Network of Trust: How Mathematics and Cryptography Will Replace Courts and Police

Imagine you are looking for a good auto mechanic. You don’t look at advertisements; instead, you call your best friend Petya. Petya says, “I don’t know anything about cars, but my brother Kolya fixes rides, and he swears that Uncle Ashot’s garage does honest work.” You go to Ashot because you trust Petya, and Petya trusts Kolya.

In IT, the “Web of Trust” is the digital version of this principle. Instead of a passport with an eagle or a ministry seal, your identity is a digital key. It is signed by friends, colleagues, and counterparties. A vast cryptographic web is formed. The more respected people who have vouched for you, the higher your weight in society. Now let’s look at the practical applications of this principle.

Cadastre and property registry. Why do we need bureaucrats shuffling papers using our own taxes? In a WoT system, your property is linked to a digital key. Buying a house? The transaction is recorded in a distributed database (like a blockchain) and signed by you, the seller, and, say, five witness-notaries with impeccable ratings in the Web of Trust. After that, no one will be able to take away your property rights, as any “fake” signature will be rejected.
Transaction guarantees. Suppose you are buying a batch of goods from a stranger in another city. You transfer the money to a special account that will only open with two out of three keys (2-of-3 multisig). One key is yours, the second belongs to the seller, and the third belongs to a pre-selected Arbitrator. Did the goods arrive? You and the seller provide two signatures—the deal is complete. Did the seller send a brick instead of a laptop? You call the Arbitrator, he reviews the evidence, and uses his key to return the money to you.
Arbitration (“private courts”). One might ask: “What stops the Arbitrator from colluding with the seller and scamming me?” This problem is solved by reputation in the Web of Trust. A private arbitration agency survives only on the trust of the parties. If it is revealed that a judge took a bribe, independent auditors will lower their rating in the WoT column. The judge’s social capital will crash to zero, and no sane person will ever include them in a smart contract again.
The “free rider” problem. Suppose not everyone chipped in for the pavement in a village, but everyone uses it. How do you make free riders pay without a tax police? Using the Web of Trust! Didn’t pay your donation to the road fund? No one fines you; live as you did. However, the algorithm automatically resets your trust level with your neighbors. Upon approaching the village barrier, a smart sensor will simply say: “Your key is not serviced; make a voluntary contribution or stick to the dirt road.” Life without coercion, but with natural consequences!
Ostracism instead of prisons. Prisons are very expensive (we pay for them), and they don’t rehabilitate people; they turn them into professional criminals. Contractual ostracism would be much better. Someone scammed their partners for money and refused to pay compensation per a court decision? Authoritative arbitrators attach a crypto-tag to their public key: “Fraudster.” Their rating in the global web of trust hits rock bottom. Automatic protocols trigger: smart locks in car-sharing don’t open, supermarket checkouts reject their transactions, and private security companies deny them access to private territories. This is scarier than prison. Anyone in such a situation would go to work off what they owe.
Lending without banks. Imagine a microcredit system based not on whether a person officially works in an office, but on their history in the Web of Trust. Need funds to launch a business? Your guarantors are the nodes in the network you’ve interacted with over the last 5 years. People will lend to you or invest in your startup directly via P2P, seeing your crystal-clear profile in the Web of Trust.

For centuries, the state has convinced us that without the stick, we would slide back into the Stone Age and kill each other. But the truth is that technology already allows us today to build structures based on voluntarism, reputation, and mathematics. No sticks and no taxes—only mutual respect and responsibility for every digital handshake!

Voluntarist, Bitarch

Learning to understand decentralized systems

Voluntarist, Bitarch

One of the mistakes often made regarding the concepts of certain systems is the inability to understand their decentralized nature. I will give an example of an absurd, yet still frequently encountered question about cryptocurrencies: what happens if the “owner” of Bitcoin decides to create as many new coins as they want or otherwise change its system? Here, there is a clear inability to understand how a currency can not have an owner. The traditional understanding of currency always assumes the existence of a specific issuer who releases new monetary units and possesses the exclusive right to do so. And many truly cannot imagine how it could be otherwise.

The example of Bitcoin is telling, as it is already a functioning system without a centralized governing body. In its case, there is no issuer; no one can unilaterally make any decisions regarding the operation of its system without the direct consent of holders of more than 50% of the computing power involved in it. Each such holder (miner) possesses their own copy of a network node, and each such copy is identical. This is precisely what decentralization consists of—there is no central node. Once launched by its creator, such a system, upon involving a sufficient amount of computing power, never again passes into unilateral control.

Even greater decentralization is given to the entire cryptocurrency system by the fact that anyone who wishes can attempt to launch a new cryptocurrency with their own operating principles. There is no such rule (nor the possibility of implementing one) that only one specific cryptocurrency exists and is used on the internet (as is most often the case with ordinary currencies within the territories of states). There can be as many as people themselves decide to use for various purposes.

If a currency can be decentralized, then why can other systems not be as well, for example, a system of public governance? Its traditional understanding is that in a certain territory there must exist one single body (the state) possessing the “legitimate” right to impose a single order on everyone, if necessary resorting to the threat of violence. But do you think it would not be just as much of a mistake to consider this option the only one possible, as it is a mistake to consider the existence of currencies possible only in the presence of specific issuers?

It would be a great folly to dismiss the possibility of achieving a free, non-violent society in which different, freely choosable systems of public order exist in parallel, simply due to a fundamental unwillingness to understand and accept the possibility of the existence of decentralized systems in principle. Those who still continue to think in a purely “centralized” way, where every system must have some single center of control, should finally learn to understand the possibility of the decentralization of various systems.

Fighting crypto-anarchists is a shot in the foot

Bitarch

I often hear objections against agorism, crypto-anarchism, Bitcoin, darknet platforms, TOR, VPNs, and everything else that allows for fighting the stationary bandit (“the state”) using non-violent methods online. Critics argue that it is easy for the state to ban and block all of this.

Indeed, purely theoretically, the state is capable of blocking all this with a flick of a finger, but as always, the ratio of benefit to cost comes into play. Currently, network connectivity is so high that blocking a single IP address, protocol, or even a specific DPI signature will inevitably lead to collateral damage.

Roskomnadzor (RKN) tried to block Telegram, but eventually abandoned the idea because as a result of the blocking attempts, completely different services stopped working: online stores, payment processing for MasterCard, courier services, and even the Odnoklassniki website. Banning VPNs won’t work either—they are used by companies. Banning them for individuals while allowing them for companies sounds like complete madness—the appearance of 140 million legal entities in Russia would be a DDoS attack on the entire bureaucratic system. Could they create a powerful firewall with DPI “like in China”? Also not an option—all halfway decent VPN services provide tools to bypass it.

Some might mention whitelists, where all resources are blocked except those permitted. That won’t work either—a great deal of imported industrial and medical equipment requires network access to connect to the manufacturer’s servers. Talking about “import substitution” for equipment of this class is simply laughable. And let’s be honest, the authorities need to develop their own next “wonder-weapons,” and for that, they need access to many different “pirate” resources like Sci-Hub, where scientific articles from foreign publications are posted.

An objection also occasionally slips in that the state can simply intimidate crypto-anarchists with repression in real life. In reality, you can only intimidate some random guy playing a “pirated” version of Call of Duty. Ideological fighters against the stationary bandit, which is what most agorists and crypto-anarchists are, will quickly find ways to bypass surveillance and blocks. They will only become more resentful of the state and, instead of innocent internet mischief, will move toward developing tangible tools to deter the aggression of tyranny, such as drones, blinding lasers, and even weapons of mass destruction, since they have plenty of skills.

So it turns out that while blocking the activities of crypto-anarchists is theoretically possible, in practice it would result, for example, in the failure of tomographs and life-support systems in hospitals, along with the shutdown of many industrial enterprises and the collapse of the economy. Will the state take on such costs? I don’t think so!

Blockchain Registries, Continuation of the Discussion

Alexei Konashevich

Thank you for your comment. I bypassed the issues of the political arrangement of the system, and the presented concept is described in the language of the current system. But the architecture is much broader. I developed these protocols with fervent crypto-anarchists who saw the idea of a “filter as a jurisdiction” as their advantage. They are applied to self-organized communities, meaning that central governing bodies are not needed; delegative democracy can be abolished, for example, and direct e-voting can be implemented on the same blockchain.

One of the problems I pointed out is that it is mistaken to believe we can do without third parties. It’s just that right now the main third party is the state in the form of a registry holder. But the registry itself no longer needs to be “held.” Blockchain performs this function. All that remains is to replace registrar officials with a decentralized system of validators in various fields. But the most important thing is the resilience of this model to all kinds of oppression. In my scientific work, I describe how it is possible to resist a potential digital dictatorship.

At the blockchain level, a digital dictatorship will not be able to prevent anything. People can write anything into blockchains, whether it is legal or not—it doesn’t matter, it is simply a repository where all facts are recorded. As I explained, above the blockchains, we have a system of “filters,” meaning that what we consider legal goes into the general pool—into the current registry of property rights and civil status. But no one holds this database. Since the protocol is the same for everyone, anyone who wishes to look into the database (there may not be one general one, but many specialized ones: civil registry, land cadastre, etc.) downloads the bundle of blockchains and applies this protocol on top of them.

As long as we trust the authority, we use the protocol, apply it on top, and all of us, independently of each other, receive the same database locally on our PCs. Legitimatization occurs through the voluntary acceptance of the protocol. Elements of the protocol (smart laws and court decisions) are also recorded in the blockchain. But if the authority oversteps, this entire superstructure can be demolished, and the data in the blockchain will not be affected in any way (all facts, whether legal or not, are recorded there, including illegal decisions by officials and courts). And as a result of a reboot of power, a new image of justice and law can be applied to all those old records. If official Bob seized land from Alice, then after the overthrow of the authority, the new government simply wipes out the old database, creates new filters, and rescans the blockchains with the new filters. Under the new rules, Alice is restored to her rights by simply declaring the record of the seizure of the plot invalid.

Continuing the theme, here is a short video about CBDCs and central bank cryptocurrencies, which are not cryptocurrencies at all, but a complete lie.

https://youtu.be/bVFmpHaoBDA

Tokenomics problems and contract jurisdictions

Regarding the conclusions about the unsuitability of blockchain for real estate registration, I partially agree. In its pure form—yes. I have been working on this issue at the University of Bologna for four years. Last year, when I visited Kyiv, I gave a presentation on how to apply blockchain as a real estate registry. So, if you are interested in learning more: theory, protocols, system architecture, regulation. I presented it quite simply in my presentation at the blockchain hub.

Alexey Konashevich

https://youtu.be/F9IYLtXrn78

Thank you, I watched the presentation with great interest. My concept of property rights registration was approached slightly from a different angle and sketched out in much broader strokes. Not being a programmer, I was answering not the question of “how,” but rather the question of “who would handle this without the state, why would they do it, and why would they do it well.”

Your presentation implicitly suggests that the state, as a monopoly territorial jurisdiction in the validation system for the transfer of property rights, is a resource-intensive atavism that does not increase system efficiency but complicates its optimization.

In order to formally describe the functioning system of decentralized legal mechanisms, you build “smart laws” on top of smart contracts—an additional abstraction that validates smart contracts, separating legal ones from illegal ones. Then you raise the question of who creates the smart laws and introduce a new abstraction, e-voting:

But in the world of decentralized ledgers, it doesn’t work that way. E-voting for a law is, essentially, its validation by a group of independent validators. What happens if a certain minority votes against a law in current legal reality? They are forced to obey the law passed by the majority. What happens under decentralized law? The minority has the opportunity to create a fork. Two alternative smart laws emerge, each describing its own set of permissible smart contracts, and different voluntary transactions can take place in different legal fields.

Essentially, these are the same good old contractual jurisdictions that I’ve already talked the audience’s ears off about here.

Registration of property rights under ancap

What will the registration of property rights for assets (land, real estate, enterprises, securities, files(?)) look like in the absence of a monopoly registrar (USRN and others)? Will it be mandatory? And what about bundles of rights under ancap?

Free Reader

Bundles of rights are simply an analytical tool for a deeper understanding of the phenomenon we commonly call ownership. Any relationship between a subject and an object can be described through bundles of rights, regardless of whether it is ancap or socialism. It is simply that under socialism, a certain property, for example, does not grant the right to derive profit from it, while under ancap it does. Also, for instance, rights to a plot of land may imply the right to prohibit boundary violations, or they may be encumbered by an easement requiring the provision of, say, free passage. All these bundles of rights are formed both as a result of concluding direct contracts and simply by virtue of established traditions. Any right is a claim that is tolerated, and if a certain claim is contested, it means that specific right is under threat.

For those who struggle to understand what the previous paragraph is about, I recommend watching Boris Yurovsky’s video, which is titled: Property as a Bundle of Rights.

Now let’s move on to the registration of property rights. A title of ownership for any object that can be uniquely identified is very easily stored in one registry or another. These could be objects such as “a plot of land with such-and-such boundaries” or “a smartphone with such-and-such a serial number” or “a file with such-and-such a checksum.”

How do titles of ownership get into registries? They are entered there by the owners of the property assets to inform everyone of their ownership right, which is primarily necessary to confirm that this right exists. Maintaining a registry requires resources, so those who decide to engage in this will have to think through a monetization scheme for the service. One could charge money for placing information about a property asset in the registry. This risks the registry being incomplete. One could charge for obtaining information from the registry. This risks people obtaining information through cheaper means. One could establish a fund, feed it for some time, and once the registry begins to demonstrate its utility to a wide circle of people, the fund could quite possibly develop the registry through donations.

The alternative to registries is the archaeology of property titles, where, wanting to ensure that the property being purchased actually belongs to the seller, a potential buyer examines the document recording the acquisition of the property, for example, a purchase and sale agreement, then turns to the previous owner, finds out how they acquired the object, and so on until their paranoia is satisfied. In effect, this is the same methodology as blockchain analysis—just without the blockchain. Additionally, if we are talking about a plot of land, for example, one can ask the neighbors whether they truly know the seller as the owner of the plot or if he is an impostor.

But this will be of little help in a situation where the owner of a property asset sells it to several people simultaneously, takes money from each, and then leaves them to figure it out however they want. This is the very “double spend” against which, in the case of bitcoin transactions, it is recommended to wait for several confirmations before considering the transaction complete. Unfortunately, blockchain is not the Internet of Things, as Ivan Ivanitsky aptly formulated in his article on Habr. Information in a registry, whether centralized or distributed, may differ from the conditions of the transaction. To protect against most such fraudulent transactions, a temporary freeze of the funds paid for the acquired object is sufficient. During this time, the problem of multiple claimants to one title of ownership will have time to surface, but the seller will not have had time to secure the money, and it can be returned to the unsuccessful buyers. Such a payment delay can be implemented either through a trusted intermediary or, possibly, through smart contracts (although I am not an expert in this area).

Evaluate the idea for the privatization of land

Alexey Data Engineer

Hello. I am interested in your opinion.

The Problem

During land privatization, the right to choose is curtailed due to a lack of knowledge. And the consequences of this ignorance are often irreparable.

The Idea

All state land should be returned to the citizens, and its disposal should reflect the democratic nature of the state.

The Motive

If 3,155,372,300 hectares are divided among every citizen in the RF, it results in 21.84 hectares per person. At a market value of 1 million rubles per hectare, each of us is a potential millionaire. Unfortunately, the voucher privatization model proved itself unsuccessful, therefore I consider the above-described reform the optimal way to bring the market into solving the problem.

The Solution

Technological progress allows us, unlike in ancient times, to automate processes. Many things that were unavailable to the ancients are now possible.

All RF land can be divided into minimal squares (1 sq.m). Every citizen of the RF receives a proportional share of every square for life, without the right of resale, but with the right of temporary transfer under contractual terms.

Legislative Part

Everyone has their own share in every square meter of Russia, giving them the right to dispose of it.
Until all owners of the meter (Russians) have granted the right of specific land use to a User, the User has no right to carry out its specific use.
- For example, if you want to build a factory, you must obtain the right to build a factory from all current owners of the leased land.
Upon the death of a landowner, their land is distributed according to a will, or in its absence, to blood relatives. If there are no heirs, the shares are evenly distributed among all citizens.
The land of incapacitated citizens is under the trust management of every citizen; rental income goes toward benefits for incapacitated citizens, and a percentage is paid to the manager as a reward for quality management.
If a person obtains citizenship, they must pay the market price and buy out a proportional share from ALL citizens. This allows them to become a full citizen with the right to dispose of and grant rights to use the land.
Budget funds are spent only on maintaining the blockchain that stores the data.
Costs and lease agreements are also stored in the blockchain to solve the problem of citizens’ incomplete awareness of the real price.
No tax is levied for owning such land, as all people possess equal rights.
Land that was in private ownership prior to privatization remains private.

Consequences

Since land that is closer to a person is more valuable to them, companies will emerge that implement trust management of irrelevant land.

The process will create a huge number of jobs and contract templates, allowing interested people to negotiate and lease land from others.

Environmentalists can hinder the construction of factories without an expertise agreement; factories can hinder environmentalists in the exercise of their domestic disposal of lands.

And other market fantasies.

Answer from Ancap-chan

I’ll start with the simplest. Of course, there is not the slightest sense in keeping a land registry in a blockchain. The whole point of a distributed public ledger is to eliminate the need for trusted intermediaries. But if the land use mechanism includes the possibility of forced alienation of land or deprivation of management rights due to incapacity, then the corresponding entries in the blockchain would have to be made by certain persons with admin privileges. That’s it, the blockchain can be thrown away; the optimal solution here would be a regular centralized database. Errors in the database are inevitable, but they can be corrected through various appeal mechanisms.

Now let’s move to something more complex. The proposed mechanism assumes that there will be two land registries in the country simultaneously, and land will circulate within two fundamentally different mechanisms. The part of the land that will be in private ownership at the time of the aforementioned “privatization” (it would be more appropriate to call this procedure socialization, instead) will remain private. A contract between the seller and the buyer would be sufficient for its sale; in other words, the land will be quite liquid. Suppose that by hour X, such land in the RF will be 10%, and the remaining 90% of land belonging to the state will be in the shared ownership of all 140-something million citizens of Russia. The circulation of this socialized land will be extremely difficult, because it will be impossible to buy; only leasing for a specific project will remain, and this project must be approved by the consensus of all owners.

Thus, the legal turnover of socialized land will be completely frozen, and private land, due to the simplicity of its legal use, will immediately skyrocket in price. Judge for yourself. I want to build a factory. The construction cost is 100 million dollars plus the price of one hectare of land. If I build on socialized land, I will have to conclude an agreement with each of the 100 million disposers (counting only the capable ones who will manage the property of their wards). Suppose, with the help of arch-effective means of communication and persuasion, I manage to conclude this agreement in just one year at a price of just one dollar per vote. In total, we have an estimate: 200 million dollars and a year of time to buy construction permission. Alternative: one month of negotiations with a single owner, and I buy one hectare of land from him for just 50 million dollars. Voila: I save time and money, so I won’t even attempt the legal use of socialized land.

On the other hand, I can always carry out a land grab of this very land and use it quite peacefully. Who can stop me? Only the nearest neighbors, who would themselves not mind using this plot. I will share some money with them so they close their eyes to this. I will also share with the land inspector so that on paper the land continues to remain unoccupied. Voila, I build a factory, spending a measly million dollars on bribes and the same month of time.

Such land grabbing will take on a massive and uncontrolled character, because due to the tragedy of the commons, no one will be interested in doing things the long and expensive way if it can be done quickly and cheaply. The doctrine of deterrence will be applied to the most obtuse opponents.

So, the draconian regulation mechanism that was proposed will lead to the emergence of a very expensive white land market and a very massive black one. As we know from history, the prevalence of a black market sooner or later leads to its legalization. This happened in Great Britain, this happened in the USA, this happened in the USSR—yes, it happened in many places—and there is no reason to believe that this case will be an exception.

Ancap-chan

I answer questions on ancap, libertarianism, economics, politics, ethics, law and occasionally on abstract topics.

Тег: blockchain