The World After Trust

The algorithm that made Bitcoin possible provides a handy fix for the all-too-human problem of trust. Imagined to its extreme, it might make possible the libertarian’s wet dream: the end of the nation state. Gulp.

Susanne Tarkowski Tempelhof is Swedish, at least according to official documents. But it’s a designation she feels little affinity for. A founder of Bitnation—a platform built using the “blockchain” technology that underlies Bitcoin—she was born and raised in Sweden by parents who were only able to obtain passports after enduring decades of struggle and bureaucracy. Tempelhof’s father was a Polish immigrant who was stateless for 10 years; her mother is of Russian descent; her brother, who was not born in Sweden, was also stuck in jurisdictional limbo. But Tempelhof got lucky. By the time she was born, her father had been granted citizenship, which meant that her national identity, at least within the scope of the law, was never contested.

But it was a source of internal conflict. As a teenager, Tempelhof started to recalibrate her view of the world and her place in it. She wondered whether borders presented more problems than they solved. Redefining questions of belonging and identity, which are inextricably bound with one’s sense of self, became an idée fixee. “The whole thing was quite traumatising for my family,” she says. “Growing up I was always thinking, what are these imaginary borders? I am not Swedish; some of my family does not have Swedish citizenship. What is the point of all of it?” Taken in the most literal sense, all politics could be considered identity politics. But Tempelhof decided to take this notion to its epiphanic extreme: what if we could divest our identities, our selves, from the nation-state, institutions and corporations that govern our everyday existence?

These political stirrings became more fervent during Tempelhof’s time as a contractor for the US government in conflict zones in the Middle East and Africa. Before her stint in Libya (where the exact nature of her work remains unclear) she worked as an art director for the US Government’s PsyOps campaigns in Afghanistan. But her sense of disillusionment was growing. American military presence had only worsened the deteriorating security situation, while a sense of order had seemingly emerged in ungovernable territories —those controlled by rebels. (She calls them “defacto anarchist societies”.) The invention of blockchain was an inflection point, a prototype for what an alternative model of governance might look like. “I became less and less convinced about government intervention and more and more convinced about competitive options,” she says, with unrestrained rapture. “It was an epiphany for me, because I realized that you don’t have to do things within the system—you could just outcompete the system.”

The notion of a community divorced from government—in essence, a private good—is not a new one. The twin forces of globalisation and technology have only heightened this corporatisation. In Imagined Communities, a foundational text on nationalism written by the late scholar Benedict Anderson in 1983, the nation-state is depicted as nothing more than a social construct, conjured by shared desires and ideals. “It is an imagined political community—and imagined as both inherently limited and sovereign,” he said, because a sense of community prevailed in spite of many members of even the smallest nation never coming into contact with one another. He argued that such fraternal bonds we derived not from their “falsity/genuineness, but by the style in which they are imagined.” These days communities thrive in all sorts of non-governmental (but centralised) institutions, like the workplace or corporations like Facebook.

Tempelhof’s radical reimagination of community takes this a step further. Bitnation, the blockchain-based start-up she founded in 2014, wants to create a kind of ‘Governance 2.0’ through self-enforcing contracts, with the aim of eliminating the authority traditionally bestowed by governments, brokers or financial institutions. The blockchain acts as a verifier and guarantor of birth and death certificates, marriage licenses, equity trades, title deeds, votes and insurance claims. But Tempelhof’s ambitions for Bitnation are for it to become not just a service provider but a recognized virtual nation. At present, virtual nationhood remains a niche pursuit: Bitnation has mostly attracted a small number of cosmopolites (or ‘world citizens’, in Bitnation parlance) for whom statelessness is a choice, rather than an imposition.

Put simply, blockchain is an encrypted public ledger that records, guarantees and verifies transactions. It is transparent and pseudonymous. It is not controlled by a single user. Each transaction is authenticated by a network of thousands of computer nodes that distil information into a code or hash. This ensures the process, which is broadcast to the network, cannot be tampered with. Unlike a bank ledger, alterations can’t be made privately or by individual decree—they must first gain the approval of the majority of computers. As such, they are known as ‘trustless’ systems, as a distributed public ledger negates the need for faith in a middleman or central authority. But this taxonomy is misleading.

The blockchain doesn’t dissolve the need for trust so much as it demands reconsideration of where that trust is placed. Instead of assuaging one’s fears through, say, a positive corporate reputation, blockchain asks us to accept the infallibility of code. Proof-of-work concepts and technological mastery do not yet fully compensate for the lack of human control at the heart of blockchain. Who takes the blame when things so sour? This devolution of authority from human to algorithm may be a step too far.

In theory, the blockchain’s potential uses are boundless, as any transaction underwritten by a contract is ripe for decentralization. This includes contracts that govern our intimate relations. In October 2014, David Mondrus and Joyce Bayo affirmed their love for each other, free from the presence of the church or state, in the world’s first blockchain wedding. A bitcoin ATM, which displayed a QR code with a love heart on its monitor, recorded the couple’s vows at a cryptocurrency conference at Walt Disney World. A handful of couples have since followed suit.

Ideological signaling aside, blockchain has real-world utility. Tempelhof says there has been growing demand for the notarization of land deeds using the technology, particularly in West Africa. According to The Economist, demand for blockchain-based land registries is growing in countries like Greece, where property rights are poorly codified by the law. To this day, the majority of Greek land deeds are logged by hand, with few identifying clues to property ownership aside from a surname. The fact that only seven per cent of Greece is mapped, suggests the country could be considered disputed territory: without a formal land registry, neighbours and companies are fighting over title just because they can. Meanwhile, it was reported that attempts, by US-based start-up Factom to form a partnership with the national government of Honduras, to secure land title records with blockchain technology had stalled. James Grimmelman, a professor of law at the University of Maryland, says that even though private companies tend to outperform the government in land recordation, their success tends to depend on the government to provide “a framework in which public registries provide a focal point for coordination and the government-provided legal system ultimately resolves disputes.”

These false starts have not deterred more politically-minded decentralisation efforts. In December last year, Bitnation has tried to redefine the European refugee crisis as a problem in need of a technological solution, rather than a humanitarian, economic or political one. The site displays the hashtag #RefugeesWelcome. On December last year it was announced the start-up had entered into partnership with the Estonian e-Residency program that would enable refugees to gain ID cards and receive financial assistance (bitcoins) on the blockchain.

Feel-good rhetoric aside, it’s hard to see how this would work in practice. Would a government consider a blockchain ID valid? It’s a proposal that requires the imprimatur of the state to be meaningful, otherwise it’s simply a method to reliably record information. Grimmelman concurs. “That's a very small part of what government does, and it's not a part that is particularly holding back society.”

Another prolific decentralization project is Ethereum, developed by Russian programmer Vitalik Buterin, which allows members of the public to create decentralized, blockchain-powered platforms of their own. Projects hosted by Ethereum include Augur, a decentralised prediction market; Etherparty, a blockchain to settle contracts and for dispute resolution; WeiFund, a non-profit crowdfunding app; and Slock, an app that uses the blockchain to automate security without the need for keys. The projects are still in the beta phase, but they hint at how decentralisation might work on a practical level.

That the more radical applications of blockchain appeal somewhat exclusively to anarcholibertarians hardly surprises. Blockchain’s politics is embedded in its mechanics, and a deep and ingrained mistrust of political institutions rife among its most fervent advocates. Take Bitcoin, the most prominent example of blockchain in action: its system of increasing the supply of money at a steady, predetermined rate is an experiment in what monetary policy might look like without the meddlesome input of policy boffins. Its underlying economic principles realize Milton Friedman’s long-held desire to replace the board of the Federal Reserve with a computer. Yet the currency itself faces resistance from a skeptical public. And no wonder: it has been mired by a number of heists, market tumult and nefarious activity. Very few cafés let you pay for a coffee with bitcoin.

If blockchain is to transcend the realms of speculative fiction and libertarian subreddits, it must, above all else, demonstrate its commercial viability. This seems possible with the help of the financial sector, which sees it as an opportunity and an existential threat to its lucrative middleman status. A report by Santander InnoVentures, Anthemis and Oliver Wyman estimated that blockchain could slash costs incurred by cross-border payments, securities trading and regulatory compliance by $15 billion to $20 billion by 2022. In December last year, NASDAQ became the first major securities exchange in the world to use blockchain technology to complete and record a private securities issuance.

If used in public markets, blockchain could make the system more efficient: instead of waiting three days for trades to be settled, the blockchain could settle the transfer of funds and securities in real time, which would reduce the risk of counterparty failure and free up billions of dollars of capital that would normally lay dormant during the waiting period.

Blockchain’s ascent into the mainstream isn’t necessarily inevitable. Even among cluey finance types, an understanding of how blockchain works—and how the sector could be upended—is rudimentary. In an interview in the Financial Times, Tim Swanson, the head of research at R3CEV (a start-up backed by Goldman Sachs, JP Morgan, UBS and Barclays) likened blockchain to gluten. “Everyone is talking about it,” he said, “but no one knows what it is in great detail.” Like the cloud and Big Data, blockchain might yet become a nebulous byword for everything and nothing, primed for corporate hijacking by the Davos brigade.

The tenor of debate surrounding blockchain mirrors the prophecies made about the rise of the robots, where evangelism at one end is met with fearmongering on the other. That’s not unusual: both technologies compel us to confront the fact of humanity’s own built-in obsolescence, the limits of our corporeality. But technology’s ascent needn’t be viewed through a deterministic lens, nor should it be assumed that the imperatives of the market are self-evident. For better or worse, blockchain’s promise lies in its blueprint for a social and financial architecture once thought unimaginable. But without the trust of a community, it leaves us with little more than an unfulfilled vision of impossible buildings.

For all the breathless takes we’ve read about Bitcoin in recent years, we’ve struggled to get a handle on blockchain, the basic technology behind the scenes. Forget trying to understand how it works on a technical level—that’s not the point. Gillian argues that beyond its utility as a financial instrument, distilling trust into its algorithmic essence will make many of the bureaucratic tasks of governance much easier. But as she points out, the hard work of being a society isn’t really in the paperwork and the rubber stamps. As Elmo Keep argues with regards to gene editing, the rules of how we interact with each other and hold power over each other remain very human ones indeed — AR

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