatically divides. Therefore, the “society” with which participants can interact is also divided, and the “governance” of the entire network is completely seamless.

In my opinion, the most fair system you can get is one where any participant can veto anything they want. This gives us the ability to create a system where we optimize not for the benefit of the majority (the goal of democracy).

This architecture creates a system where we optimize for minimizing harm to the entire user base.

3. Traditional Governance Models

Let’s think about how human civilization has evolved to where it is today. Over the past few thousand years, we have created various hierarchical command and control systems to help us self-organize, to help us specialize so that no one has to worry about growing their own food.

You can delegate these specific functions to other professionals, who may be part of a company or class that focuses on doing one or two things, very efficiently and productively.

The result of this is that you have a lot of power concentrated at the top of your system, power that is essentially used to coordinate people at other levels, in fact, it is these people who do the work throughout the organization. This model applies to both public and private sector organizations.

It is quite effective, but of course, it has its pros and cons. I think as a society, we haven’t really considered these pros and cons. We have gained greater efficiency, more convenience, but at the expense of robustness and reliability.

4. Social Scalability

You must have heard a lot of people talking about technical scaling solutions, as well as the performance issues of blockchain, because blockchain may be the most inefficient and underperforming database structure in history.

But I think many people overlook the issue of social scalability. So what is social scalability?

“The progress of civilization is the increasing number of things people can do without thinking about them.” – Alfred Whitehead, British mathematician and philosopher

If you think back to how bureaucracy and civilization have developed with these orders and control hierarchies, it’s a big problem, a balancing act between efficiency and the systemic risks of concentrating power in the hands of a few.

Therefore, I believe that a consensus network based on blockchain can allow us to create systems that have social scalability, which means that the cost of participating in the network and staying in the network is much lower.

And I’m not talking about technical costs, but cognitive costs. You know Dunbar’s number, which refers to the idea that the human brain can only maintain close relationships with about 100 to 150 people, otherwise cognitive overload occurs.

When you are in a system architecture where other participants have enough power to harm your interests, change the rules, and essentially change the system itself, you have to spend a lot of time guarding against them and worrying about how they will affect your sovereignty.

However, if we can establish a strong and reliable platform with a high degree of decentralization, you can create a more flexible and trustworthy system, so that people can interact and use this system with minimal cognitive costs. With a public permissionless network, we can create a truly free market that is socially scalable. We can achieve this goal by creating a system where you don’t have to worry about power dynamics and behind-the-scenes games.

Essentially, we are creating these new forms of network society by reversing and automating bureaucratic systems.

“When we can ensure the most important functions of financial networks through computer science, rather than traditional accountants, regulators, investigators, police, and lawyers, we can transition from a manual, inconsistently secure local system to an automated, more secure global system.” – Nick Szabo, “Money, Blockchains, and Social Scalability”

5. Property Rights

In a sense, property rights are defined very well in cryptographic protocols. Either you have the ability to provide enough evidence to the network to prove that you have an entry in the distributed ledger and can manipulate it, or you have nothing.

However, at a higher level, there is game theory. While you can ensure that your assets are not easily stolen or frozen by any arbitrary institution, it does not guarantee that the entire ecosystem will never betray you. Due to the reversibility of game theory and the difficulty of coordinating such changes in a permissionless public network governance, this situation is highly unlikely to occur, but it is never absolutely impossible.

A famous example of a reaction to a perceived major threat is Ethereum’s response to the DAO hack, but this is by no means the only time a protocol has been changed due to the actions of malicious entities.

In the case of the DAO hack, a sufficient number of entities in control on the network removed a sufficient amount of value, creating a strong incentive to coordinate a protocol change and return the funds to the original owners. The DAO attacker managed to control 3.6 million ETH, about 5% of the total supply at the time. Of course, one could argue from a logical standpoint that the DAO hacker simply obtained legitimate ownership of these tokens by following the protocol rules, but it also demonstrates that not all rules are written.

It is worth noting that similar incidents have occurred in Bitcoin, although it is a much smaller ecosystem. On August 15, 2010, it was discovered that block 74,638 contained a transaction that created 184,467,440,737.09551616 BTC distributed across three different addresses. This was possible because the code used to check transactions did not account for sum overflow when the output was too large.

Within five hours of this discovery, a new version of the client was released, which included a soft fork update to enforce consensus rules against output value overflow transactions. The blockchain forked. Although many unpatched nodes continued to build on the “bad” blockchain, the “good” blockchain fork surpassed it at block height 74,691, at which point all nodes accepted the “good” blockchain as the authoritative source of Bitcoin transaction history.

On the one hand, regardless of who exploits this vulnerability, their Bitcoin will be almost taken away by the entire network. On the other hand, if the rules are patched from that time, the attacker will eventually own 99.9886159% of all Bitcoin. The motive is obvious.

Spock: “It makes sense. The needs of the many outweigh the…”

Kirk: “Needs of the few.”

Spock: “Or the one.”

6. Social Contract

Establishing a social contract is even impossible because there is no authority to enforce it, which is a problem. I believe that the legal system established by the government is an attempt to codify the social contract.

“Everyone bears a part of society; no one can exempt themselves from their responsibilities. If society is heading towards destruction, no one can find a safe way out for themselves. Therefore, everyone, for their own interests, must vigorously engage in this intellectual struggle. No one can stand by; because the result concerns the interests of everyone. Regardless of choice, everyone is involved in this great historical battle, and it is our era that has propelled us into this decisive battle.” – Ludwig Von Mises, Austrian economics master

In my opinion, “social contract” is just a euphemism for the “lowest common denominator of human belief” in a specific organization. It is elusive, hard to define, and susceptible to change. Although we have made significant progress in promoting machine consensus to automate the execution of rules for the entire society, we seem to be forever limited by the chaotic and unquantifiable nature of human consensus.

7. Choose to Join or Choose to Exit Society?

The greatness of creating a permissionless public network protected by cryptography lies in the fact that those who choose to participate in the network do so out of their own interests. People today use Bitcoin because they choose to join this system of rules. However, if more countries decide to adopt Bitcoin as legal tender, the situation may not always be the same in the future.

8. Bitcoin Social Contract

What is the social contract of Bitcoin? I usually refer to it as a set of “inviolable properties” universally recognized by users.

• Consensus, not command and control: Governance relies on the principles of rough consensus and running code in the cypherpunk tradition.

• Minimization of trust: Trust makes the system fragile, opaque, and costly to operate. Trust failures can lead to systemic collapse, trust management can result in inequality and monopoly lock-in, and naturally arising trust bottlenecks can be abused to deny due process.

• Decentralization: Among many attributes, power is the most important.

• Censorship resistance: No one should have the power to prevent others from interacting with the Bitcoin network. No one should have the power to indefinitely prevent the confirmation of valid transactions. Although miners are free to choose not to confirm transactions, any valid transaction that pays competitive fees should ultimately be confirmed by economically rational miners.

• Anonymity: Owning or using Bitcoin does not require official identification. This principle enhances the system’s resistance to censorship and fungibility because it is harder to single out transactions deemed “tainted” when the system itself does not track users.

• Open source: The Bitcoin client’s source code should always be open, allowing anyone to read, modify, copy, and share it. The value of Bitcoin is built on the transparency and auditability of the system. The ability to audit any aspect of the system ensures that we do not need to trust the honest behavior of any specific entity.

• Permissionless: There should be no arbitrary gatekeeper to prevent anyone from participating in the network (as a user, node, miner, etc.). This is a result of trust minimization, censorship resistance, and anonymity.

• Not bound by national laws: Bitcoin should not be bound by national laws, just like other internet protocols. Regulatory bodies must figure out how to deal with the functionalities brought by Bitcoin technology, rather than impeding its development.

• Fungibility: Fungibility is an important attribute of sound money. If every user needs to perform tainted analysis on all funds they receive, the utility of the system will significantly decrease.

• Forward compatibility: Bitcoin supports signing transactions without broadcasting them; there is a principle that any transaction currently signable but not broadcasted should remain valid and broadcastable. Bitcoin’s adherence to this principle instills confidence in everyone in the protocol. Anyone can protect their funds with any scheme they envision and can deploy these funds in a permissionless manner.

• Resource minimization: To maintain low verification costs, block space is scarce. Therefore, it should be expensive for anyone to consume a large amount of block space. Verification should be cost-effective because when more users can afford to audit the system, it supports trust minimization; low-cost verification also makes resource exhaustion attacks prohibitively expensive.

• Convergence: Any two Bitcoin clients, if they connect to an honest peer node, should eventually converge on the same chain tip.

• Transaction immutability: Each new block added to the chain after a given block should greatly reduce the likelihood of the given block becoming an orphan block in chain reorganizations. Although immutability cannot be technically guaranteed, we can ensure that the cost of reversing transactions becomes extremely high and impractical after they have been sufficiently buried under proof of work.

• Conservatism: Currency should be stable in the long run. We should make changes or updates conservatively, both to minimize the risks to the system and to allow people to continue using the system in ways they deem appropriate.

9. Sovereignty lies within the system, not against the system

Systems like Bitcoin are superior because their incentives and governance are more transparent, even though the governance process and power distribution may be undefined. Some may argue that this is a feature in itself.

We all have the ability to possess sovereignty in a limited way, but we rely on cooperation with others in society to conduct transactions and depend on others to provide us with their labor products. Remember, “no man is an island.”

10. Inter-generational pressure on sovereignty

While joining a networked society may be better than traditional state and city-state governance based on violence threats, what if the concept of joining society fails after the efforts of several generations?

Over the years, I have repeatedly encountered a question related to the cycles of civilization that we have witnessed.

“Difficult times create strong men,

strong men create good times,

good times create weak men,

and weak men create difficult times.”

― G. Michael Hopf, American author

I believe that there is a moral dilemma in considering that a society may choose to restructure itself and form a new government and legal system. However, these laws often become permanent and imposed on future generations. If society changes and decides that the laws no longer conform to the social contract they expect, it can be quite difficult to peacefully change the laws.

This is because things that are default are difficult to change. If we observe the rise and fall of empires, we can see that as more and more bureaucracy is imposed on society, the empire will collapse only when the people rise up in resistance, or when the system collapses due to resource depletion and inability to cope with a constantly changing environment. I often wonder if it would be fairer if laws needed to be reapproved every generation or every few decades.

11. Where are we heading?

After exploring all these questions, I believe it boils down to how you try to guide the development and evolution of the social contract. I think this is a problem of culture, narrative, and memetics.

“My prediction is that libertarians will turn to Bitcoin. In about two years, Bitcoin will be mainstream. I don’t know how to get to the mainstream without the fringe people and politics… You just have to go through a maturing process, and the technology becomes mainstream on the other side. In this process, fringe politics will continue.” ― Marc Andreesen, 2014

Although Marc’s prediction did not come true, he got some things right. If a society that chooses to join moves from niche to mainstream, new entrants may bring their own culture and values, which could change the unwritten social contract and lead to attempts to change the written rules. Since the ideal of liberalism is “fringe,” the mainstream adoption of Bitcoin will undoubtedly result in the social contract of that system eventually lacking guarantees.

I think one of the advantages of Bitcoin is that the early adopters who have strong ideological beliefs hold a large amount of Bitcoin, which gives them significant influence and power over the companies in this field, and they will not easily waver. How this game theory will develop is still an open question.

Dear readers, what can you do to help maintain the social contract of Bitcoin and the integrity of what we consider inviolable property?

• Run your own node to enforce the rules for your funds.

• Safeguard your keys.

• Spread awareness and educate your friends and family.

We all have a responsibility to ensure the stability of the system, respond to new threats, and prevent internal corruption.

“Vigilance is not only the price of freedom, but also the price of any success.” – Henry Ward Beecher, American clergyman and famous orator.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!