The Next Economic Paradigm

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The WIKiD Tools Algorithm

The WIKiD Tool algorithm provides a mathematical framework for analyzing dynamic data related to social interactions in a network and memorialized on a Blockchain. This example uses an analogy to the position / velocity / acceleration equations that some people may remember from their school days.

These types of relationships are important for measuring things like innovation. Ask any VC for a definition of Innovation and they’ll probably say “I’ll know it when I see it” or “it’s a good idea with an economic outcome”. Neither of these things are measurable until long after the innovation occurs which is not practical. However, if we could measure something that is closely related (correlates) with innovation, perhaps we could use that to measure the thing we can’t see.

A similar thing happens on Wall street – how do you measure consumer confidence? Financial analysts noticed that the price of some commodities track closely with consumer confidence so they use that as a proxy for the thing they cannot measure directly. This is called a derivative – something whose value is derived from the value of something else. Suppose we use the same idea to measure things like Wisdom, Innovation, Knowledge, Information, and Data (WIKiD)?

As engineers interact with each other to form transaction records, the blockchain records the chronological order of every event, so we can now correlate all events with respect to time.  The connections that are made may be analyzed for both quantity and quality (magnitude and direction). We can now use common mathematical tools from finance and physics.

We have established that the blockchain records the time function for all events to an immutable ledger.  In order to represent vector magnitude we’ll follow a well known analogy to the displacement-velocity-acceleration formulas from physics and associated Calculus.

WIKiD stands for:

(W) = Wisdom
(I) = Innovation
(K) = Knowledge
(i) = information
(D) = Data

Data: In general, we can define data as points placed on such a coordinate system. Each point defines a position in space and the time where an event is recorded. The distance between data points can be called “displacement”, because of the relative distance between the points. In the simplest sense, we can see that Data (D1) and Displacement (D2) share an analogy.

Information: When you draw a line connecting two points, or you draw a line approximating a cluster of points, the slope of that line on a graph provided information about the phenomenon under observation. Is it getting larger slowly? Is it getting smaller rapidly? In essence, the slope of the line represents the rate of change in displacement with respect to time and gives the observation its “velocity”.

This may be represented by the relationship simply stated as:

i = dD/dt

Information is proportional to the rate of change in the data with respect to time

It should be clear that we are defining ‘information’ as a derivative of ‘data’.  a derivative in physics is the same as a derivative in finance, that is “something whose value is derived from the value of something else” That said, we now proceed down the latter of derivatives.

Knowledge: The analogy between velocity and knowledge is intuitive. Knowledge is a phenomenon that may be modeled as the derivative of ‘information’. Strictly speaking, the value of knowledge is derived from the value of the information from which knowledge was created. It is intuitive that one accumulates knowledge over a long period of absorbing information and integral data. Education is the process of absorbing information from a printed page or screen, and combining that with other previously accumulated information to form knowledge.

Hence, the following relationship holds and is simply stated as follows:

K = di/dt =d2D1/dt2

Knowledge is proportional to the rate of change of information with respect to time

Innovation: The analogy between acceleration and innovation is also intuitive but a little more difficult to put to words  (that is why we use equations). Consider an child who is knowledgeable in riding a bicycle on pavement. Suppose that the child, for the first time, encounters sand on the pavement while also executing a sharp turn. During the ensuing deceleration, the child experiences a very high increase in knowledge about their environment within an extremely short period of time. In any case, the child is forced to innovate a solution. Likewise, the motocross racer is constantly innovating to adapt to the conditions of the track.  You can read a book about riding bicycles, but none can adequately describe the moment when the child must create the experience anew.

For the fact of innovation, we provide the following relationship simply stated as follows:

I = dk/dt = d2i/dt2 =d3D/dt3

Innovation is proportional to the rate of change of knowledge with respect to time

Innovation Example: One of the gross errors that we make in business is due to the inability to differentiate an economic event from it’s constituent physical parts.  The classic example is innovation; Venture Capitalists often describe innovation as a new idea that has an economic outcome.  This is problematic because innovation is defined with one equation having two unknowns.  This is mathematically impossible to solve, except by laborious and expensive iterations.

The rational (mathematical) approach would be to test and observe high rates of change of knowledge in a community and use that as a proxy to identify the presence of innovation (as defined above). After that, the community may be tested for economic outcomes.  Unfortunately, I=dk/dt is not normally possible to observe in a hierarchical business structure.  However, when formatted and validated correctly, and applied to a network organizational structure, then I=dk/dt can be represented graphically and accurately identified even by a child.

Wisdom: When we think of wisdom, our minds conjure the image of an elderly person with a lifetime of experiences behind them. Somehow, our elders seem to be able to predict the outcome of a series of actions before those actions take place.   This is why we seek wisdom to lead our organizations and institutions.

Consider the manager of a factory floor who has 30 years experience. During those 30 years, they have seen many things succeed and many things fail. In fact, their experience represent a statistically significant sample of representative events that they have experienced in the past.   The wise manager is able to process new information with old information to predict the probability that the new idea will yield the desired results. The propensity for wisdom may be modeled as a time function in a similar manner.

W = dI/dt = dK2/dt2 = d3i/dt3 = d4D/dt4  

 Wisdom is proportional to the rate of change of innovation with respect to time

In general we could say that Wisdom is the second derivative of Knowledge and the fourth derivative of Data. Similarly, Innovation is the first derivative of Knowledge and the second derivative of information, and so on.  In order to identify innovation, we would measure high rates of change of knowledge.  Wisdom would be proportional to high rates of innovation, etc.  The utility of these functions should be apparent.

Conclusion

The WIKiD tools algorithm provides a set of relationships for what are now considered intangible assets that are integrated by a time function.  The Blockchain provides the master schedule for the time function to be recorded, leaving us with a somewhat routine task of identifying rates of change in observable events.  

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Valuation of Hierarchy vs. Network

Modern platforms such as Google, Facebook, AirBnB, and others enjoy astronomical market valuations despite having comparatively less hard assets as legacy firms like Marriot, Boeing, T-Mobile, or Walmart. The difference may have something to do with their organizational structure.

Hierarchy: Since the dawn of the industrial revolution, centralized organizations comprised of multiple levels of management have been the proven means for allocating resources and minimizing risk.  The value of such a construct is expressed in terms of market demand and sensitivity to risk as expressed by the Capital Asset Pricing Model (CAPM).

E(Ri) = Rf + Bi (E(Rm)-Rf)

Where:

E(Ri) = Expected rate of return on capital amount
Rf = Risk free rate of return
Bi = Sensitivity to market volatility
(E(Rm) = Expected market return

The CAPM valuation model for an organization is dominated by market risk multiplied by a firms sensitivity to market risk.  CAPM valuations are limited by market expectations and performance.  CAPM is largely a linear function except in the exclusive state where volatility is very low and market returns are very high, such as monopoly or some duopoly conditions.

Networks: A network is characterized by a collection of nodes (which may represent a switch, a computer, a sensor, or a person) and branches (wires, signals, instructions, or communications) connecting the nodes.  The value of networks is a function of the total number of nodes and the total number of possible connections that can be completed between them multiplied by some coefficient of value for the quality of those connections. 

Metcalfe’s law for Networks suggests that the theoretical value of a network will be proportional to the square of the number of nodes according to the following relationship.

Theoretical value is proportional to: n(n-1)/2

The Actual value would be related to the quality of the nodes, the actual number of existing branches, and the net quality for the transactions that transpire over the network. For example, the Value of Facebook is estimated at:

VFacebook = (5.70 x 10-9) x n2

Where (n2) is the total number of users and (5.70 x 10-9), is an incredibly small number represents the average quantity and quality of nodes and branches between them. The Facebook platform objective is to maximize total number of connects AND maximize quantity AND quality of the interactions.  For reference; MySpace still has 500M registered users giving it a valuable network, however, a low coefficient of interaction has eroded value of the platform substantially.

Self-regulation, fault-tolerance, and Management Autonomy

The network can make independent decisions: An engineer that is mis-allocated can quickly move closer to their area of interest and competence.  Overlap between civil, mechanical, and electrical engineers can be managed appropriately.   A corrupt engineer would have a very difficult time gaining access to a target without enduring a long and difficult road to establishing a transaction record that would permit sufficient isolation to the target to actually profit from the crime. It would be difficult to corrupt an engineer without knowing if they will be assigned to a target.  It would be difficult to which engineer will be assigned to a potential target in advance of the attack.  If an attack was attempted, it would be easy to identify who committed the crime.  High impact targets may be covered with redundancy or a Byzantine proof.  Obviously, Bots would be quickly and easily dispatched to the null condition.

Network Learning

Interactions between nodes will tend to optimize claims such that the value of the compensation received is proportional to the effort required to establish and verify a claim.   This is a common practice in professional societies and certification bodies today.  Further, strong professional communities with sufficient diversity, create conditions for rapidly and iterative teaching, learning, and collaboration leading to a high rates of innovation.  Finally, professionals may reflect artistic or literary expertise or cite membership in multiple networks on their own valuation and the valuation of their team.  Reflecting diverse interests from professional, recreational, and social opportunities will increase the individuals stake in the network and everyone’s stake in a team.

The Value of the Quantchain Network:

Economist Robert Solow received a nobel prize for his work in estimating that 80% of economic growth can be attributed to technological change. Said another way, for every 2 dollars spent on engineering, society can expect 8 dollars returned to the economy.  This conveniently provided an average nodal value for engineers.

It is easy to count the number of engineers on the Quantchain, therefore the only variable left is the ability to assess the value and diversity of the interactions. Quantchain accomplishes this precise objective in several ways:

  • The decentralization of engineers diversifies interactions
  • Dominant game strategy = cultivate a diverse community of claimants and validators approaching Dunbar Number.
  • The Percentile Search Engine assigns optimum probability vs. cost to all transactions. 
  • Individual transactions and collective transactions are readily analyzed.    

Engineering networks can be assembled and subdivided in any number of ways and theoretical values may be assigned to them making the valuation of teams, mergers of teams, divestiture of teams, or scenario testing of any imaginable combination of teams, a quick and accurate projection of network value.

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TVG: The Value Game

A New Class of Business Methods

The Value Game (TVG) is a new class of business methods where value is extracted from an asset, not by consuming the asset, rather, by preserving the asset.  The process of preservation and maintenance is the substrate for the creation of social, creative, and intellectual capital in a community.  TVG is a difficult thing to sustain in a legacy economic model, but may be quite efficient and profitable in the modern networked organizational structures enabled by decentralized adjudication, a decentralized ledger. and simple game mechanics.

To illustrate, we cite examples from on-line games collectively referred to a Fantasy Sports.   Fantasy baseball for example is a game played by adapting real life game statistics to create hypothetical game scenarios using some randomization system such as a set of dice.  Over time these games have become more sophisticated, computerized, and have spread to other sports, and now they are on-line.  Today, fantasy sports are estimated to be a 2 billion dollar industry involving over 56 million people.

What if a “fantasy play” could be replicated given a set of validated statistics, in real life? How would the real world game actually turn out?  This is not an uncommon thought. Many HR directors, corporate recruiters, and entrepreneurs dwell on this topic extensively: “How could we identify social capital, creative capital, and intellectual capital of people, given a set of market measures, and allocate them into a self-optimizing game to yield production and profit?”.

Building A Value Game

  • The Value Game starts by identifying any asset that a group of people may share.
  • The next step is to find 3 or more diverse communities that have a vested interest in preserving the asset rather than consuming the asset.
  • Each player acting in their own best interest will seek to play their expertise among the others as best as possible.
  • Any threats to the shared asset will be neutralized by the majority of players in a network.
  • The transactions between the diverse communities of people will “mine” social capital, creative capital, and intellectual capital into existence generating tokens in the process.
  • Individual transaction records will be memorialized on a blockchain under the control of the individual.
  • Validated transaction records may be transferable to other Value Games, blockchains, or tokens.

Example:  A condominium is an arrangement of several individual owners (of living units) who all have individual talents.  It is in the best interest of each that the building is well maintained, but none are necessarily qualified to manage and maintain a complex structure.  Another community of nearby vendors such as restaurants, accountants, engineers, physicians, and employers have in their best interest that the condominium is maintained because the value of the units impacts the value of commerce – and the productivity of the residents is the primary source of revenue for vendors.  It is also in the best interest of neighboring buildings, the school district, and the city tax pool, civil servants, etc., that the shared asset is maintained to optimize it’s value.  Each player is aware of the impacts in the network based on the analysis of similar networks.

While malicious actors may be a symptom of illness, by actual attack vector is apathy and neglect. Gravity, weather, and deferred maintenance are constantly trying to reduce that condominium structure to lower state of value.  Maintaining an asset creates value equal to the entropy of the system plus asset appreciation due to the creation of social, creative, and intellectual capital.

The Value Game would form a cryptographic token that may be exchanged among the parties in whose best interest it is to preserve an asset rather than to consume the asset.  This is done in many forms today – a restaurant may offer a coupon to residents for a lunch special.  A physician may locate close and rely on referral instead of advertising.  An trades person saving time and travel expenses may pass that on to local community.  When a drug dealer comes to town, they are quickly identified and excised from the community by the community.

Almost any shared asset may be used to form a value game. 

  • A residential or commercial building
  • A Corporation
  • A car, airplane, or other transportation asset
  • Land for farming, mining, or urban forest
  • Water, food, and energy
  • Engineers, Doctors, Civil Servants
  • Educators, mentors, apprentices
  • Laborers, Maintainers, cleaners
  • Planet Earth

New Value Entrepreneur 

The objective of the New Value Entrepreneur will be to organize three or more communities to interact around a shared asset where the interactions among these communities act to preserve the asset rather than consume the asset.  As people interact with each other, they teach, learn, and iterate with each other.  This activity manufactures social capital, creative capital, and intellectual capital memorialized by transaction records represented by the community token.

In general, once a value game is started, it will improve itself.   All players will eventually find and play roles in Value Games that correspond most closely to their natural interest and passions and therefore maximize their personal value.

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The Return of The Ingenesist Project

After about 4 years of not posting to this site, I have decided to return to the original ideas that resulted in so much innovation in this space. For a quick review, the term “Ingenesist” is derived from the Latin word for Engineer – A Maker of Useful Things.

The TIP archives found here include almost 600 blog posts (site map) approaching 1/2 million words. You’ll find the original thesis for the international mobility of engineers under NAFTA between US, Canada, and Mexico. That project involved 6 universities, the California Board of Professional Engineers, The National Council of Examiners for Engineers and Surveyors, and the National Society of Professional Engineers – and with the cooperation and support of CETYS University, the Baja California State Government, and over 250 Engineers from Mexico who presented the US Engineering Board exams.

That work was further developed at the Boeing Commercial Aircraft Company and published at the Boeing Technical Excellence series of conferences by their Technical Fellowship. From this effort, TIP developed The Innovation Bank that would match most worthy knowledge surplus to most worthy knowledge deficit to form an internal market (network) for knowledge transfer. That work is memorialized in an old 2007 Patent Application

Later, TIP co-founded Social Flights – a ride sharing service for private jets. The innovation was our ability to predict most likely passengers and match them with most likely seats available on private aircraft. Supply and demand were both dynamic. Keep in mind that this was before Uber and we were acting within a highly regulated industry. Ultimately Social Flights was acquired.

TIP developed three key innovations:

The Value Game: An economic game where multiple self-interested agents must share a common asset. Their motivation and incentive would be to preserve the asset rather than consume the asset. This was supposed to simulate a sustainable economy such as what is desperately needed for our planet. The Value Game originated at Boeing and was tested with Social Flights and successfully deployed in several remodeling projects for condominium associations (shares asset communities)

The WIKiD Tools Algorithm. WIKiD Tools creates a mathematical relationship between (viewed backwards) Data, information, Knowledge, Innovation, and Wisdom. WIKiD tools is useful when you can’t measure something like innovation directly, you could measure a derivative such as the “rate of change in knowledge” as a proxy. In this way,the richness of Wisdom, Information, Knowledge, information, and Data can be more predictable.

Curiosumé is a combination of the words Curate and Resumé. The idea behind curiosumé is to convert the CV or Resumé to a form of code that can be overlaid on other information databases such as Wikipedia, Amazon ontology, even the Library of Congress. This allows us to measure intangible assets as they act in a community.

Then Came Blockchain:

We stopped publishing to The Ingenesist Project in 2016 in order to apply TIP innovations to emerging technologies such as Social Media, Blockchain, AI, etc. It appeared that the decentralization of the engineering profession would be an important step in achieving the original goals of sustainable global enterprise. During this time, I also started a small engineering consulting firm called CoEngineers, PLLC that served a traditional local market bringing engineering services to a retail clientele. CoEngineers, PLLC helped pay the bills while also serving as a sandbox for testing and developing TIP Innovations. Our first entry into blockchain was the creation of a token called Quant on the BitShares Blockchain.

SIBOS, NSPE Task Force, and National Association of Insurance Commisioners: Collectively each of these organizations represent the Banking Industry, The Insurance Industry, and the Engineering Profession. TIP published 3 whitepapers that became the basis for the next iteration. It was noted that each of these industries trade an invisible currency called Risk. It was found that TIP methodologies were better described by actuarial math (probabilities) rather than interest laden monetary metrics. This 3-way association became the genesis of the Insurance / Engineering Blockchain Consortium. This was later changed to the Integrated Engineering Blockchain Consortium or IEBC.

IEBC: Over the course of several years, IEBC was the umbrella organization for 150 engineers, scientists, and business persons who advanced the idea of a decentralized engineering network to mesh with the banking and insurance environments. IEBC published numerous seminal documents and spoke at dozens of industry conferences. The two main achievements were to publish a whitepaper with detailed specifications for a blockchain strategy that would accommodate all prior TIP innovations. The IEBC team built a prototype blockchain by cloning an existing successful chain and modifying it to suit MVP demonstration. IEBC ultimately ramped down for lack of funding. But everything we learned is now open for iteration.

Where to re-Start? TIP has always been a place where ideas are formed and implemented either by ourselves or by others. Many TIP Ideas survive to this day in the many hundreds of engineers and scientists who have participated in the conversations, the start-ups, the publications, lectures, and webinars over the last 15-20 years. We can see many past TIP contributors advancing in their careers, businesses, and leadership roles.

There is something that binds people to this network – it has to do with the underlying belief that Makers Of Useful Things are the cause, not the effect, of sound and sustainable economic activity. The flaw of market capitalism has the world operating in a mirror image of the economy that was supposed to happen. The solution is more about perception than it is about revolution.

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The World’s First Intrinsic Cryptocurrency

5734783736_66d18531f1_oThe value of engineering is perhaps the greatest arbitrage opportunity in history. After 100 years of regulated professional engineering practice, engineering is still valued on a linear time and materials basis. In the Internet age, where everything and everyone is connected by engineering, I argue that the value of engineering may be accounted by the exponential Network Effect.

For example, many social networks such as Facebook or Google enjoy corporate valuation in accordance with Metcalfe’s law which states that the value of a network is proportional to the square of the number of nodes in the network.  Facebook, Linkedin, Google, etc., are simply a platform upon which participants reflect value through their interaction with each other.  The real physical value of those interactions is projected upon the virtual value of the platform.  This is significant.

This condition may be mirrored with engineering infrastructure, such as a bridge or a building.  The physical value of the bridge is accounted for in a linear time and materials, but the network value of the bridge is proportional to the exponential number of connections that people make in using the bridge.  The difference between the two quantities represents an arbitrage opportunity whose value would be easily measured into existence by a clever cryptocurrency.

This analysis can be extended to nearly all works of engineering from renewable energy facilities, clean water installation, transportation systems, and all buildings, etc.  The Network Effect also applies to the security, fault tolerance, transparency, and reliability of a network as well – each reflect additional layers of engineering proof of work.

Today, the value associated with the network effect of infrastructure engineering is unaccounted for – it does not exist on any balance sheet yet it is widely distributed in society.  For example, doctors have hospitals, manufacturers have machinery, bankers have assets to finance, insurers have accidents to underwrite – none could exist without the network effect of engineering.

The World’s First Intrinsic Cryptocurrency

The purpose of Quant is to measure the network value of engineering into existence with a digital currency. Such a currency would represent the intrinsic value of all people who interact with works of engineering.  A currency that accounts for intrinsic value will quickly achieve a generalized reciprocity among a community of beneficiaries who will then readily trade in that currency.

Much like Amazon.com started as a bookseller, Quant will start with infrastructure engineering. This initial transition step is essential to achieve initial reciprocity of the digital currency. The interface will be at the adjudication of smart construction contracts upon which banking and insurance depend to capitalize and underwrite the works.  Once this point of entry is established, additional layers of infrastructure can be added eventually capturing the true value of every human being that contributes their productivity to the network.

The consortia being promoted by The Ingenesist Project between engineering and insurance will be a critical component in establishing this base layer of intrinsics.  We have compiled a group of founders and visionaries that can bring this idea into a practical blockchain protocol.  Would you consider joining us?

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Blockchain and NAFTA May Have a Lot in Common

nafta-crossingAnyone who was around in the early 1990’s may remember the mantra of modern globalization was that centralized markets were bad and decentralized markets were good. Fast forward to 2016 and blockchain technology: centralized ledgers are bad decentralized ledgers are good.  Does this sound familiar?  Blockchain and NAFTA may have a lot in common. The good news is that perhaps this new world is not quite as uncharted as it now appears.

Coinciding with the end of the Cold War, we can now look back at NAFTA as the Big Bang of modern globalization.  The supporting calculus is credited largely to the ‘theory’ of Comparative Advantage;  an economic thesis referring to the ability of any given economic actor to produce goods and services at a lower opportunity cost than other economic actors. The idea first appeared in 1817 in a book by English economist David Ricardo, “Principles of Political Economy and Taxation”  David Recardo’s ideas still serve as the logical basis of international trade. The efficiency of this economic model were at the time, and still are, indisputable.

Further back, the 15th Century concept of Laissez-Faire is an economic system in which transactions between private parties are free from government interference.  Meanwhile, the “invisible hand” was a term first used by Adam Smith to describe the unintended social benefits of individual actions.  These ideas formed the cornerstones of modern Capitalism – the decentralization movement of a prior era.  Indeed, Capitalism solved a great many human problems while arguably ushering into existence new, and possibly more perilous problems such mass political instability, financial crises, and even climate change.  Now, the advent of bitcoin claims to solve many of these problems.  This begs the question, what new problems will be created after 25 years of blockchain technology?

More importantly, perhaps this connection to a large body of precedence (if we are clever) can guide us to a different set of outcomes than prior decentralization technologies.  This is an important and timely question given the blockchain technology, due to the Network Effect, is exponentially more powerful than the relatively linear Law of Comparative Advantage.

Lessons Learned

I was involved with developing standards for the mutual recognition of engineering professionals between US, Canada, and Mexico back in 1993-1996.  What made NAFTA different, and hence “modern”, was an inclusion of free trade in services sector.  These included financial services like banking and insurance as well as professional service providers from engineers to librarians.  Essentially NAFTA attempted to treat intangible value directly as a tangible object for international trade.  Still a problem yet to be solved.

At the time however, the mutual recognition of professional engineers was controversial and divisive. The US engineers were fearful that they would lose their high paying jobs to cheap Mexican engineers, whose salaries were about 1/10 the US engineering salary.   A “giant sucking sound” was the popular phrase coined by a billionaire presidential candidate at the time.  The fear was made very real for many people, not unlike the immigration debate that continues to rage today.

I saw something different.

In Mexico, I saw an entire nation – an entire continent – that needed everything that US engineers create. Mexico, Central America, and South America needed roads, bridges, structures, water, energy, and every manner of infrastructure upon which free markets utterly depend.  Since NAFTA also liberalized trade in financial services, that meant that economic development could be financed at low cost of capital.  In my youthful idealism, I felt that the opportunities for engineers from all countries was beyond extraordinary – to me, it was specifically the rising tide of basic infrastructure that would float all boats.  Unfortunately, this opportunity was woefully squandered.   Let me explain.

In the US, and many developed countries, the professional engineering licensure laws assure transparency, consensus, and economic incentives that rewards high integrity rather than low integrity among engineers and contractors who carry such licensure.  When the PE stamp is indelibly attached to the project plans, the asset that is described by those plans is held in suspension on the balance sheet during the design and construction phase. This span of time is when the highest monetary risks and technical risks occurs.  Insurance companies depend heavily on engineers to verify the design, materials, processes, components, chronological order and performance of all components of the systems that they insure.  Where risk can be transferred to insurance, the cost of capital can be minimized.

The problem with the NAFTA Mutual Recognition Standards for engineers was that the three negotiating bodies for the US, Canada, and Mexico failed to reach an agreement over reciprocity of the other member’s licensure model and instead defaulted to the highest common denominator which fell far short of practicality while also failing to meet the conditions of insurability, especially for Mexico.  As such, infrastructure projects could not be financed for lack of licensed engineers in the relevant NAFTA jurisdictions. This was not for lack of money because NAFTA also liberated access to financial services – but for lack of insurance. Without a tip-to-toe insurance presence, Latin American economies continue to experience difficulties in bridging the capitalization gap.  Innocent people suffer.

Many trade agreement that followed NAFTA would go on to include free trade in services, and also inherit this flaw capitalization of infrastructure for lack of Global Engineers.  Unfortunately, mutual recognition of engineers would be stopped cold at the borders for lack of insurance.   Many of the problems associated with globalization today, in my opinion, can be attributed to the failure of the NAFTA Mutual Recognition Document for Professional Engineers.  We have an opportunity to correct this flaw and it is imperative that we do so.

To centralize, decentralize, or re-centralize. 

While the economic theories of decentralization are sound, the intended outcome has been elusive.  Instead of converting from centralized serfdom to the invisible hand of freedom, we keep inventing new forms of re-centralization where one centralized system is traded for another under the auspice of decentralization!  The danger is that blockchain technology will not reach its potential of economic freedom for all, rather, it will simply become another form of mechanization that replaces people with machines.  A decentralized solution will require the integration of machines with people.  That means we need to augment human capacity not “surplus” it.

Blockchain technology replaces some – but not all – of the decisions that a human administrator makes.  It will be important to look at bureaucratic processes and accurately discern what can go to a blockchain and what must remain in human judgement.  The current markers of re-centralization include so-called permissioned ledgers to replace back office workers.  Permissioned by whom? A centralized authority? The running joke in the cryptocurrency space is that any effort to control a decentralized system quickly cancels out the advantages of having one in the first place.  Re-centralization is dangerous.

Instead, the integration of humans and blockchains should take a hybrid approach where humans serve as adjudicators to the blockchain machinery pointing smart contracts toward the intended outcome at specific points of risk transfer.  Eventually, a means to decentralize the human adjudicators will be required so that they cannot be corrupted.  One such solution is proposed by The Ingenesist Project.  It is called Curiosumé and it converts a CV to cryptography so that holders can lock contracts to a blockchain quasi-anonymously.

The consortium between engineering and insurance is a critical development in the current evolution in blockchain technology and is required to break the cycle of recentralization by expanding the insurance capacity of our financial system to a fundamental storage of value – public infrastructure.  We need to learn how to convert existing engineering and construction contracts into blockchain adjudicated smart contracts. We need to figure out how to decentralize the adjudicators in a fault tolerant system that cannot be easily corrupted, thus providing for optimal allocation of public and natural resources.  Then we need to expand the adjudication system to all other service professionals who also serve the needs of our human markets.  The resulting cryptocurrency will have intrinsic properties that people will be willing to trade. In this manner, the cost of capital will be lowest for the most proper allocation of resources required by an increasingly crowded planet.

(Adapted from; Insurance: The Highest and Best Use of Blockchain Technology, D.Robles, July 2016 National Center for Insurance Policy and Research / National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf)

 

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What Problem Does Blockchain Solve?

pic-what-problem

A great deal is being said about Blockchain Technology.  But what exactly is the problem does blockchain solve?

The main problem that blockchain solves results from the fact that computer databases simply cannot talk to each other without a layer of expensive fault-prone human administration or bureaucratic central authority controlling every node. Blockchain technology, on the other hand, is a single, decentralized database managed by software and shared by multiple users, without any third party authority. This makes processing transactions less costly and less error-prone. This software enables process efficiency because new links can form as needed, and improves organizational efficiency because no management gatekeepers are needed.

The applicability of blockchains may include everywhere that many people may want to interact with a computer database. It is easy to imagine a tremendous breadth and depth of potential applications and markets.

Centralization

The traditional way to enable databases to communicate with each other is to consolidate and combine them into a single database, hoping that enough commonality would exist to patch them together. This approach is typical of mergers and acquisitions of corporations where two somewhat similar entities combine their data under a central authority. Efficiencies are gained in scale and elimination of redundancy. Unfortunately, centralization can also lead to inefficiencies such as top-heavy hierarchy, monopoly, obfuscation, stagnation and vulnerability to external shocks. Failures would often trigger blanket legislation and government regulations. Meanwhile, the original problem remains; how do these new mega databases communicate with other mega databases?

See also: How Blockchain Will Reorganize Society  

Decentralization

The other way to eliminate intermediaries and enable data to be shared between organizations is for everyone to share the same database. Multiple writers can retrieve and populate data simultaneously with no controls, consensus or centralized authority. Natural organic links would form, and operations would become faster, cheaper and easier to perform and maintain. The network effect can take hold where the value of the network would grow exponentially. Unfortunately, there would be no way to stop a person from cheating another person, or going back to change the conditions of a contract, or giving himself a raise, or double spending a unit of account, etc. For decentralized databases, these are precisely the problems that blockchain solves.

Before Bitcoin, if a person sent a contract over email, each party would hold an identical copy that could be easily manipulated. After Bitcoin, a person can send a contract electronically, and the receiving party would hold the only valid copy. While this may sound trivial at first, it is extraordinarily difficult for a computer to do. But it would allow computers to perform some of the functions that administrators routinely perform today at nearly every interaction with a computer.

Not unlike what happened with mechanization in the last century, once achieved, the software-managed architecture will be faster, more reliable and cheaper while the marginal cost of adding additional capacity approaches zero. Centralized databases scale at the speed of bureaucracy. Blockchain may scale up to handle large and complex transactions or scale down to accommodate billions of micro-transaction with little difference in operations cost. Also like what happened with mechanization, society will certainly reorganize around these new forms of value creation and exchange. This is already evident with the extraordinary amount of venture and investment capital and creative new decentralized autonomous organizations (DAOs) pouring into blockchain space.

Blockchain technology makes business cases that may never have been viable become brilliantly viable today. To use an engineering example, the invention of the hydrostatic wheel bearing eliminated enough mechanical friction from a steam locomotive that it could become a viable engine of economic growth. Likewise, blockchain technology holds the potential to eliminate a tremendous amount of friction from everyday transactions and agreements. For anyone reading this article while standing in line at the DMV, that is a problem that deserves to be solved.

The innovation has just begun.

Adapted from:

Insurance: The Highest and Best Use of Blockchain technology, July 2016 National Center for Insurance Policy and Research / National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

Blockchains, databases, reification: are bottom up standards possible? Vinay Gupta 2015 https://youtu.be/AbacROAa4xY

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The Mechanics of Blockchains

rubrik-fridge The Mechaics of Blockchains

Blockchain technology is like a three-trick pony. It essentially combines three slightly clumsy computer tricks to mimic decisions that a human administrator routinely makes. The difference is that, if done correctly, the computer can perform some of these decisions with great speed, accuracy and scalability. The peril is that, if done incorrectly, the computer can propagate an incorrect outcome with the same stunning efficiency.

1: The Byzantine General’s Dilemma

A scenario first described in 1982 at SRI International models the first trick. This problem simulation refers to a hypothetical group of military generals, each commanding a portion of the Byzantine Army, who have encircled a city that they intend to conquer. They have determined that: 1. They all must attack together, or 2. They all must retreat together. Any other combination would result in annihilation.

The problem is complicated by two conditions: 1. There may be one or more traitors among the leadership, 2. The messengers carrying the votes about whether to attack or retreat are subject to being intercepted. So, for instance, a traitorous general could send a tie-breaking vote in favor of attack to those who support the attack, and a no vote to those who support a retreat, intentionally causing disunity and a rout.

See also: Can Blockchains Be Insured?  

A Byzantine Fault Tolerant system may be achieved with a simple test for unanimity. After the vote is called, each general then “votes on the vote,” verifying that their own vote was registered correctly. The second vote must be unanimous. Any other outcome would trigger a default order to retreat.

Modern examples of Byzantine Fault Tolerant Systems:

The analogy for networks is that computers are the generals and the instruction “packet” is the messenger. To secure the general is to secure the system. Similar strategies are commonplace in engineering applications from aircraft to robotics to any autonomous vehicle where computers vote, and then “vote on the vote.” The Boeing 777 and 787 use byzantine proof algorithms that convert environmental data to movements of, say, a flight control surface. Each is clearly insurable in a highly regulated industry of commercial aviation. So this is good news for blockchains.

2: Multi-Key Cryptography

While the Byzantine Fault Tolerant strategy is useful for securing the nodes in a network (the generals), multi-key cryptography is for securing the packets of information that they exchange. On a decentralized ledger, it is important that the people who are authorized to access information and the people who are authorized to send the information are secured. It is also important that the information cannot be tampered with in transit. Society now expends a great deal of energy in bureaucratic systems that perform these essential functions to prevent theft, fraud, spoofing and malicious attacks. Trick #2 allows this to be done with software.

Assume for a moment that a cryptographic key is like any typical key for opening locks. The computer can fabricate sets of keys that recognize each other. Each party to the transaction has a public key and a private key. The public key may be widely distributed because it is indiscernible by anyone without the related private key.

Suppose that Alice has a secret to share with Bob. She can put the secret in a little digital vault and seal it using her private key + Bob’s public key. She then sends the package to Bob over email. Bob can open the packet with his private key + Alice’s public key. This ensures that the sender and receiver are both authorized and that the package is secured during transit.

3: The Time Keeper

Einstein once said, the only reason for time is so that everything doesn’t happen at once. There are several ways to establish order in a set of data. The first is for everyone to synchronize their clocks relative to Greenwich, England, and embed each and every package with dates of creation, access records, revisions, dates of exchange, etc. Then we must try to manage these individual positions, revisions and copies moving through digital space and time.

The other way is to create a moving background (like in the old TV cartoons) and indelibly attach the contracts as the background passes by. To corrupt one package, you would need to hijack the whole train. The theory is that it would be prohibitively expensive, far in excess of the value of the single package, to do so.

Computer software of the blockchain performs the following routine to accomplish the effective equivalent process: Consider for a moment a long line of bank vaults. Inside each vault is the key or combination to the vault immediately to the right. There are only two rules: 1. Each key can only be used once, and 2. No two vaults can be open at the same time. Acting this out physically is a bit of a chore, but security is assured, and there is no way to go backwards to corrupt the earlier frames. The only question now is: Who is going to perform this chore for the benefit of everyone else, and why?

Finally, here is why the coin is valuable

There are several ways to push this train along. Bitcoin uses something called a proof-of-work algorithm. Rather than hiding the combinations inside each vault, a bunch of computers in a worldwide network all compete to guess the combination to the lock by solving a puzzle that is difficult to crack but easy to verify. It’s like solving a Rubik Cube; the task is hard to do, but everyone can easily see a solution – that is sufficient proof that work has been done and therefore the solved block is unique and valid, thereby establishing consensus.

Whoever solves the puzzle is awarded electronic tokens called bitcoin (with a lower case b). This is sort of like those little blue ticket that kids get at the arcade and can be exchanged for fun prizes on the way out. These bitcoins simply act as an incentive for people to run computers that solve puzzles that keep the train rolling.

Bitcoins (all crypto currencies) MUST have value, because, if they did not, their respective blockchain would stop cold.

A stalled blockchain would be the crypto-currency equivalent of bankruptcy. This may account for some amount of hype-fueled speculation surrounding the value of such digital tokens. Not surprisingly, the higher the price, the better the blockchain operates.

While all of this seems a bit confusing, keep in mind that we are describing the thought patterns of a computer, not necessarily a human.

The important thing is that we can analyze the mathematics. From an insurability standpoint, most of the essential ingredients needed to offer blockchain-related insurance products exist as follows.

1. The insurer can identify the risk exposures associated with generals, traitors, locks, vaults, trains and puzzles.

2. The insurer can calculate probability of failure by observing:

  • The degree of Byzantine fault tolerance.
  • The strength of the cryptography
  • The relative value of the coins (digital tokens)

3. The consequences of failure are readily foreseeable by traditional accounting where the physical nature of the value can be assessed, such as a legal contract.

We can therefore conclude that each of the tricks performed by this fine little pony are individually insurable. Therefore, the whole rodeo is also insurable if, and only if, full transparency is provided to all stakeholders and the contract has physical implications.

Markets are most efficient when everyone has equal access to information – the same is essential for blockchains. So much so that any effort to control decentralized networks may, in fact, render the whole blockchain uninsurable. It is fundamentally important that the insurer is vigilant toward the mechanics of the blockchain enterprise that they seek to insure, especially where attempting to apply blockchain to its own internal processes.

Adapted from: Insurance: The Highest and Best Use of Blockchain Technology, July 2016 National Center for Insurance Policy and Research/National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

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Are Blockchains Insurable?

home-fireAre blockchains insurable?  This question was posed to us as a topic for presentation by the Center of Insurance Policy and Research, a research arm of the National Association of Insurance Commissioners (CIPR / NAIC)

The trigger appears to be that some insurance companies are being asked to insure the business operations of blockchain enterprises. This same concern would apply to legacy business operations that may choose to deploy a blockchain – basically, a shared database managed by software.  If one listens to the blockchain activists, this could basically apply to everyone in the near future.

The Ingenesist Project volunteered the following opinion to the question; Are Blockchains Insurable?  The article was published in the July 2016 CIPR Journal

Article available here

This article is comprehensive and staggering in its implications.  It begins by shaping the given landscape of finance and entrepreneurship in terms of insurability.  It follows with, in essence, a mathematical proof that arrives at a conclusion that blockchains are insurable, but business processes using blockchains may not be.   Luckily, the technology offers sufficient mathematical underpinning to calculate and adequately pool risk exposures of its components.  However, the trouble arises where digital assets can neither be treated as money nor property.  This extralegal condition may exist which would be categorically non-insurable in mainstream finance.

“Extralegal” refers to a condition in which something is neither legal nor illegal. Economist Hernando De Soto writes about how the extralegal sector in many parts of the world grossly inhibits economic growth because people are unable to secure “title” to property and businesses that they create.  They are unable to bridge the capitalization gap – that is, the ability to borrow “money” against tangible assets or future returns.

Blockchain technology appears to be languishing in the extralegal domain as courts and governments have little uniform ideas about how and where this tech fits in society.  That is, until something goes wrong like a major hack where important people lose a lot of money.  Then some patchwork of blanket legislation will likely emerge to favor those of one sector over another.  The running joke in crypto-space is that any effort to control blockchain technology would negate any benefits of having it in the first place.

There is a third option.

This article raises the possibility that the pairing of blockchain tech with professional engineers (as the decentralized adjudicators of smart contracts) would achieve a state of insurability and thus bridge the capitalization gap required for mainstream financing of blockchain enterprise.  This arrangement applies primarily to basic infrastructure and derivatives of basic infrastructure which may not actually be a bad thing at all.

Ucritcal pathOn a critical path.

The Earth is an epic case study in deferred maintenance.  There are very real and serious global problems that impact every living creature on Earth that we need to attend to immediately.  Critical path methodology is a technique familiar to all builders as a set of instructions specifying where one action must precede the next in order for subsequent actions to occur.  Millions of business plans that provide basic human needs and protect our natural resources, and that are currently unprofitable, will suddenly become hugely profitable.

These outcomes could be accomplished with the recommendations provided within.  Please read this article and forward it to others who are interested in this technology.  There is very real money to be made in the next economic paradigm that is currently at our fingertips.

Article available here

 

 

 

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Infrastructure Finance With Blockchain Technology

Jericho Beach Walk

Face it, if the water was not clean, and if we did not have a warm place to sleep, or safe roads, or fresh food, reliable energy, Internet technology, bug-free software etc., something like bitcoin, let alone antibiotics, could never have come into existence. This is a fact, the value of all money is derived from the value of infrastructure that supports human productivity. For the avoidance of doubt, simply compare US infrastructure with, say, Haitian Infrastructure.

Infrastructure Finance with blockchain technology should be the financial system that society adopts. The entire planet is now an epic case study in deferred maintenance. The greatest threat to bitcoin, Ethereum, Steemit, and all future great innovations will not come from some oppressive government, it will come from a failure of basic infrastructure.

One of the problems in the cryptocurrency space is that speculation is needed to increase adoption. However, speculation requires volatility, otherwise there would be no spread or arbitrage opportunities and therefore little incentive to to make a bet. Conversely, a productive and sustainable economy requires stability – i.e., low volatility or no volatility. Stability and volatility are mutually exclusive and therefore the incentives associated with each of these crypto-methods are likewise mutually exclusive. At best, we have a zero sum game devolving to a race to the bottom, or at worst, we’ll wind up with the worst of each one, i.e., irrational stagnation.

There needs to be a completely different path. Finance DEPENDS on insurance (not the other way around) and insurance has long term objectives, not short term profit taking. Further, insurability decreases the cost of capital which allows for an organic portfolio of development to emerge. The highest priority applications will be those that decrease volatility. Invariably, these will include basic infrastructure, clean energy, universal education and health care, etc.

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Hacking The Financial System

Hacker

The financial System is made up of 5 components that act as a system. If any of these components falters or is corrupted, the whole system becomes unstable. Therefore, it may not be a good idea to attack any one of these 5 components individually without understanding the consequences to the whole system. In fact, many economic shocks have been an attack on only one of these components.

The trick to hacking the financial system will be to alter it without disrupting the fundamental purpose of each component. In order to accomplish this, we need to replicate and integrate the functions of all 5 of these components. In that way, we may be able to induce what I call “The Big Flip” toward a more sustainable set of outputs.

These 5 components are as follows:

Entrepreneurs (supply — sources)
Markets (demand — sinks)
Accounting System (inventory)
Currency (storage and exchange of value)
Institutions (to keep the game fair)

Entrepreneurs: There is no shortage of entrepreneurs. To harness and release the vast stores of intelligent, productive, and creative people in the world should be fairly easy — all we need to do is give people a game that they can win playing by a consensus set of rules.

Market: There is no shortage of work to do, the entire planet is an epic case study in deferred maintenance. New energy sources, educational programs, safe food and water, transportation, civil liberties, community building and collaborative enterprise are all desperately in demand.

Accounting system: This is where we fall woefully short. Factors of production in the current economic model are scarce land, labor and capital — these are called “tangible assets”. Meanwhile, social capital, creative capital, and intellectual capital possessed by all people are called “intangible assets” and do not appear on a balance sheet — yet are responsible for the value tangible assets!!

Guess what, this is how we are controlled. This is how we are held captive, this is how we are made invisible and how our identity is taken away. As long as we continue to buy into land, labor, and capital economics, we will remain imprisoned by an accounting system that clears our accounts of what is valuable leaving behind what is not.  For example; motherhood is responsible for all taxpayers, yet does not appear on the GDP. This may sound weird, but we are accustomed to it. We need to develop an accounting system where factors of production are abundant Social Capital, Creative Capital, and Intellectual Capital, then allocate that to a sustainable market.

Currency: The dollar will soon expire under the weight of compound interest on an impossible debt load. Cryptocurrencies offer the brightest hope for a new way to articulate value. We are all very excited about this, but cryptos cannot also be called upon as the vetting institution that keeps the game fair. The recent events with the DAO demonstrate this. There still needs to be human intervention of some kind.

Institutions: Today we have laws and courts and enforcement that articulate power to ostensibly keep the game fair. This system is falling apart. Smart contracts embedded in the blockchain do not work. The recommended strategy is human adjudicated smart contract articulated on the blockchain. The best way to keep the game fair is to decentralize the human adjudicators. This is the great advantage of the proof-of-stake algorithm — people can be arranged in many real byzantine fault tolerant systems to secure a network.

Curiosumé is an analog to digital converter for knowledge assets. Curiosumé serves two important functions; the new accounting system and the decentralization of smart contract adjudicators.

1] First it establishes an accounting system for knowledge assets. This allows people to reorganize around social, creative, and intellectual capital in existing communities. Productivity is associated with innovation instead of some increasingly irrelevant association with land, labor, and capital.

2] Curiosumé decentralizes the role of the adjudicator by converting a person’s résumé to cryptography that can open and close contracts on a blockchain. The algorithm can select the adjudicator anonymously until the point of transaction upon which their ID is sealed to the blockchain. You cannot corrupt what you cannot see.

By deploying Curiosumé to a blockchain with the distinct purpose of hacking the financial system via the five components of an economy simultaneously, we may stand a chance of inducing The Big Flip to an economy based on new factors of production. Maybe a lot sooner than anyone is expecting.

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The Highest and Best Use for Blockchain Technology

earthshot2The hallmark of a great society is the ability to capitalize it’s needs, not it’s arbitrage opportunities.  The Highest and Best Use for Blockchain Technology must be to reduce the cost of capital by decentralizing risk, not necessarily money…yet

Blockchain technology carries a promise of great opportunity, efficiency, and fairness in business operations and governance for an entire struggling planet. If that is true, then Blockchain technology should be integrated broadly and uniformly across society and within as many existing institutions as possible. If that is true, then Blockchain development should not be the exclusive domain of a single sector, such as banking. Nor should Blockchain development reflect priorities of highest ROI from VC start-ups. Likewise, purely Decentralized Autonomous Organizations (DAOs) may carry the risk of operating in an extralegal sector without legal recourse, thereby increasing net volatility, not decreasing it.

A different track is required.

The primary objective of Blockchain technology must be to reduce the cost of capital by decentralizing risk, not necessarily money. The highest and best use for blockchain technology is therefore insurance, not necessarily banking. In doing so, blockchain innovation can then be applied broadly, evenly, and intentionally across the economy. This makes sense because when building anything complex or important, one logical piece needs to go in front of the next logical piece regardless of it’s individual ROI, because the collective ROI is the true basis of valuation. If people tried to build an airplane in the same manner we are now trying to build decentralized economics, a few may benefit, but an air transportation system, as a whole, would be tragically constrained.

We have seen this before.

Many of the issues currently propping up the narrative to the Blockchain phenomenon were also present during the time of this author’s participation in the NAFTA negotiations. Anyone who was around in the early 1990’s may remember the mantra of modern globalization was that decentralized markets were good and centralized markets were bad. The mathematics supporting the efficiency of free trade models such as the Theory of Comparative Advantage were, and still are, bullet proof. So what happened?

Unfortunately, decentralized markets were administered unevenly, disproportionately, and only partially insurable, at best. The act of trying to control a decentralized market eliminated many of the benefits of having one. Today, we face a similar peril, except we are playing with a far more powerful technology promising exponential efficiency, or exponential deficiency. Don’t let the pundits fool you. It can go either way.

The difference today is that we also have the knowledge, foresight, a technological tool kit, and profound responsibility to get it right this time.

Let’s begin.

The place to start developing blockchain technology is through a consortium of Insurance and Professional Engineering institutions for the creation of relevant infrastructure and the physical derivatives upon which everyone utterly depends. This includes renewable energy, clean air, safe water, transportation systems, health and welfare, housing, building systems, computer networks, etc. After all, bitcoins aren’t worth a whole lot when the power goes down.

Infrastructure projects, and all their beneficiary derivatives, require financial institutions that can bridge the capitalization gap between the inception of a project and revenue from the project. This period of time is rife with peril because the “money and title” precedes the delivery of the physical asset. The cost of capital is directly proportional to the risk associated with project delivery. Wherever the insurance industry is capable of pooling project risks, the cost of capital will fall precipitously. The insurance industry is therefore an imperative component to this objective. Banking is relatively simple, accounts can be cleared with a placeholder currency; a token, if you will.

Herein lie both the challenge and the opportunity facing Insurance and Engineering institutions related to Blockchain Technology:

First, as with all new technology, we need to recognize that society will reorganize itself around Blockchain Technology. We need to provide hundreds of millions of entrepreneurs and citizens the support systems with which to do so.

Second, if each component part of the blockchain system is insurable, so too should the entire system. We need to insure and reinsure each individual components of a blockchain business system(s) in order to lower its cost of capital.

Finally, once insurable, each component part of the new economy will have the same cost of capital as any other part. The relative value of an investment will therefore be ordered in time — the most important and valuable piece is the one that goes next in the critical path. This is how things get built.

Taken together, Insurance and Engineering are sufficiently disintermediated from short-term objectives and are ideally suited for the long game. Together, they can bridge the capitalization gap upon which everyone can then cross. They provide outcomes in the physical world that are essential to everyone. Together, they can deliver the projects that are most important — the ones that come next as we navigate our critical path into the future.

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Questions Related to Bitcoin Protocol For The Insurance Industry

There is no shortage of crypto pundits who’ll wax poetic over the imminent disruption that blockchain technology will render over the insurance industry.  A more likely scenario will be a slow and intentional transition between new and old technology.   The objective of this article is to present some questions related to Bitcoin Protocol for the insurance industry and begin laying out a strategy for mitigating these perils.

725_aHR0cDovL2NvaW50ZWxlZ3JhcGguY29tL3N0b3JhZ2UvdXBsb2Fkcy92aWV3L2QzNjA1NGQ3MDZmZDM2ZDQ0NDIxYWJhZWY3ZDk1NGEzLnBuZw==On a sour note, the Bitcoin protocol now provides a way for Insurance Company Executives to eliminate countless brokers and administrators from the balance sheet as computer algorithms are now capable of performing many of the same tasks.  On the other hand, these same executives are being asked to provide insurance to clients who intend to do exactly that; replaced countless brokers and administrators with a computer algorithms.   Can these companies identify the risk exposure to their selves and their client?   Can an actuarial scientist calculate the probability that any number of perils will manifest?  If so, does anyone truly understand the consequences of a crypto-block-coin meltdown?  I didn’t think so.

Meanwhile, regulators are faced with with a set of circumstances without precedent.  The purpose of regulations of any kind is to encourage or discourage certain types of human behaviors.  So if the human is removed, are these regulations still needed?  How will they be interpreted? What new regulations must be created?  What current regulations stand in the way of insurance innovation using the blockchain?

How different would it be to insure a decentralized organization than it would be to insure a centralized organization?  Where do the liabilities attach and where is dominion asserted by the owners where decisions and outcomes are determined by a computer algorithm?   Is bitcoin money? Can it be taxed like money? Does taxation make it money? Is bitcoin property?  Can I hold title to bitcoin?  Is bitcoin risky? Is there any actuarial data that provides valid historical trends to extrapolate from?   Are blockchains defensible in a court of law? Are their  currencies legal, illegal, or extralegal?

These are huge questions.  Fortunately, the world will not likely change as rapidly as the pundits will have us believe.  There will needs to be a methodical transition plan between current centralized structures and future decentralized structures.  The best way to start is be collecting an inventory of existing social institutions that are codified and acting successfully as an effective bureaucracy today.  Then we need to slowly add a blockchain to their clock and study the opportunities in that environment.  We need to understand the difference between where human decisions can be replaced by algorithm but to also be vigilant to preserve those human judgements that are not replaceable by an algorithm.

The outcome will be a new type of bureaucracy where humans act at a much higher level as adjudicators to smart contracts on a blockchain

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Blockchain Technology and the Engineering Profession

Blockchain Technology and the Engineering Profession

Blockchain protocol and technology is said by many to be among the greatest accomplishments of human intellect since the Internet.  Blockchain is the underlying technology to what is commonly known as Bitcoin, however, the technology is not exclusive to Bitcoin.  Swarms of innovators are working feverishly to design and deploy new business platforms that incorporate blockchain technology.

The blockchain protocol

However, the implications of combining blockchain technology and the engineering profession may be among the most profound.  In short, a blockchain is a computational “machine” with vaults, gears, and locks that acts as a trusted 3rd party to secure a database that is mutually shared by banks, insurance companies, corporations, and private parties. They use cryptographic “keys” instead of physical keys to open and close doors. Blockchains also include a feature where computers (owned by “miners”) compete to solve a trivial puzzle (proof-of-work) in order to open new blocks in a chain and reveal the next puzzle.  This assures that the block cannot move backwards in time therefore forming an indelible seal, or “notarization”.   This process also generates an electronic token (coin) that provides people with incentives to work hard to maintain the network. With these components, the “machinery” can automatically verify facts and execute transactions between parties where nobody can cheat.

The Professional Engineering Protocol

By contrast, for nearly 100 years, the Professional Engineer too has acted as the trusted 3rd party to banks, insurance, corporations, and the public.  The PE stamp has served to secure the public ledger of accounts related to physical infrastructure upon which modern civilization depends.  In the United States (and other countries) the PE stamp is the node of assurance that validates time and fact. Each PE is a node in a system and is individually secured by education, experience, examinations and model law. Engineers solve real puzzles in order to reveal the next real puzzle in a chain – the engineering product can never move backwards and is therefore indelible. The combination of these components provides banks and insurance companies with assurance to execute financial transactions and payments whose value is, in fact, stored in public infrastructure and productivity.  Nearly all actuarial data used by banks and insurance companies is tied somewhere to the professional engineering stamp of assurance.

The problems with Blockchain

Part of the problem plaguing cryptocurrencies is that they are virtual assets and can never meet the intrinsic standard of representing a real physical asset. This problem may be solved if professional engineers were to adopt blockchain as their own new iteration of the PE stamp.

There is no shortage of crypto-pundits who wax poetic over the ideals of a decentralized universe thanks to the miracle of the blockchain.  Meanwhile, speculators fawn over Bitcoin’s potential as an alternate currency, possibly a black market currency, without really understanding the nature of currency itself.  The truth is that money must represent human productivity otherwise people would not be willing to work in exchange for it.  Human productivity is the domain of engineering, period. 

The Opportunities for Blockchain in Engineering

Needless to say, the opportunities to deploy blockchain technology in the engineering profession cannot be overstated.  The professional engineer represents a “smart key” that can open and close smart contracts on a blockchain.  All contracts ultimately must lead to a physical entity and more often than not, that physical entity is tied to an engineering stamp somewhere in it’s value chain. This is a fact.

What you will not find is a collection of experts who understand the direct analogy of blockchain technology to the institution of professional engineering as deeply at the researchers at Coengineers. It is almost as if the Bitcoin designers came to the conclusion that professional engineers had it right all along.  Coengineers, PLLC is now at the forefront of this industry, at the global level.

Give us a call and we will help you develop blockchain applications specific to your engineering business methods.  We understand the technology, the platforms, and the developers. Industry, government, banking, and insurance are all beneficiaries of blockchain applications adjudicated by professional engineers.  We are Coengineers, we build together.

***

Coengineers, PLLC is currently leading the Financial Technologies Task Force for the National Society of Professional Engineers.  The objective of the task force is to research the implications and discover the opportunities to deploy Blockchain Technology to the Professional Engineering Disciplines. [Reference: The Bitcoin Protocol and Future Currency Impacts on the Engineering Profession ]

***

Please forward this article “Blockchain Technology And The Engineering Profession” to others.

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BidPool Adjudicated Smart Contract Game

Problem:  Many contractors say that their COGS (cost of goods sold) consumes 10-30% of their expenses. Obviously, this cost is passed on the customer.  Bidding can be made far more efficient with BidPool Adjudicated Smart Contract Gaming platform.

For example: 5 contractors may spend $10K bidding on a 1 million dollar project that only one will win. Further, each contractor may only win 1 out of 5 bids submitted. These losses are ultimately passed on to the market in increased cost, lack of industry collaboration, and influence peddling. As such, the cost of bidding is represented by the following relationship:

Cost of bidding = COGS multiplied by Number of Bidders

Adjudicated smart contract: Consider a process where a project owner and all 5 contractors (or more) each put a $10K promissory note into a blockchain  escrow account. An engineering firm such as Coengineers, PLLC will then perform a 3rd-party project definition report and Statement of Work that collects all relevant information that the contractors would need to bid on a job. All contractors are then invited to an electronic RFP.

Game Mechanics: Whoever wins the RFP pays (by escrow release) $10K to Coengineers, PLLC for the SOW report. The losers pay nothing. If the owner does not select a contractor, the owner then pays for the report and can use it to hold another contest in the future. These savings are ultimately wrapped into the discount of the projects according to the following relationship:

Cost of bidding = COGS divided by number of bidders

Aligned Incentives: Where there is no penalty for either winning or losing, the incentive to cheat is reduced. The Value Game realigns major incentives and the projects benefit from.

  • Improve matching of qualifications to the project
  • Improve quality and seriousness of owners (no “tire kickers”)
  • Eliminates bidding redundancy
  • Everyone bids “apples to apples”
  • Rewards collaboration and intangible assets
  • Reduces project variance (i.e., change orders)
  • Reduces marginal cost of additional bidders
  • Opens market to more bidders (prediction markets)
  • Increases transparency
  • Reduces project costs
  • Insulates conflict of interest
  • Resistant to corruption

Additional benefits:

A comprehensive project definition can be used for many purposes downstream:

  • Contractor RFI/RFP
  • Master Schedule
  • Bank Financing
  • Project Insurance
  • Statement of work
  • Contract language
  • Inspection compliance
  • Construction and Accounting Forensics

Scalability:

Future advancements in financial technologies such as the Blockchain protocol and Knowledge asset networks such as the Curiosumé protocol will allow BidPool to scale infinitely to many project types, markets, and jurisdictions.

Summary:

BidPool is a Value Game that reduces the cost of procurement, increasing project assurance, and realigning market incentives to reward high integrity and not reward low integrity. By introducing simple game mechanics and deploying modern financial and knowledge Asset technologies, BidPool may generalize procurement across markets and industries with direct lineage to the banking, insurance, and engineering sectors.

For more information contact Coengineers.com

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Uber Airlines

Uber AirlinesAs the Uber/Lyft business model continues to hone its end-run around the heavily regulated taxi industry, many are now looking at the air transportation industry for vulnerability to Uberesque disruption. Enter Uber Airlines.

Long before social media, entrepreneurs have been trying to sell empty legs on private airplanes – almost 40% of all private jets fly empty as they return their pilots to base after dropping off their charge – and again for pick-up. Every few months I’d hear about some new start-up claiming to provide private jet service for the price of a commercial flight.  A few limited operations exist, but not many – and they can’t scale.

I spent about a decade in commercial aviation and later co-founded Social Flights, a jet-sharing service out of Nashville – we unsuccessfully tried to solve the same problem and learned a great deal in the process. I can say with great confidence that it is not possible to close the business case on Uber Airlines, YET.  A few more technologies need to be invented and maybe, just maybe, we’ll see an Uber Airlines achieve a scalable business model.

The aviation industry is heavily regulated by the Federal Aviation Administration. There are mountainous regulations pertaining every detail of the air transportation process; the aircraft, the crew, the passengers, weather, DHS, customs, scheduling, baggage, the airport, etc.  Aviation is many times more regulation dense than automobiles and the costs associated with air transportation are many times again higher than automobiles.   In order to make the economics work, an operator needs to be a commercial airline with scheduled service flying big jets between hub and spoke airports or they need to be a private on-demand charter operator. You can’t just stand on a street corner and hail Uber Airlines to anywhere.

There are three technologies that need to happen first:

  1. Next Generation Air Traffic Control. NextGen ATC refers to aircraft management technology that uses space-based GPS instead of ground-based radar to manage air traffic around airports. NG-ATC could literally light up 500 municipal airports and eventually up to 5000 small airports with all-weather service. Currently, only 30-40 major hubs can handle such operations.
  1. Curiosumé is a concept that we first developed at Social Flights, LLC for determining the probability that a certain number of people within a certain geographic area would all want to go to another geographic location within a certain window of time – and again in reverse, on the same day. The reason that we wanted to take this approach was an attempt to manage 5 sets of FAA regulations statistically instead trying to do so preemptively.
  1. Blockchain Technology would then provide the database technology which could handle all of the pilot qualifications, flight logs, aircraft maintenance logs, passenger manifest, inter-party payments, ground transportation, hotel reservations, etc. A set of rules and adjudicated contracts could be developed to manage the rest of the regulations.

With these technologies, we estimated that an Uber Airlines service would need a minimum of 2.5 million registered users located within 10 miles of 500 small NG-ATC airports (5000 per airport) in order to fill 6-8 seats on a private aircraft traveling in both directions to and from any one of the other 500 airports within an 8 hour period at least once per day. If this puzzle can be solved for small airplanes, it is only a matter of time before you could disintermediate large carriers as well.  That is how to solve this problem.

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Identity Verification On Blockchain

This Panel was formed at the Future of Money and Technology Summit in San Francisco on December 5, 2015 to unpack the issue of Identity verification on Blockchain.  One of the most powerful components of blockchain technology is the equal ability to disintermediate a person’s identity from their data, as to associate identity with a dataset. During this panel of experts, the lines were clearly formed around the notion of who “controls” identity and whether anonymity is considered as valid a form of identity in a transaction as full disclosure.

Dan Robles, PE – The Ingenesist Project (moderator),
Tim Swanson – R3
Paige Peterson – MaidSafe,
David Birch – Consult Hyperion,
Joyce Kim – Stellar.org

Background:

There can be no blockchain banking without verification of identity on blockchain.  While this may seem like an invasive requirement, it may also be considered a liberating requirement.  Billions of people are “unbanked” and cannot hold assets because there is no way to identify who owns what.  Where blockchain makes banking available to more people, so too must identity be verifiable among those people.

Even in the developed world, identity is deeply flawed.  Why would I need to show a driver’s license with address and driving record just to prove that I am old enough to buy a beer, or receive a senior’s discount at the movie theater?  Why can’t a person simply prove age, or prove driving ability, or prove residence, or identify any facet of trade without also revealing every other facet?  It is often such matters of identifications that can best secure privacy.

This brings to question who would maintain, manage, and / or control identifications.  Would it be a fully decentralized system or would it be a permissioned database system?  Would the identity institution be a bank or a private corporation, or a government or a decentralized organization?

Finally, what is the core objective of an identity system?  Will it project the ability to access something? Would it quantify and qualify the potential to produce something?  Does identity pertain equally to the object of commerce and the objective of commerce?   To what degree does the security of identity impact the durability of ownership?

Blockchain technology and those who seek to apply it are all encountering the identity issue.  From Banks trying to comply with KYC/AML to engineering societies trying to identify the right knowledge assets to solve a particular problem, the question of identity management is a paramount consideration.  These are exciting times because the subject is so new.  Please sit back and enjoy this rare opportunity for such a diverse panel of experts to drill into an important subject that impacts us all.

 

 

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Introducing Quant

What is Quant?

Quant is a digital token that represent human productivity. The total number of Quant that can be mined is 223.3 Trillion corresponding to the approximate dollar value of outstanding human productivity existing on December 15, 2015. This is the amount of future productivity that everyone in the world has committed to each other in the form of global debt obligations.

The flaw

What people may not fully understand is that human productivity is not stored in banks, corporate boardrooms, and governments – these institutions only maintain and control the ledger of future productivity, they are not the actual source of the productivity.

Rather, human productivity is stored and sourced in the combined education, experiences, talents, skills, health, community, passions, professions, careers, as well as works of engineering, artistic expression, and scientific achievements of humans. These are the actual stores and sources of human productivity.

Unfortunately for most people, it is very hard to see this distinction without a proper reference. Introducing Quant provides that reference unit of account.

Fixing the Flaw

Curiosumé represents a person’s talents, interests, and skills (i.e., future productivity) in a form of cryptography. In essence, fabricating smart keys that can open and close social contracts on blockchain. As a result, knowledge assets may become visible to an accounting system under the explicit control of the owner. Once built, Curiosumé will mine Quant from the “proofs-of-work” performed by real people solving real puzzles that maintain a real network. The Network will be able to allocate Quant using algorithms measuring fault tolerant network dynamics, thereby decentralizing production.

Building Curiosumé

The Ingenesist Project (TIP) has created the Quant Token on the Bitshares Blockchain.  TIP has issued to itself Q10,000,000 to be allocated to the development of Curiosumé.   All participants in the initial phase will be given a donation of Q100 per hour for helping build and disseminate Curiosumé to the public domain. Future levels, if founded, will re-value the earlier round on a ratio of 10:1

Introducing Quant as the internal token of the Curiosumé network will allow people to articulate knowledge assets in true decentralized corporations.

***

Disclaimer: Quant is not a currency nor is it meant to represent value or security in any entity.  Quant is akin to a game token where the challenge is to solve a puzzle to a public domain ledger. There will be leaderboards, level-ups, and player interaction similar to any role-play game. Quant may be sourced and sunk only within the intended open-source game that it portrays.  The whole “Global Debt” thing is part of the backstory, not some sort of political aspiration or commentary.  C’mon, this is supposed to be fun.  

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Zertify Zillow Zestimates On Blockchain

Big Problem with Zillow Zestimates:

Perhaps the best example of metadata being imposed upon an unwary public is the “Zillow Zestimate”.  Zillow.com is a real estate website that aggregates public information and boldly publishes the value of your personal property while quietly disclaiming that invalidity of their own valuation.  In all fairness, RedFin.com and Trulia.com also provide similarly structured valuations of your most valuable asset with no physical verification. The slightest misrepresentation could cost the homeowner tens of thousands of dollars for which there is absolutely no recourse.

According to Homevisor.com: if your house (or a house you are looking to buy) has a Zestimate of $300,000 – there is almost a 25% chance that the house will sell for less than $240,000 or more than $360,000. That is a pretty wide margin of error. 

There must be a way to Zertify Zilliow Zestimates on blockchain

Implications:

The result is that responsible homeowners who have conscientiously maintained and improved their property at great expense of time and money may be punished in a market while those who neglected their properties may be overly rewarded.  Neither the buyer nor the seller has any way of inspecting comparable homes used by Zillow.  This causes market distortion that affects the buyer, the seller, and the community at large.

Root Cause:

Zillow, Trulia, and RedFin all scan from public data sources.  The problem is that there is no trusted public ledger where owners can register valuable improvements and amenities that may dramatically impact the value – and which lower the risk of owning a particular property.  If such a trusted ledger did exist, it is certain that data scrapers such as Zillow, Trulia, and RedFin would be happy to scrape the data at no marginal cost.

Solution:

An organization such as the National Society of Professional Engineers has sufficient authority to provide a blockchain based ledger where a licensed professional engineer could physically review major components of a property including structural, plumbing, electrical, envelope, energy efficiency, HVAC, Solar Installations, mold, corrosion, critical slope, tree liabilities, view amenities, etc., and formulate an annual cost of ownership statement (ACOS) over a standard period of time.  The licensed engineer will register the ACOS, along with recent remodeling permits filed with the city, on the NSPE blockchain where it may be accessed by Zillow, Redfin, Trulia, MLS, banks, insurance, and the public, etc.

Value Proposition:

The ACOS and the Professional Engineering condition assessment could be provided to owners for a flat fee or subscription fee with a ROI greater than 10:1. This means that viability threshold for engineering assessment is defined as adding more than 10,000 dollars to the average sales price of the property for every 1000 dollars that the homeowner spends on the engineering report.  Owners that don’t meet this minimum threshold would not benefit from an ACOS and could not be listed on the NSPE Registry.

Size of market:

Assuming that there are about 100 million private homes in the US.  The percentage of under-valued homes that would benefit from a 10:1 PE registry are characterized at over +1 standard deviation on a bell curve distribution and higher.  This is roughly equivalent to 14% of 100 million, or approximately 14 million properties.  If each of those spends a minimum of  $1000 dollars for assessments, the value of the market would exceed $1.4B dollars. According to Homevisor.com estimates, the market would bear an engineering cost of $6000 yielding a $60,000 ROI, or roughly a $10B dollar market.

Conclusion:

Such a blockchain would safeguard the health and welfare of people and property while increasing  the visibility of professional engineers as a public financial institution with real financial impact.  The NSPE data would reduce volatility in banking and insurance ledgers so that pricing becomes more efficient. Real Estate professionals, renovation contractors, and real estate appraisers would also benefit from the registry by delivering the right product to the right client at the right time. It will increase the demand for a retail professional engineering sector to defend the technical best interest of society.  It will signal high integrity rather than low integrity to the preventive maintenance market.  Most importantly, the homeowners who maintain their property and those who will buy those properties benefit from fair market assessment of property values at a far greater utility than the typical point-of-sale home inspection.

Notes:

  • The ideas presented here are the sole creation of the author and not meant to reflect the intentions or interests of the National Society of Professional Engineers, Zillow, or any other referenced entity. 
  • Zertify takes its name from a portmanteau between the word certify and the statistical z-test https://en.wikipedia.org/wiki/Z-test
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NSPE Launches FinTech Task Force

The National Society of Professional Engineers has formed a task force to research and review blockchain applications aimed at the banking and insurance sectors for applicability and impacts to the engineering profession.  The task force is made up of 8 visionary engineers from within the membership.  Daniel Robles, PE (this author) was appointed to lead the task force by the president of the NSPE and approved by the board of directors.

Today, Licensed Engineers serve an essential role in the economy as adjudicators to banking and insurance industry underwriting of our nation’s infrastructure, in effect, supporting the value of our currency.  The integrity of infrastructure is what supports the majority of assets on a corporate or municipal balance sheet. It is a natural progression that Professional Engineers would articulate their judgement in design, safety, process, and longevity of these critical assets on smart contracts in blockchain protocol.

For example; The design and construction process is comprised of a master contract and a long series of minor contracts.  Validations, inspections, compliance and defect assurance etc, can all be articulated as smart contracts on a project blockchain where the licensed professional engineer serves as an adjudicator to flip the switches that release payments, trigger insurance coverage, time stamp completion, or open the next contract in a series of work orders.

Further, Curiosumé is an application developed by The Ingenesist Project that converts a résumé into cryptography.  This may be used to fabricate smart keys to open and close smart contracts on a blockchain.  By decentralizing the adjudication process, moral hazard and negative incentives can be effectively eliminated from acquisition, commissioning, servicing, and maintenance of high value public and private assets.

There’s an old saying that “A fish does not have a word for water”. This is because water is so elemental in the life of a fish that they can’t even see it. The same can be said for public infrastructure.  We often take for granted the availability of clean water, warm buildings, and safe transportation that we do not often see it as a storage place for value.  In fact, infrastructure is the perfect store of value because without it, society is far less productive where, say, we had to ride a mule, grow our own food, or chop wood for heat, etc.  It is well observed that the value of a nation’s currency is directly proportional to the value of their infrastructure.

The Liquidity Crisis

Many people in the cryptocurrency space are coming to terms with the speculative nature of the current collection of crypto-coins.  They realize that a virtual asset cannot be represented as a physical asset without some intrinsic intermediary to store real value. Cryptocurrencies appear to solve part of the problem of transferring an asset, but suffer many new problems such as articulating quantity and quality of the asset. In essence, money must represent human productivity otherwise people would not be willing to work in exchange for it – this is the source of low mainstream adoption and poor liquidity of cryptocurrencies.  The social agreement required to form a true currency is, and will remain, elusive without intrinsic value.

The engineering profession is precisely the means by which that intrinsic conversion can be implemented. People need electricity, they need food, shelter, energy, schools, bridges, highways, and airplanes and are willing to convert their own productivity in producing these things in reciprocal exchange with others producing these things.  Blockchain transactions must be developed to represent stored value in infrastructure thereby holding intrinsic value from which supply, demand, and factors of production (markets) can behave as needed in a functional economy.

NSPE Launches FinTech Task Force

The NSPE task force is an extremely important step in bridging financial industries with the needs of people and society. This may be one of the most important developments coming out of the cryptocurrency domain since the Satoshi Genesis block one.

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Municipal Governance On The Blockchain

As a member of the City of Edmonds Planning Board, I hear a lot about what the public wants and what they do not want from their local government.  As a seaside town, property values can be greatly impacted by water and mountain views.  As such, there is an incentive to remove trees blocking views.  In other parts of town, the urban forest is extremely beautiful and there is great incentive to preserve trees from high density developers. So what happens when a town wants to regulate trees?  In our case, it was NOT an Edmonds kind of day. Perhaps it’s time to try municipal governance on the blockchain. 

Problem:

Many municipalities are adopting laws which may restrict the cutting of trees on private property in response to factors such as canopy loss, erosion control, wildlife protection, urban forest management, development, view amenities, climate change, etc.; or to enhance tree cutting to make way for new development and associated tax dollars. However, most models for tree regulation are unpopular with their imposing fines, permit fees, high density development, and government regulation on private property. Yet, these fines and permit fees are required to fund a bloated top-heavy tree code in the first place!!

Proposal:

Incorporate cryptographic and/or block chain technology to create a web-based public ledger and tree inventory that everyone can see and anyone can audit. By adding simple gamification features, the tree code may become self-regulating as players interact with the game. This may minimize government involvement, except in the most exceptional circumstances.

Discussion:

Think of it like a huge public accounting ledger that everyone can see, but can only edit their own data.  Instead of accounting for money, the ledger accounts for trees.  The game starts when a property owner registers his or her own trees on the ledger.  The city will issue cryptocurrency based on the number of tree units the property owner claims. These tokens would go into an electronic wallet on a blockchain associated with the property parcel number.  Each year, the resident will be issued more tokens by the city as their trees grow – the value of the tokens is derived from climate data or LIDAR surveys.  Some years may increase token values, some years may decrease token value based on estimated growth rates.

When a person wants to cut down a tree, they need to spend tokens to do so. Ideally, A property owner would not cut down more than they can grow. If they don’t have enough tokens, then they need to buy them from adjoining neighbors who are also trying to grow more than they must lose. If trading is restricted to adjoining properties (not commoditized like carbon credits), then community actions must be agreed upon by neighbors to settle any difficult situations.

The city would rarely get involved except to peg the value of the tokens on climate data. Algorithms programmed into the public ledger would manage the token values and electronic wallet exchanges automatically.

Shifts incentives

This sounds innocent enough.  But in reality, it changes all of the incentives that we are now attempting to manage with convoluted linear rules and imposing government regulations on private property.

For example,

  • It rewards tree preservation.
  • It rewards early and active registration,
  • It is self-enforcing because neighbors have a vested interest, and the ledger is public.
  • It is self-governing because neighbors need to agree on price.
  • It is self-limiting – an area cannot get rapidly stripped without progressive costs.
  • If a developer tries to take out a lot of trees, the neighbors can make it very expensive to do so – or negotiate concessions, etc.
  • If an arborist is needed, then the business case exists to hire one.
  • The municipality is able to referee disputes and establish coin allocations based on canopy quota or weather conditions, etc.
  • It provides tree liability (or asset) disclosure at property sale.

Business case

Today, proposed tree code regulations expose the citizens to cutting fees as high as $1000 dollars per tree. Violations for unauthorized cutting can approach $3000 dollars per tree. This money is required to fund a tree department that may consist of up to 3 arborists (for a small seaside town in Washington state; pop. 50,000), a permit reviewer, an enforcement arm, and possible court challenges. It could cost a million dollars per year to have an effective tree code for a city under 100,000 people, or 10 dollars per person per year just to regulate.

A price point of 1 dollar per citizen per year would therefore not be an extraordinary amount of money for a city to resolve a difficult social problem with modern technology.   Several thousand small cities dot the American coastline making this a strong candidate for private entrepreneurial partnership simply to maintain and audit the public ledger.

Conclusion:

A new generation of web applications and cryptographic technologies would allow this activity to happen autonomously. No new labor is required. No regulators are needed, no special penalties or enforcement mechanisms are required.  The city can stay out of the private property tree business completely.

Technically, this is called a multi-agent algorithmic game on a decentralized autonomous platform.  The difference is that today, these things can be made to look and feel like a game that is fun to play – people may play it. How many other Municipal Governance functions can be self-governed on a blockchain such as motor vehicles, animal control, gun control, schools, parking, water rights, energy, executive power, or any intrinsically valuable shared community asset.

 

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Gun Control On The Blockchain

The following discussion related to Gun Control On The Blockchain is a thought-exercise only inspired by new and emerging technologies for decentralized self-governance and does not necessarily represent the opinion of the author. It is not intended to favor any single political position. it is not presented as a comprehensive solution to all scenarios. This article is intended to invite readers to imagine new approaches and constructs to resolve complex governance issues using blockchain technology on public ledgers.  

Problem: According to some sources, 280,000 Americans have died from guns in the last decade.  Even opponents of gun control acknowledge that there is a need to assure that a gun owner is qualified to operate each specific type of firearm that they possess. Even proponents of gun control acknowledge that registering a gun with a central authority (government, insurance, gun schools) constitutes a loss of civil liberty. Everyone knows that “blanket legislation” accomplishes little more than punishing a large number of responsible people in order to deter a relatively small number of irresponsible people.

Proposal: A person who seeks to acquire a gun may create an anonymous Curiosumé persona that includes their training, qualifications, mental health record, police record, and personal references from other qualified gun owners, etc. This anonymous information can then be encrypted and time stamped on a blockchain. Any changes in these conditions must be added to the persona by one-way edit.  The identity of the persona remains on a private key held by the owner.

Gun dealers would be able to sell the level of armament commensurate with the threshold of competence evident by a quasi-anonymous persona. In the event of a disputed gun discharge, the actual identity of the person and their gun becomes known, therefore, their private key can be revealed without loss of civil liberty.  If the gun owner’s persona is accurate, then they will be protected under the 2nd amendment and receive an isolated incident judgment.  If the person lied on their persona, they forfeit some protected under the 2nd amendment and receive broad penalty and liabilities.

Alternate: Gun Owner Insurance:

Without revealing identity, the gun owner’s Curiosumé persona may act as a proxy identity for the person. The proxy would then be assigned to a risk sharing cooperative pool based on similar Curiosumé personas of the other people in the pool. The gun owner would pay insurance premiums commensurate with their persona – i.e., corresponding to the correct risk pool of their persona. In the event of a claim, the identity is unencrypted and revealed. If the person cheated on their premiums, they would not be covered. If they were truthful, they would be covered for accidental discharge.

Discussion:

Disciplined and experienced owners will pay a trivial amount for gun insurance while beginners would pay substantially more. This is an incentive to become educated in the rules of firearm ownership. If an individual has demonstrated severe shortcoming of responsibility, judgment, or prior convictions, then they will be pooled with others possessing the similar characteristics. As such, their insurance would be exponentially more expensive, perhaps prohibitive. Therefore, they would need to pay more to own a gun and or complete a rehabilitation program.  The market will reach a new equilibrium of relative safety.

This type of arrangement applying a Curiosumé layer to a blockchain effectively preserves the identity of the gun owner while also providing essential data to a public ledger that may be assessed by gun dealers, gun trainers, insurance companies, mental health professionals, personal references, legislators, and the public at large.

Again, in the event of a shooting, the gun owner and their gun are discovered anyway, therefore privacy no longer exists. Only at that time may the public ledger be reviewed.  There is a negative incentive for all people in the chain of possession in a community to allow an unstable person to possess a gun.

In the event of a worst case scenario intended by our founding fathers requiring for a protection by a trained citizen militia, then the blockchain can be shut down until such civil order is restored.

The Curiosumé layer on a blockchain satisfies the 2nd amendment on all points while protecting the public by filtering incompetent owners without punishing competent owners through fair market forces.

***

 

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Introducing Intrinsic Coin

From Wiktionary: INTRINSIC

Nothing economic can happen until two or more people get together and build something useful.  In a global human network that is facing global constraints, the core function of the economy must be to find each other.  This is made extremely difficult by the existing “factors of production” that now classify and allocate your productivity and mine.  The true intrinsic value of money resides in the social, creative, and intellectual capacity of people who design, maintain, and support those factors of production.

Early cryptocurrencies solve only part of this problem by providing a indelible ledger and medium of exchange. But true money must store (represent) human productivity, otherwise people would not be willing to be productive in exchange for it. To reconcile these shortcomings, The Ingenesist Project (TIP) is building a new class of cryptocurrency with the defining characteristic of storing and exchanging social, creative, and intellectual value intrinsically, i.e., within the currency itself.

By integrating a Curiosumé layer with an efficient and robust blockchain backbone, people can exchange a currency that represents the intrinsic value of their own productivity in collaboration with that from their community.  Curiosumé converts the résumé into cryptography that allows people to control their own identity as “smart keys” where they can interact with each other using “smart contracts” on a “smart blockchain” such as Bitshares and others.

It is well known that the value of a nation’s currency is backed by the productivity of its citizens. The same is true for states, communities, and even individual persons. Money must have intrinsic value. There really is no way around this except by developing an Intrinsic Coin with these specific characteristics.  This already works on a small scale with community currencies and in co-ops. The challenge now is to scale broadly it to a point of voluntary generalized reciprocity.

Introducing Intrinsic Coin solves this problem by decentralizing productivity of a community prior to the exchange, not after.  This allows people to take control of their identities and the market place for their social, creative, and intellectual capital. From decentralizing so-called ‘human resources’, to putting a tollbooth on big data, to hedging debt instruments, the implications of an Intrinsic Coin are sweeping and vast.

There is no shortage of work that needs to be done, but there is increasingly scarce money to pay for it. There are abundant social, creative, and intellectual assets in people that are not articulated in any traditional accounting system.  If we can create that accounting system, we’ll be able to tap into a ground swell of hugely productive makers who are misallocated in their jobs and careers by the silos they are placed in … or excluded from.

People need a new form of money that they can trade among their selves which helps them find each other and represent their true unadulterated productivity. They need a decentralized ledger and a local exchange. This is where the promise of blockchain technology started. This is where Intrinsic Coin will serve.

The Ingenesist Project Team is comprised of multi-disciplinary experts in Engineering, Insurance, Banking, Philanthropy, and Blockchain Development. Interested partners and financial technology media are encouraged to contact the Ingenesist Project at https://ingenesist.com

References: Curiosumé – Reorganizing In the Era of Social Capitalism

 

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The Bitcoin Protocol And The Future Currency Impact On The Engineering Profession

Beginning with the failure of the NAFTA Mutual Recognition of Professional Engineers followed by an introduction to modern cryptocurrencies, this seminal presentation specifies a future where engineering knowledge represented by a virtual asset may store true intrinsic value.

This presentation was filmed at the 2015 National Society of Professional Engineers Annual Conference, Advanced Leadership Track, July 16, 2015 in Seattle Washington. Daniel Robles, PE, MIB is the founder of Coengineers, PLLC and The Ingenesist Project

Abstract

The Bitcoin Protocol And The Future Currency Impact On The Engineering Profession

In a Wall Street Journal essay, two authors wrote, “The digital currency known as bitcoin is only six years old, and many of its critics are already declaring it dead. But such dire predictions miss a far more important point: Whether bitcoin survives or not, the technology underlying it is here to stay.” This session will cover what digital currency means for the engineering profession.

“Decentralization” is a term being applied to platforms that use the Blockchain Protocol pioneered by Satoshi Nakamoto, the inventor of Bitcoin.  As a cryptographic currency, Bitcoin remains problematic.  However, as an algorithmic protocol, blockchain technology will enable society to cheaply perform common business processes that are now controlled by institutions such as banks, insurance companies, corporations, government, etc.  Today, rapidly emerging platforms are under development to bring “smart contracts” (algorithms based on blockchain technology) into the mainstream.  

An important and essential variant of smart contracts is called an “Adjudicated Smart Contract” that requires an independent 3rd party adjudicator that would “flip the switch” on algorithmic agreements in finance, insurance, and decisions of governance.  There is a staggering opportunity ahead for the engineering profession to position itself for the role of the adjudicator in a wide variety of important and high value transactions.  The caveat is that we too must change the way that we organize ourselves.   

This presentation, Decentralizing the Engineering Profession, begins with the failure of the NAFTA MRD followed by an introduction to blockchain technologies, and ending with specifications on how our profession can jump to the top of the value chain in the era of Social Capitalism – if, and only if, [the engineering profession] can choose to change. 

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Intrinsecus – The First Intrinsic Cryptocurrency Platform

The Ingenesist Project is excited to announce the launch of a new class of cryptocurrencies with the defining characteristic of storing and exchanging value intrinsically, i.e., within itself.  

Intrinsecus is a Blockchain 3.0 platform that combines Curiosumé with the Bitshares blockchain ecosystem to form a class of cryptocurrencies representing the intrinsic value of human productivity – the intrinsic merit of an action.   Simply put, Curiosumé converts a résumé to cryptography to create “smart keys” that can interact with “smart contracts” on a Bitshares “smart blockchain”. 

Recent experiments with Blockchain technology have demonstrated the difficulty in representing physical assets with virtual assets, leading to an enduring liquidity crisis in cryptocurrencies.  Intrinsecus solves this problem with a currency that directly represents and immediately decentralizes human productivity prior to the centralization effect of banks and corporations.  

From decentralizing “human resources” to putting a toll booth on “big data” to hedging human debt instruments, the implications of an intrinsic cryptocurrency are sweeping and vast.

The Intrinsecus team is comprised of multi-disciplinary visionaries from Engineering, Insurance, Banking, Philanthropy, and Blockchain Development industries.

The Ingenesist Project will be available for limited media inquiries pending further details of a crowd funding program.  Please use the contact form on this site for quickest response.

References:   

17:00 Curiosumé, Fintech Seattle:  https://youtu.be/m_-JkUI5ATE

29:00 Bitshares User Issued Assets https://youtu.be/yzruOULgmng 

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