Think Bigger. Aim Higher. Go Further.

Month: October 2014

Proof of Work vs Proof of Performance

POW_POPProof-of-work (PoW) is a cryptographic technique introduced to a transaction which solves problems of fairness or abuse.  For example, a PoW would require a computer program to solve a simple puzzle before it can pass an email from sender to a receiver.  Someone who sends spam emails would be burdened with an computational costs greater than the possible benefit of sending spam.  A legitimate email from a single sender to a small packet of recipients would pass easily.

Proof-of-performance (PoP) refers to a condition where two parties enter into an agreement and a third party judges whether the conditions of the agreement are met.  Like an escrow account, the buyer puts the money into an account and the seller puts the title into an account.  If the conditions of the contract are met, a judge (adjudicator) flips the switch that completes the transfer.  If conditions are not met, the switch returns the money to the buyer and the title to the seller.

Proof of Work vs Proof of Performance

PoW and PoP are substantially different in many important ways.  For example, for POW the adjudicator is a computer program.  For PoP, the adjudicator is a person.  Ideally, the PoW is perfectly unbiased and cannot be corrupted for personal gain.  The PoP however, resembles the business model of most Brokers who can be biased, if not corruptible for individual gain.  Herein lies the promise of crypto currencies and so-called smart contracts that can be executed by computational algorithm rather than untrusted human agents.

On the other hand, PoW and PoP are conceptually similar is some ways as well.  In the Bitcoin protocol, for example, completing a PoW results in the issuance of a new coin.  Similarly PoP adjudicator is payed a fee or commission for validating the conditions of a contract.  The mother of all PoPs happens in the Banking System which literally issues new dollars into existence in the form of debt as a consequence of an adjudicated contract between a buyer and seller.

While the puzzles and context may differ, the consequence is the same – money is conjured into existence as a result of a humanly intensional transaction.  There really is nothing, except perhaps the deep training of an oppressed population, that says that a decentralized POP adjudicated by qualified and unbiased persona (disaggregated from the transaction) could not also result in the creation of new money.  This is exactly what Curiosumé proposes can be accomplished.

In the prior post; The Conjuring of Intangible Values,  The tangible value of a bridge connecting two cities and the intangible value of that same bridge are vastly different quantities.  Likewise, the tangible value of Bitcoin and the intangible value of Bitcoin are also vastly different different values for the same reason as the bridge between two cities.  If PoW = PoP could be assimilated in a single currency, we could build an economy whose currency is underwritten by the intangible value of infrastructure.

Ultimately, our planet would be the apex of infrastructure preservation, i.e., Humanity’s New Central Bank.

The Conjuring of Intangible Values

Conjure valueMy prior post “The Tale of Two Cities” demonstrates that the intangible social value conjured into existence by the bridge that connects two fair cities far exceeds the ‘tangible’ value of that bridge.  Yet, only the tangible value of the bridge is accounted for on a balance sheet such as GDP.

The Conjuring of Intangible Values

This may seem trivial until you observe that people are paid for their intangible assets (knowledge, creativity, and engineering calculations) as a percentage of the far lower number while the bankers, government, and corporate interests compensate themselves as a percentage of the far higher number.  The difference appears to be unaccounted for.

The Tail of Two Cities article concludes that the value that is conjured into existence by both the bridge and the fractional reserve system must be equal, by definition; otherwise the metaphorical breezeway that connects the two worlds would fall.

Bitcoin suffers from a similar curse as The Tail of Two Cities.  The prevailing argument against the crypto-currency is that it has no intrinsic value.  I have personally argued that a currency must represent human productivity intrinsically or else no other human would be willing to work (be productive) in exchange for it.  An article by Paul Bohm “The Value Of Bitcoin is Decentralization” makes a good point that the intrinsic value of Bitcoin is based on the value conjured into existence by increased productivity to society by what can be accomplished with Bitcoin that otherwise would be impossible without Bitcoin.

So if the valuation of a bridge crossing the river and the valuation of Bitcoin crossing the broker both suffer the same curse that there is no accounting system for intangibles, wouldn’t it make sense to solve that problem first  – i.e., measure into existence the intangible value of the Ingenesist – and then release those millions of human intentions (bridges and Crypto-currencies, not withstanding), into the system of trade?  This is the problem that Curiosumé proposes to resolve.

I believe that we first need to solve the under-mining problem that there is no accounting system for intangible assets.  Only then can there be intrinsic value in the conservation of those assets

… then maybe none of this would seem so mysterious.

A Tale of Two Cities

Tail of Two CitiesSuppose two cities are separated by a river. Every day 100 people pile into a boat for the 1 hour journey to the other side two times per day. Crossing the river costs 200 person-hours per day. Then civil society decides to spend 1 million dollars to build a bridge to carry 10,000 people across the river every day in negligible travel time = 10,000 person-hours of productivity are added and redistributed to the communities every single day.

These people go on their merry way expressing themselves as intangible assets to create art, raise families, and transfer new ideas to enterprise according to classical Schumpeterian design.  They are doctors, nurses, and engineers.  They are teachers and students, collaborators and Capitalists.

If the bridge has a service life of 50 years, it will conjure into existence 178 million hours of human productivity. If the average income is 25 dollars per hour, a simple $1M bridge is amplified to a stunning 4.5 Billion “dollars” worth of productive community value. This value never appears on any accounting statement because market capitalism measures value into existence at the tail end, not at the palette. The economy is measured as the stuff that intangible entities (people) are told to produce, not what they actually want to produce.

This 4.5 Billion dollars is uncounted value that is expressed in fiat currency which, through the miracles of the fractional reserve, corporations, and a litany of exotic financial instruments also amplifies 1 million dollars of Real Value into billions of dollars of paper value.  In fact, the ONLY reason that the tangible financial system does not yet collapse is that it is being propped up by this “invisible” intangible asset value that never appears on any accounting statement.

Many new money theorists claim that 70 Trillion dollars in debt can never be paid back because the “interest” on that debt does not exist.  I believe it does exist, it must exist otherwise the system would collapse.  The real problem is that the debt exists in a form of uncounted currency.  All we need to do is measure intangible value into existence and trade it directly as a financial instrument – nothing will change and everything will change.

From Charles Dickens’ A Tale of Two Cities :

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

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