Interview Transcript — Filozofuj
Interview conducted by Artur Szutta & Krzysztof Saja for philosophy Magazine Filozofuj
This interview was conduced via email and the translation has been published in the polish philosophy magazine Filozofuj which is now also available for purchase.
The Internet has become an essential element of the 4th industrial revolution; some authors (e.g., Klaus Schwab) labeled blockchain as one of the breakthrough technologies. But is it an accurate estimation? What important social (or human in general) consequences may bring the so-called Web3?
Shermin Voshmgir: Web3 reinvents how data is managed in the backend of the Internet. While current iterations of Internet infrastructure and applications are predominantly centrally managed by private institutions, with little accountability over what happens in the backend of their operations, Web3 is a collaboratively managed Internet. It consists of a set of protocols that are collectively managed, which fundamentally change the power and data structures. Blockchain networks or similar distributed ledgers are the backbone of this Web3. They provide a universal state layer that is publicly verifiable by all network participants. The Bitcoin network was a game changer in Internet history because — for the first time — it introduced the concept of blockchain networks and universal state. It paved the way of what we now refer to as Web3 — where any Internet user can co-manage public Internet infrastructure — and they are incentivized to do so with native network tokens. Participation is “permissionless.”
Which are the most salient features of Web3? Is it (sometimes) misunderstood?
Shermin Voshmgir: Any new technology tends to be misunderstood or differently interpreted by various members of society, at least in the beginning. New technologies are often reduced to the first applications that emerge. The same is true for Bitcoin, blockchain & Web3. Bitcoin is often reduced to being a currency, a so-called cryptocurrency, when in fact it is a completely new form of collaboratively managing Internet infrastructure. Bitcoin consists of a blockchain network, the node operators, the protocol, and the tokens. The Bitcoin blockchain network is a public payment infrastructure that is collaboratively managed. Anyone can become a node operator and validate transactions. This infrastructure has its own computational constitution — the Bitcoin protocol — according to which node operators are allowed to operate and are incentivized to do so. This protocol can only be changed by majority consensus. The term “Bitcoin” is also used to refer to the token that has currency like features. This Bitcoin token is the internal currency of the Bitcoin network with which network transactions have to be paid and network operators are remunerated. Other blockchain networks have their own currencies. The main application of blockchain networks that innovated on top of Bitcoins protocol are tokens, DAOs & user centric identities:
- Tokens: Tokens are the atomic unit of Web3 and can represent any form of rights — property rights, access rights, voting rights or management rights. They can manifest as a store of value, or a set of permissions in the physical, digital, and legal world. Tokens are publicly verifiable and globally valid digital certificates — they transcend the established certification authorities that often only operate in a single jurisdiction. The first tokens, such as Bitcoin tokens and other similar native blockchain protocol tokens, had currency-like features — but tokens can represent used for so much more. While more and more people are starting to issue or invest in cryptographic tokens, the general understanding of different token types is still limited. Terms like “cryptocurrency,” “crypto assets,” and “tokens” are very often used synonymously. The media tends to refer to these new assets as “cryptocurrencies,” which is often used to describe a diverse range of “crypto assets” or “tokens” that could represent anything from a physical good, a digital good, a security, a collectible, a royalty, a reward, a concert ticket or a driver’s license.
- Decentralized Autonomous Organizations (DAOs): Are steered by purpose-driven tokens and reinvent governance, government, and organizations. We are seeing a range of decentralized organizations with varying degrees of autonomy and participation emerge. Their founders can be anonymous,( as in the case of Bitcoin and Satoshi Nakamoto) or spearheading the R&D of a foundation dedicated to the pursuit of a network’s maintenance (as in the case of Vitalik Buterin and the Ethereum Network). Their internal network tokens (currency of their community) are traded on token exchanges, instead of their shares (parts of their company) being traded on stock exchanges. These decentralized organizations are emerging to be a dominant non-state actor on the international scene, already funding a lot of research and development non-reliant of state subsidies.
- User-centric Identities: As more sophisticated Web3 based user-centric identity solutions emerge, individuals will start to have more control over their digital identities and data.
The rise of blockchain technology also seems based on certain philosophical assumptions. What are they?
Shermin Voshmgir: I guess I would say: self-custody of tokens (“Not your keys, not your crypto”), inclusion (permissionless participations and interactions), transparency (A publicly verifiable ledger of transactions that guarantees institutional accountability), personal privacy, decentralization, security.
- Some would argue the “Immutability of the ledger” However, this is where serious practical, political and philosophical disputes have already arisen within the crypto community.
- Some would argue “Code is law.” This mantra is also highly disputed, or at least differently interpreted, and the source of many philosophical disputes among crypto practitioners.
Can we also say that specific cultural-philosophical contexts are especially conducive to technological development? And each ground-breaking technology seems to empower some and undermine other values, rules, and institutions in our culture. Which institutions or values might be jeopardized by the development of Web3? Which ones might be strengthened?
Shermin Voshmgir: Many refer to Web3 as the decentralized Web. I think this term can be misleading. Web3 networks are collaboratively managed but not necessarily completely decentralized. The term “decentralization” describes more what the Web3 opposes rather than what it allows us to do, namely to collectively manage web applications, their underlying data and the governance rules of all social and economic interaction of the network including the token generation rules. Rather than speaking of the “decentralized web.” I would therefore suggest referring to it as the “collectively managed web” where individuals are privately incentivized to contribute to a public infrastructure. This is an absolute paradigm shift not only regarding how the Web3 is managed in the backend, but also how individuals can be rewarded to contribute to the upkeep of public infrastructure in general through token rewards and it all started with Bitcoins reward mechanisms “Proof-of-Work.” The term “decentralization” is somewhat of an “anti-word.” It categorically opposes “centralization” and implies somewhat of a more democratic Web. It also implies that fully automated systems need no manual intervention and course correction. While automation and decentralization both have their merits, no large scale social, economic or political institution can be fully decentralized and automated without human intervention. Furthermore it is important to acknowledge that — depending on the type of Web3 network — the levels of decentralization vary. Often, the practical implementations of these networks are less “decentralized” than the initial founders had envisioned. The Bitcoin network — for example — is not fully decentralized but has become de facto “controlled” by a handful of large mining companies, a limited number of full node operators, and a handful of core protocol developers. The same is true for the “de facto” power structures in many other Blockchain networks. While none of the different network actors usually have exclusive power over the network, points of power concentration have developed over the years in all blockchain networks or other Web3 networks. Such power structures and points of centralization are a political and economic reality not only in the Web3 but anywhere institutions and individuals pursuing their own best interest collide. This needs to be considered when designing the initial token governance rules of any decentralized application/Web3 network/DAO. While it is likely that the future of the Internet might be more decentralized, this does not mean that we will get rid of centralized systems altogether. Centralized systems, or at least a certain degree of centralization, have advantages and will likely prevail, at least for specific use cases. Which is why I would like to turn the attention to the fact that Web3 networks and their applications are collaboratively managed. The right level of collaboration needs to be determined based on the purpose of a network, and the values of the participating community and in consideration of the reality of socio-economic dynamics. Politics and socio-economic power structures will not disappear. They did not disappear with the introduction of the Web1 and Web2 and they will not disappear with the invention of the Web3 either. Politics just takes new and different forms with every evolutionary step of any new technology. Power structures shift, but don’t evaporate into thin air. How we use any given technology is still a social question, not a technological question. We have a new chance to rebuild the Internet, but how we do it, what type of decentralized applications we create will depend on the social, ethical and economic values we apply. Freedom, decentralization and democracy are not baked into any technology but depend on how we use the technology.
One of the essential ideas behind Web3 is the concept of “intelligent contracts”. What chances, but maybe also threats, would the change of law into an algorithmic “code of law” bring?
Shermin Voshmgir: I think you refer to the term “smart contract.” The term “smart contract” itself is a bit unfortunate, since smart contracts are neither particularly smart nor do they reflect legal contracts. A smart contract is a piece of software that is processed by a blockchain network or similar distributed ledger. It is a rights management tool that can formalize and execute agreements between untrusted participants over the Internet, and comes with inbuilt publicly verifiable compliance and controlling. Smart contracts can reduce the costs of formalization and enforcement of a simple agreement between two parties, the bylaws of an organization, or to create different types of tokens. A smart contract can only be as smart as the people coding it, taking into account all available information at the time of coding. While smart contracts might have the potential to enforce legal contracts if certain conditions are met, we first need to resolve many techno-legal questions, which will require time and interdisciplinary discourse between lawyers and software developers.
The limitations of my language are the limits of my world. Generally, people use natural or legal language in social interactions, while computers use artificial language and intelligent contracts. The term “token” in a given blockchain network may be treated as a “word” and transactions as “utterances” — language actions in a specific blockchain “language”. A word, utterance and legal agreement may represent various beings and values. Tokens in a blockchain system may also represent many things, e.g., property rights, a right to share or access, etc. If tokenization is a process of binding tokens with “real” values (either through a convention or legal agreements), what limits would such a process have? What could be tokenized, and what could (or rather should) not?
Shermin Voshmgir: The question of what should not be tokenized is a political and philosophical discussion that requires nuance. Rather than “should” or “should not” I suggest asking the question of “how.” Tokens can have various properties, such as fungibility, transferability, condition upon which event they are created or destroyed, the supply and distribution properties etc. Depending on the purpose of a token, or the token system, one needs to design the properties of a token accordingly. These questions are not purely technological questions but happen on the intersection of economics, law, technology and politics and are subject of an emerging discipline referred to as “token engineering.”
Blockchain technology is widely recognized as a promising platform for many things’ digitalization (or tokenization). For example, it facilitates the transfer and the automatization of value transfers. Consequently, contracts between humans and intelligent objects (IOT) or AI may exist. Do you think this might have important implications for agency, responsibility, abiding by rules, or property?
Shermin Voshmgir: Blockchain networks, other Web3 protocols and tokenization don’t happen in a technological vacuum. Most interesting applications of tokenization and DAOs will happen — and are already emerging — on the intersection of the digital and physical world. They require the interplay of various technologies, such as 5G communications, machines that are connected to the Internet over IoT protocols and machine learning algorithms. In such an interconnected world, machines such as solar power plants or cars, can be equipped with a blockchain wallet and become autonomous economic agents. The design principle behind these applications will need to consider factors such as morals, agency and accountability, and should be the result of interdisciplinary protocol design.
What special could philosophers bring into the debates over blockchain technology?
Shermin Voshmgir: The nature and purpose of philosophy is, from what I understand, to make sense of reality and provide a perspective on reality. In the digital age, the Internet is the fundamental technological infrastructure upon which the reality of our daily social and economic interactions build. “Token engineering” is an interdisciplinary and emerging domain in this emerging Web3. It combines technical, legal, economic and political aspects that all need to be considered when designing token systems. Token engineering is about rigorous analysis, design, and verification of systems and their assumptions. Their assumptions need to be assisted by tools that reconcile theory with practice and critically reflected by its philosophical underpinnings. As opposed to electrical engineering — designing a system within which we expect certain behavior — token engineering is much more comparable to steering national economies and public policy design, as it requires much more “fuzzy” modeling techniques. When analyzing the emerging token systems that are being currently built, it seems to me that the focus is often on the “technical engineering” aspects of a token system. A look at the composition of team members of most blockchain/Web3/token startups reflects this techno-centricity quite well. Engineering, however, is the practice of creating a technology that ultimately always has a social goal. Looking at engineering through a purely technological lens perpetuates a reductionist view of why and how we build technology. Such critical inputs and reflection is — among others — the role of philosophy.
A shortened interview that was translated into polish is available in: Strona główna / Numery / 2023 / Filozofuj! 2023 nr 3 (51). https://filozofuj.eu/produkt/filozofuj-2023-nr-3-51/