Building Intellectual Machines to Execute our Principles

The Silk Road

The printing press was a technological resource used by the founders to put the principles of the government they were trying to establish within the minds of the people. It is doubtful that without the books and pamphlets put out by the revolutionaries that the ideas of the new government would have been able to take hold amongst the people. Today information technology enables us not to only communicate the principles of a system, but it even allows us to ensure that the principles are executed according to our expressed intent.

When systems are designed properly, transactions can be audited to a degree that provides a very high level of trust that what we told the system to do is actually what it did, and will do in the future. These systems can even be designed to be distributed in nature so that a centralized takeover of the principles and functionality of the system is all but impossible. If only we could trust our legislatures and pastors to operate with such integrity! But that is exactly the problem isn’t it? For an amazing example of how technology can be used to create systems of trust in order to facilitate the transactions of principle consider the online black market called the Silk Road and the virtual currency called bitcoin.

 
The Silk Road (http://en.wikipedia.org/wiki/Silk_Road_(marketplace)) is a website that can only be accessed by using a special internet client that anyonymizes your internet activity over a distributed network of encrypted channels called the Tor network (http://www.torproject.org/).

The Tor network hides your source internet address from the websites that you visit so that your visit to the website cannot be traced back to your home or office internet connection. The system also makes it very difficult to identify the location of a server hosting a website on the tor network, so the Silk Road is able to maintain an open storefront without agents of the state being able to find out where it physically exists. This is important because the Silk Road is a market place for items prohibited by the state. The main products offered on the Silk Road are illegal drugs. The site uses feedback and has other systems of trust developed to allow anonymous buyers and sellers to be comfortable in participating in their very risky, mostly illegal transactions. The currency of the Silk Road is bitcoin.



Bitcoin

Bitcoin (http://www.weusecoins.com/) is a technological innovation that enables people to exchange value via the internet while remaining anonymous to each other if desired. A major obstacle to a truly free market online is the fact that in the middle of every transaction is a financial institution acting as the trust agent to process the credit card.

The financial intuition not only takes a high fee for the transaction, but it also ensures that the parties involved in the transaction are identified and stored in a database. It also requires that both parties, particularly the merchant, trust the financial institution. Trust in financial institutions is waning, if you haven’t watched the news lately. In addition to this, the information the bank keeps on the transactions have of late been more and more accessible to government agencies wishing to impose upon the market with regulation and taxation.

What is Bitcoin?

Bitcoin was launched as an idea of principle that garnered an online community of developers who created a system to execute those principles and enable online transactions that are trustworthy, anonymous and require no middle man. By employing sound economic principles and trusted technology, bitcoin has developed into an actual currency that is virtually if not actually impossible to counterfeit, has no central authority, allows for the direct exchange of value between two anonymous entities, and it is trusted daily by millions of people to facilitate transactions of actual value as money.

 

The bitcoin system offers anonymity, but interestingly enough it also offers an ability to audit transactions in a way that makes fraud very difficult to perpetrate  because every transaction is publicly recorded in the network (as encrypted source and destination “addresses”).  If an individual was more interested in the integrity of the transaction vs. the transaction’s anonymity, then the bitcoin system allows for the transaction to be audited in a way that can undeniably show that the amount invoiced was the amount actually paid. This is sometimes referred to as triple entry book keeping, where a neutral third party (the peer to peer bitcoin network) has a record of every transaction. So it would be difficult to create an invoice for $100 and then for the parties to conspire to pay $1000 and split the $900 between themselves off the books. This is particularly relevant in third party payer systems where an institution is trusted to payout on behalf of its contributors. Some prime examples of these kinds of systems are churches and governments.  The bitcoin network would be able to actually show that the documented transfer of value was the actual transfer of value. It is by definition and in multiple ways, a facilitator of trust.


The bitcoin and tor technologies were created in a way that people trust them even to facilitate transactions of value that if not done properly could result in arrest and imprisonment! The people who developed these tools did so trusting that the principles they shared could reliably be established and executed by technology. The development of these technologies was also done in a communal and open way that allowed for transparent input and competition among ideas so that the most effective ideas were implemented in order to achieve the principles of the projects.

 The Silk Road does over $2 million (USD via Bitcoin) a month in sales and the bitcoin currency is becoming recognized even in traditional circles as a reliable conveyor of value. In effect these two technologies have allowed people to step outside the view of what they see as an over reaching government meddling in transactions over which many believe they should have no moral authority, and voluntarily trade with each other according to their beliefs.

Silk Road and bitcoin are clear examples of people taking principles they commonly believed in and putting them into action via technology in a way that they trust, and trust at a level that enables a person to act in spite of the fear of imprisonment looming as a result. These systems have minimized the dependency upon human administrators to perform the work of executing the transactions, opting instead to automate these principles through technology.

Now obviously bitcoin and the anonymous internet are not the final solution to overcoming the inappropriate authority currently in the possession of our federal government. In fact these innovations really do very little to overcome the problem that the people participating in these markets actually face. The government still has the actual authority to arrest and imprison someone for conducting a transaction they have determined to be illegal, even if the transaction is not immoral. Since the government is the one feeding the poor, the authority it holds as a result is the actual problem we face. What if instead of using these technologies to bypass the authority of the state, instead we used the technology to fracture the authority of the state by feeding the poor?

--For an excellent technical and economic explanation of bitcoin, watch this youtube video.--

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