Scale-Free Money: A Public-Goods-First Economic System - Bangkok 2024

[Music] all right well I will do my best to deliver on that introduction by the end you can judge if I've succeeded or not so I am Christopher and I'm going to be talking about scale-free money this presentation has 50 slides which I realize is horribly ambitious for 20 minutes so I will do what I can and someone please tell me if I'm running out of time right I want to start first with a Content warning maybe of a slightly different sort than your us to which is here be theoretical dragons the content in this talk is speculative and has not been mathematically verified just so you know buyer beware so I want to start by motivating this a little bit by the following observation at least of mine which is that crypto is stuck in a wheel this wheel relies on three inputs uh primarily three inputs public Capital which funds you know ultimately funds the events the development the production the salaries this conference uh public credibility which is how new people become aware of crypto as a social movement as a thing they can participate in and credibility is required in order for them to consider participating in it and internal cultural Integrity which is what sustains any kind of self- understanding as a movement any kind of ability to enforce cultural norms Etc uh those three inputs at least at the moment I think are being kind of unsustainably used up right we're not reproducing them as fast as we're consuming them especially well really all three of these things but especially recently the first two um and we do get some outputs from the crypto wheel as it rolls around it produces some progress in applied cryptography we've I think helped with that and it produces some progress in what people are very hesitant to call but what actually is database Engineering in a terribly unsexy name but it's important there are a lot of databases in the world um but this wheel is unsustainable I think it's self-terminating so if we want to think about what will it take to break the wheel I think we need to first ask ourselves the question of what is crypto and there are a lot of definitions and I don't claim to have one true definition but I want to put a few things on this chart to sort of give a picture of how these different definitions play out in the world as we find ourselves at the moment so one thing crypto might understand itself as or at least one thing which crypto does a lot of is database engineering database engineering is not new databases have been around since like 1960s database engineering is not a product it's a backend database engineering is actually needed like you know there are a lot of databases would be great if we can make them better database engineering however is not interesting um I kind of wanted to put sexy on this but you know we'll just say interesting um next one applied cryptography that crypto does do you know crypto means cryptography right crypto does do some applied cryptography the the applied cryptography especially the applied ZK MPC um and autonomous te stuff is indeed new at least there's a lot of new applied research there it is not a product it's a back end it is actually needed and it is interesting but it's not like you know this is say part but not the whole right of what we need in order what we need to produce in order to offer something interesting to the world uh crypto has contained a lot of Ponzi schemes Ponzi schemes are they're not new they've been around for a long long time um they they are a product I mean they're user facing you know you can do something with Ponzi schemes um but they're not actually needed and at least to me they're not particularly interesting uh another thing that crypto sometimes tries to do is kind of replace web 2 and this one I think is sort of close to break the wheel but it's not quite there um replacing web 2 is new I mean if we're if we're actually providing some kind of new protocol substrate to replace what are just what were previously just a bunch of SAS products that's new um it is a product or you can build products that replace web 2 products and use different backends it is actually needed but it is just not very interesting because most of the products that you build by replacing web 2 are like you know I don't know like a car hailing app but the back end is decentralized and it has better long-term socioeconomic properties this is important but it's this sort of long you know sort of plotting institutional march to try and reform the economic system um that doesn't it it's not very flashy right and it doesn't provide it's it's very hard to do this alone to shift the equilibrium because much of the reason that web 2 companies are so powerful has more to do with like Capital structures than technology and so if you only change the technology you're just not really going to change the social equilibrium right it's not sufficient so the final thing which crypto sometimes does understand understand itself as uh but where I would argue the understanding is insufficient is as a new monetary system and this I think checks all four boxes a new monetary system if it is actually new is is something that the world doesn't have yet it is a product it is actually needed and I'm going to spend most of the rest of the talk arguing why and I think it is interesting but it's not working so I went to coin market cap this morning and I I I scrolled down and I checked you know how many cryptocurrencies are there on coin market cap today and we are at [Music] 9,931 which have of course been good enough at political lobbying to get themselves on the coin market cap now you know now kind of difficult uh so we're at you know nearly 10,000 cryptocurrencies and no new monetary system found something is wrong right making more ain't going to help um and I think really the problem as I see it is that we have a lack of a clear understanding of what money is or how to use it and in the absence of a clear understanding it's not like we act with no understanding like we don't throw up our hands instead act on some implicit understanding which structures how Capital moves in the space and right now that implicit understanding is mostly USD is money so when people say market cap they say it as if market cap were some kind of like objective scientific term uh that you know describes a feature of the world but this is this is just a lie market cap is a measure uh of things that is in almost always US Dollars which is uh you know to Julio's earlier talk uh uh some notion invented by the US government uh and whatever it measures like if if if if if we Define our success based on that one you know we're just not going to produce anything interesting so this talk is about uh one what is a theory of money I'll try to sketch that two a candidate Theory which I call scale free money and three why should crypto care followed by a conclusion so what is a theory of money uh skip that um this this again this this like whole talk is sort of conceptual terrorism and I am not going to dive into the anthropological record um I'm just going to try and Define money in a way that I think allows us to analyze our specific problem now so for the purposes of this presentation money is a giant symbolic database it has different tokens different denominations with units and owners uh money this database what makes this database money as opposed to like some other databases which are not money is that it's endowed with some social semantics and I'll talk about that in a second but the database details for reasoning about you know how to use money how to think about money the details of the database don't matter whether this is like the evm or the svm or frankly Microsoft Excel it doesn't matter what is a user so this you know User it's not always the best term but uh user for my purposes is whoever is using money so a user acts in the world they might possess physical resources they have freedom they can choose what to do uh and they can read from and write to this database right they can see what their balances they can see what changes other people make they can send money to people Etc and in particular a user has preferences if your users don't want anything there's no point designing coordination systems okay what is a theory of money a theory of money is a mathematical iCal construction specifies how to use this database as a tool right how to use this database from the perspective of a user to move the world towards the state that they prefer so note in particular that this is a theory of how to use money as means not how to use money as end right it's like we've got this database this database has some numbers so we don't care about the numbers we care about the world but we want to be able to reason about how we change these numbers to somehow influence the world in a way that is valuable to us so here's some questions which are not relevant here to how I have defined a theory of money uh one question which is not relevant is why do we have money this theory of money lives in the world of like it's chilling in the world of platonic forms along with a number two you know the number two is just there two doesn't exist or not exist based on why we have it it's you know maybe someone conceptualized it for a reason but two is just there uh I'm also not relevant what is the history of money that is a great topic which I'm not an expert in um but luckily if you Define mathematical abstractions clearly uh you could at least Define them clearly and then whether or not they apply to history uh another another question which is not relevant what is the one true money yeah I don't care about that one um and finally uh the question which is often confused with the question of what is money that I'm not talking about is what is valuable so uh in my definition here a theory of money must have three things one it must have inputs which are choices that the user makes uh two it must have outputs which are outcomes these don't necessarily have to be quantitative they could be qualitative but things that the user is measuring what they're observing in the world three it has a causal model which is how these inputs and the inputs of other users affect the outputs right how do you use the database to achieve changes that you want in the world so some example inputs to Ether uh to money right uh let's just say we have many different tokens uh some example inputs you could accept a token in an exchange for an act I accept some dollars I give you a sandwich you could hold a token you know I hold some I don't know Dow tokens I participate in governance over issuance uh theoretically if I held US dollars I would have some influence in governance and sometimes that works but not the way we want it to which is weird um I could spend a token in exchange for hopefully for some ACT you know maybe I want a sandwich I could swap one token for another token or I could lend a token perhaps with collateral and another these are just five kind of General types of inputs right there are more but here are some important ones outputs some example outputs here I'm often going to segment the outputs into two categories the first are sort of an act or Goods these will maybe look a little bit more like private goods and these are individual and immediate so if I hand over some dollars and get a sandwich like the immediate output is that I get a sandwich if I pay someone to cut down some wood the immediate output is that a tree gets cut down I get some wood right uh but with every I'm going to argue with every use of money there is also always a composite or Collective output and the collective output let's say in the case of sandwiches is that I support the supply chain in the world that produces sandwiches um or at least collectively everyone who buys sandwiches is doing this right uh uh Collective output in the case of paying for a bunch of wood to cut cut down might be an increase in carbon emissions because less carbon is sequestered by the trees so the caal model is the relationship between inputs and outputs now there are two aspects of this that we might care about the first is causation in the database this is just like if there are many different assets and they're related to each other in different ways they have Mutual Credit liquidity lines Etc uh there's some causation in the database when I take one action I can analyze what other assets get affected but the much more complex and sort of usually the the the model that we really care about here um is the causation outside the database so for example if I want to reason about how my actions affect the climate I actually need to have a model of how the climate works this is not trivial right luckily though it's outside of our theory of money it doesn't have to do with how the database works it has to do only with the world so I do want to distinguish actually I'm going to skip those slides right okay the great challenge the great challenge in thinking about theories of money and what we might want out of a theory of money is that money is an inter subjective tool meaning the effects of using M the effects of taking action in this database are entirely conditioned on the beliefs and actions of others so if I let's let's um use a hypothetical to demonstrate this so suppose that like I have monetary database one called Chris coin and you have monetary database 2 called like Bob coin right and I make some changes in Chris coin and you don't see them because you don't care about Chris coin my changes will have no impact right uh so there's only only value or not um maybe that's not the word I want to use here but uh the in order to reason about what is going to happen as a result of making some change in the distribution of money I need to be able to know what theories of money other people have right I need to also know what uh kind of what expectations they have out of this system uh so my case here is that we would really benefit from trying to come up with a neutral theory of money and by neutral I mean value neutral currently the world has implicit theories of money like X you know BTC is money USD is money uh I I'm as I Define it these are not theories of money they're just attempts to convince people that a particular token is valuable but they usually use these words uh and we spend a lot of time fighting over this which seems wholly unproductive so to me neutral neutrality in the context of a theory of money means that the theory of money does not itself make any decisions about what is valuable right it doesn't say that you should want this thing or you should want this other thing or this thing is good or this thing is bad uh the expectation at least implicitly here is that people will always disagree on values and values change over time and we're not going to embed them in a theory anyways um so but that people could potentially agree on a theory and provide some greater Clarity to this sort of interpersonal or uh uh this this coordination that we're engaged in if the theory makes no decisions about what is valuable so uh the basic idea of scale-free money is that we associate different denominations of money um with different values so if you were to say start from scratch let's say you have a society you want to create a new monetary system and run it with scale fre money you would find some values associate denominations with those values and use issuance from different denominations to fund progress towards uh you know whatever specific actions uh you you think will advance those values and and you can use different these these different denominations could have different governance structures some of them could be I don't know more hierarchical more direct Democratic there can be a lot of plurality here um and you continuously adjust and the main mechanism by which you continuously adjust is by changing denominations right so as opposed to having one you know primary currency and you send that currency around to different companies or something like this um as even we still do in the crypto space most people are paying for their flights and tickets here using USD right um You are continuously adjusting denominations going to skip so in order to make that plausible uh one thing you need is some technological infrastructure to make the separation of unit account unit of account medium exchange and store a value choices seamless right now you pay a large tax for kind of not agreeing on these things or on one one or many of these things with the person you're trying to interact with and if we can reduce that to tax this becomes more feasible so this is where some crypto technology can come in handy uh yeah going to skip that so um one aspect of scale-free money that I think is important and touches upon also an earlier Point Julio made in this ha is that if you look at sort of the locus of monetary control versus scale of governance in our world today there's this really like a bipolar graph right uh there are a few local currencies and maybe people have some amount of control in certain uh jurisdictions they have some amount of control at the local level then there's a big gap in between and then there are like I don't know 10 or 20 nation state currencies that really matter right so there's a lot of power at the top there's a little bit of power at the bottom and of the scale graph right and basically nothing in between uh and in a world of scale-free money uh we would be able to balance control across scale maybe not exactly Al but at least a little bit uh uh less asymmetrically right so as a refer the theory is a causal model and I'm just going to quickly discuss what these actions can do in the context of scale-free money right so accepting a token again there're always going to be two effects the individual and Collective so accepting a token creates an offer uh you may potentially reive this receive the token in question hand over your sandwich and you also um in some sense you lend weight to the objective associated with that ation so let's use the example of a dollar so if I have a sandwich and I offer to give you the sandwich in exchange for a dollar I am supporting the American Military weird as it may sound right and is that what I really wanted to do I mean maybe but often we don't think about it um spending creates an offer of it uh I got to skip some of this stuff sorry come find me later okay so um scale free money I'm going to argue without a lot of justification is neutral um which is that is a theory of uh not a theory about what denominations of money are supposed to mean mean or which meanings would be good or bad it's just a theory about how actions in the database relate to uh as a result of who holds what currency or what kind of issuance is happening from what currency denomination uh how actions in the database relate to kind of those Action potentials or even you could say those like structures of political power outside it right and this I think gives us the possibility uh of having a theory which uh people who have different values can still agree on right people who have different values can still agree on what the integers are they may disagree on like how to use the integers right but they can agree on what they are and this is helpful because it allows them to talk to each other clearly um so scale free money related to this conference is public goods first I would argue in a way that our existing system is not um issuance can fund public goods and if there are a lot of denominations and a lot of issuance this kind of public goods funding model is pretty different than individual charity right if your system is focused on production funding of public goods uh you don't have the free writer problem anymore people's of course what people individually produce still has an impact on how much kind of voting weight they get let's say uh but you no longer need to this isn't such a big problem um and at least executed well scale-free money has the potential to make public goods production competitive which I think is pretty important efficiency in public goods production also matters um and here we can have governance at multiple levels so have like one minute left right okay um right skip skip skip uh okay one reason another reason I think this is is important is right now I think crypto lacks a vision of what a world with crypto would look like that isn't just we will make you rich in the existing system if you look at how most people especially in you know uh uh I don't know in the US with FTX or in other places where people are getting pitched crypto is an investment class and basically the pitch is buy some cryptocurrencies now and next year you can sell them and you will have more dollars this is a horrible horrible pitch if we want to I mean a one people don't believe it anymore which is Justified and B it doesn't it's not like it's not very interesting you know they're just there there are other ways to make more dollars if that's really what you want um and glimpse of alternative world right okay um where is this no that slide didn't work uh okay um right uh the one last slide I want to give you here is that I think an advantage of scale-free money applied in crypto right if we dog food our own theories is that it would greatly increase the plurality and diversity of kinds of public goods production that we can internally fund right now crypto has a very sort of Bas layer heavy capital structure right these like l1s or everyone wants to be the Bas layer infra because there's some implicit theor that being the Bas layer infra which is really like the same Theory as valuation of SAS companies or whatever there's some implicit theory that being Bas layer infra will make money or or capture value and that applications or other things are useless um and I think this uh theory is wrong but right now this theory is structuring how Capital allocation works right and so this means that we can't you know people won't invest in tokens for research guilds or tokens for vertically integrated applications or tokens for autonomous tees or tokens just for like independent public goods production that isn't associated with some blockchain that can capture fee revenue and if we can dog food our own Theory here and increase the plurality of goods that can be funded I think we can move towards a much more coherent product offering for the world all right sorry I skipped so many slides but thank you very much and come find me after if you have questions [Applause] n