[e-cvs] cvs commit: e/doc/talks/pisa/paper/images 1-engelbart.gif 2-soviet.gif 3-hubs.gif 4-low-trust.gif 5-bootstrap.gif 6-exchange.gif 7-duties.gif 8-option.gif 9-layering.gif figures.sxi
markm@eros.cs.jhu.edu
markm@eros.cs.jhu.edu
Wed, 26 Dec 2001 10:52:11 -0500
markm 01/12/26 10:52:10
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</TR>
</TABLE>
<hr>
- <!-- #BeginEditable "LongBody" --> <b>Introduction</b>
+ <!-- #BeginEditable "LongBody" -->
+ <p> </p>
+ <h3>Introduction </h3>
<p>As Hernando De Soto highlights in The Mystery of Capital, the people
of the third world do not suffer from a lack of assets; rather, they suffer
from a lack of capital. As a simple example, the house you live in, from
@@ -65,7 +67,7 @@
mediating disputes and enabling cooperation among suspicious parties,
could such instruments dramatically increase capital liquidity, spawning
a flood of new wealth in the poorest areas of the world?</p>
- <p><b>The Wealth of Poor Nations</b></p>
+ <h3>The Wealth of Poor Nations</h3>
<p>The poor around the world do, surprisingly enough, have assets. In a
simple experiment, in which Hernando de Soto's associates drove about
the countryside, assessing the value of buildings which were not formally
@@ -78,8 +80,8 @@
of rules about who owns what, and how they may interact and exchange the
property they own. A deeper and subtler failure is at work here. There
is another brick to be identified and removed.</p>
- <p><b><img src="images/1-engelbart.gif" width="429" height="312" align="right">The
- Brick</b></p>
+ <h3><img src="images/1-engelbart.gif" width="365" height="168" align="right">The
+ Brick</h3>
<p>In the early days of computers, Doug Englebart, who was fascinated with
augmentation of the human mind, was asked, what does augmentation mean
exactly? What is an example? Realizing that it is very hard to visualize
@@ -91,7 +93,7 @@
superior to that of the students with bricks. Removing the brick from
the pencil, then, is an augmentation. The goal of augmentation, then,
is to identify, and remove, the next brick.</p>
- <p><b>The Bricks of the 20th Century </b></p>
+ <h3>The Bricks of the 20th Century</h3>
<p>Difficult as it is to visualize augmentation of the human mind, augmentation
of society is perhaps even more difficult to perceive beforehand. Fortunately
(or unfortunately, for those who were involved), the 20th Century was
@@ -105,7 +107,7 @@
hiding there as well. In fact, there are two other bricks that have been
identified, one of which is in the process of being lifted in America
as we speak, a brick that takes this nominally open society to an extreme
- new level of openness. <img src="images/2-soviet.gif" width="429" height="312" align="right"></p>
+ new level of openness. <img src="images/2-soviet.gif" width="381" height="145" align="right"></p>
<p>The right of free speech, which underpins so much of the strength of
western civilization, is being transformed by the Net. In today's Web-enhanced
society, freedom of speech is no longer a right which is to be negotiated
@@ -114,7 +116,7 @@
a law, but is completely jurisdiction free--even if all the nations of
the world agreed that free speech should be constrained, no constraint
would prevail. </p>
- <p><b>Technological, Jurisdiction-Free Law</b></p>
+ <h3>Technological, Jurisdiction-Free Law</h3>
<p>The advent of technologically imposed, jurisdiction-free law has several
ramifications. Even in the US, where free speech has historically been
not merely respected, but rather worshipped, free speech was by common
@@ -138,7 +140,7 @@
only way to cope with bad speech is with more better speech, so the only
way to cope with bad bits (computer viruses) is with better bits (capability
secure infrastructures).</p>
- <p><b>The First Brick of the 21st Century</b></p>
+ <h3>The First Brick of the 21st Century</h3>
<p>We have removed so many bricks, how can third world poverty remain as
persistently intractable as ever? Free speech is not enough. The end of
Communism is not enough. The universal desire for capitalism has proven
@@ -146,7 +148,7 @@
when the Berlin Wall fell was that, once government was out of the way,
the market would take care of the people. This has proven tragically wrong.
What else is missing, what other bricks must be removed?</p>
- <p><b><img src="images/3-hubs.gif" width="429" height="312" align="right"></b>It
+ <p><b><img src="images/3-hubs.gif" width="347" height="212" align="right"></b>It
seems clear that another brick is the one that distinguishes low-trust
from high-trust societies (Fukiyama). Trust relationships directly impact
what types of business relationships are possible. It is not so much the
@@ -167,7 +169,7 @@
take them a long time, a time during which desperate poverty will remorselessly
prevail. Can we accelerate them through this part of the process of capital
formation?</p>
- <p><b>Patterns of Trust</b></p>
+ <h3>Patterns of Trust</h3>
<p>Trust relationships can be thought of as analogous to the airport hub
and spoke pattern (see picture). Many small local networks are interconnected
on the wider scale through major hubs. Yet there is not a central hub
@@ -181,14 +183,14 @@
beings have the cognitive power to form direct trust relationships with
only a very tiny fraction of the number of people in the society; the
WTTPs enable us to have indirect trust relationships with virtually everyone.</p>
- <p><img src="images/4-low-trust.gif" width="429" height="312" align="right">From
+ <p><img src="images/4-low-trust.gif" width="350" height="218" align="right">From
a simple graph-theoretic point of view, we can analyze the Fukiyama low-trust
world (in which the local networks are small) and the de Soto missing-WTTP
world (in which the hubs are absent), and immediately recognize which
one has the greater impact on a society's effectiveness: it is the absence
of the WTTPs that ultimately prevent society-wide trust relationships
from forming. </p>
- <p><b>Types of Trust</b></p>
+ <h3>Types of Trust</h3>
<p>Historically, western societies have developed specialized WTTPs that
bundle trust with another other expertise: one trusts Citibank not only
because Citibank has a demonstrated history of reliably backing their
@@ -241,7 +243,7 @@
</tbody>
</table>
</div>
- <p><b>The Crucial Trust Specialty</b></p>
+ <h3>The Crucial Trust Specialty</h3>
<p>In fact, while all these trust institutions are valuable to the construction
of advanced societies, not all are equally crucial. de Soto's analysis
suggests that the institution which most needs trust, which is most lacking
@@ -252,7 +254,7 @@
at a distance</i>: people who have never met one another and probably
never will can engage in asset transfers and capital formation with the
confidence that they will acquire the goods specified in the contract.</p>
- <p><b>The Government Solution</b></p>
+ <h3>The Government Solution</h3>
<p>The obvious--though not necessarily most trustworthy--organization to
fill this crucial titling role in a nation is the government itself. This
is the strategy de Soto has adopted, converting extra-legal assets, village
@@ -285,8 +287,8 @@
The process never becomes easy: each village is another major upheaval
in the perceptions and preferences of entrenched groups dedicated to protecting
the status quo. </p>
- <p><b><img src="images/5-bootstrap.gif" width="429" height="312" align="right">The
- Digital Path</b></p>
+ <h3><img src="images/5-bootstrap.gif" width="366" height="214" align="right">The
+ Digital Path</h3>
<p>How can we sidestep this brutally painful process? Perhaps with the Internet.</p>
<p><font color="#000000">For goods that can be exchanged electronically,
the Internet has wiped out geography and jurisdiction. If the function
@@ -312,7 +314,7 @@
(i.e., national) high-trust hubs as well: an entity becomes high-trust
simply by consistently performing in accordance with the contracts being
managed by first-world WTTPs. </font></p>
- <p><font color="#000000"><b>Smart Contracts</b></font></p>
+ <h3><font color="#000000">Smart Contracts</font></h3>
<p>How would such WTTPs deal with the idiosyncracies of local village tradition,
the idiosyncracies that sabotage traditional governmental attempts to
capitalize village assets? By the use of smart contracts.</p>
@@ -330,7 +332,7 @@
clauses which require separate enforcement after contract breach, as is
typical in traditional contracts. </font><font color="#ff0000">(ref Nick
Szabo and Ode)</font><font color="#000000">. </font></p>
- <p><font color="#000000"><img src="images/6-exchange.gif" width="429" height="312" align="right">The
+ <p><font color="#000000"><img src="images/6-exchange.gif" width="390" height="247" align="right">The
basic metaphor for the composition of smart contracts is the board game.
When two people negotiate a contract, they are jointly designing the rules
of a game they would both be willing to play. To start the actual play,
@@ -345,7 +347,7 @@
<p> </p>
<p> </p>
<p> </p>
- <p><font color="#000000"><img src="images/7-duties.gif" width="429" height="312" align="right">In
+ <p><font color="#000000"><img src="images/7-duties.gif" width="297" height="299" align="right">In
the simple example illustrated in Figure X, we have a 5-party game (contract).
Alice wishes to buy stock from Bob. The contract host escrows money from
Alice (managed by the currency issuer) and stock from Bob (managed by
@@ -359,7 +361,7 @@
<p> </p>
<p> </p>
<p> </p>
- <p><font color="#000000"><img src="images/8-option.gif" width="429" height="312" align="right">Games
+ <p><font color="#000000"><img src="images/8-option.gif" width="379" height="235" align="right">Games
such as this can be arbitrarily sophisticated, requiring only more sophisticated
software to embody them. A slightly more sophisticated example is the
covered call option. (see figure).</font></p>
@@ -374,7 +376,7 @@
specialized contract knowledge needed in traditional WTTPs: The owners
of the computer that is acting as a smart contract host do not know, and
do not need to know, anything about the nature of the contract. </p>
- <p><img src="images/9-layering.gif" width="429" height="312" align="right">As
+ <p><img src="images/9-layering.gif" width="324" height="304" align="right">As
a consequence, the local village's unique definition of property rights
can in principle be embodied in a smart contract, which can be executed
with perfect integrity on a WTTP contract server on a different continent,
@@ -386,7 +388,7 @@
enormous homogenization costs of integrating with a national body of law.
They would leapfrog into the world of nonjurisdictional coercionless legal
systems made possible by the Web. And they can make this jump at Web speeds.</p>
- <p><b>Smart Contracting for the First World</b></p>
+ <h3>Smart Contracting for the First World</h3>
<p>Smart Contracting is not just a good idea for the third world. In technological
western civilization as well, smart contracts can wring new efficiencies
from the economy. An example can be seen in the way a new special-purpose
@@ -409,7 +411,7 @@
giving the rental stores movies at nominal prices, encouraging the rental
stores to maintain quantity and quality at dramatically higher levels.
</p>
- <p><b>The Rule of Law, Not Of Men</b></p>
+ <h3>The Rule of Law, Not Of Men</h3>
<p>What does smart contracting do to the next brick? The next brick that
must be removed from the world is the brick that prevents the long-distance
credible right of property transfer. We remove this brick by moving the
@@ -426,7 +428,37 @@
more likely to leap across national jurisdictional systems, and go directly
to the high-efficiency, low friction, strongly impartial, extremely corruption-resistant,
non-jurisdictional legal systems of the future. It will bring us a giant
- step closer to a world governed by the rule of law, not of men</p>
+ step closer to a world governed by the rule of law, not of men.</p>
+ <h3>Acknowledgements</h3>
+ <p>These ideas have formed over much time and many valuable conversations,
+ for which we thank K. Eric Drexler, Charles Evans, Robin Hanson, Doug
+ Jackson, Don Lavoie, Zooko (Bryce Wilcox-O'Hearn), Gayle Pergamit,
+ Chris Peterson, Terry Stanley, Nick Szabo, E-Dean Tribble, Bill Tulloh,
+ Ka-Ping Yee, and the members of the e-lang mailing list.</p>
+ <h3>References</h3>
+ <p><a name="deSoto89"></a>[deSoto89] Hernando de Soto, "<b>The Other
+ Path</b>", Harper & Row, 1989. (in </p>
+ <p><a name="deSoto00"></a>[deSoto00] Hernando de Soto, "<b>The Mystery
+ of Capital</b>", Basic Books, 2000.</p>
+ <p><a name="Fukuyama95"></a>[Fukuyama95] Francis Fukuyama, "<b>Trust</b>",
+ Free Press Paperbacks, 1995. </p>
+ <p><a name="Granovetter73"></a>[Granovetter73] Mark Granovetter, "<b>The
+ Strength of Weak Ties</b>", in: American Journal of Sociology (1973)
+ Vol. 78, pp.1360-1380.</p>
+ <p>[Hardy??] Norm Hardy, "<b>Computer Security, the Very Idea</b>".
+ Online at <a href="http://www.cap-lore.com/Dual.html">http://www.cap-lore.com/Dual.html</a>.</p>
+ <p><a name="Kelsey99"></a>[Kelsey99] John Kelsey, Bruce Schneier, "<b>The
+ Street Performer Protocol and Digital Copyrights</b>", First Monday,
+ vol 4, no 6, 1999. Online at <a href="http://www.firstmonday.dk/issues/issue4_6/kelsey/index.html">http://www.firstmonday.dk/issues/issue4_6/kelsey/index.html</a>.</p>
+ <p>[Mill??] John Stuart Mill, "<b>On Liberty</b>", ???.</p>
+ <p></p>
+ <p><a name="Miller00"></a>[Miller00] Mark S. Miller, Chip Morningstar, Bill
+ Frantz, "<b>Capability-based Financial Instruments</b>", Proceedings
+ of Financial Cryptography 2000, Springer Verlag. Online at <a href="http://www.erights.org/elib/capability/ode/index.html">http://www.erights.org/elib/capability/ode/index.html</a>.</p>
+ <p><a name="Szabo97"></a>[Szabo97] Nick Szabo, "<b>Formalizing and
+ Securing Relationships on Public Networks</b>", First Monday, vol
+ 2 no 9, 1997. Updated copy at <a href="http://www.best.com/%7Eszabo/formalize.html">http://www.best.com/~szabo/formalize.html</a>.</p>
+ <p> </p>
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<TD WIDTH="10%"> </TD>
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