Tuesday, November 12, 2013

Bitcoin and the future of "the public good:" Decentralization, anonymity, philanthropy

In the previous EdgedSolo post, a question was presented:  In light of developing "bitcoin anonymity" solutions, which will eventually (and fundamentally) alter the relationship between the indidual and the state, how will individuals and associations manage resources to maintain and enhance "the public good" at a time when government capabilities to do the same are diminishing?  This post will address that question, as well as some other relevant questions and issues.

First, some assumptions are going to be made for the purpose of addressing this question.  One assumption made here is that the progress of decentralized virtual currencies (particularly as solutions that enable anonymity evolve) will eventually liberate large numbers of individuals all over the globe to exercise greater ability to do what they want completely outside of the purview of governments.  Another assumption that will be made here is that many individuals will, upon realizing they are capable of doing so, will act primarily in a self-interested way, but that a growing number will become involved in micro-philanthropy - a practice of making small donations that collectively will comprise a significant part of the gifting economy.

In some ways, these assumptions are already borne out by data.  In many cases, as incomes rise, contributions to nonprofits decrease, and tax incentives - provided by governments that are currently able to do so - often enable higher levels of giving than would otherwise occur.  This, however, is a generalization, as current levels of giving to nonprofits vary widely from place to place in the United States.

We are currently approaching a figure of 12 million bitcoins in circulation, which is over half of the expected total to be produced. There has been a consistent and gradual rise in the number of bitcoins in circulation, as measured since 2009.  There have been expected occurrences such as bitcoin exchanges that close and abscond with users' funds, thefts of bitcoin via account compromise (resulting from failure to enable two-factor authentication), and attempted or successful seizures of bitcoin where users were alleged to have used bitcoin in connection with a crime.  Also expected are the coming attempts by government to meddle with bitcoin on November 18, 2013 (and beyond), which will likely have only a temporary (if any) effect on the use of bitcoin - much like when the US government declared faxes to be in the postal service's control alone, an edict which simply was ignored.

On the other hand, there are examples of use of bitcoin for the purpose of charitable intent, and signs that it will be used to support localized food production.  Decentralization is likely to continue, and that is a good thing. There are gifts to society as well as gift cards being developed with the use of bitcoin.  There is bitcoin production realized using the power of the sun, and bitcoin mining for charities.  Solar-powered microprocessors that are modular and easy-to-use are available and are fast becoming more affordable.  There are discussions about the expected increases in the value of bitcoin. What will happen as those who have purchased bitcoin see the value of their decentralized virtual currency increase significantly while the dollar falls and (as central bankers struggle with 'currency wars') is tossed back at the banks from whence it came?

These are questions that do not have clear answers, but they cannot be ignored.  On the one hand, decentralized virtual currency users may continue primarily down a path of self-interest, but another very real (and in my view, more likely) possibility is that a growing number of decentralized virtual currency users will contribute a portion of their earnings first to charities, and then as time goes on, to maintain the public good.  Eventually, a "new public good" will be created - largely out of the voluntary efforts of charitable giving from decentralized virtual currency users - that will become a viable alternative to the kinds of government services that have traditionally served to help the population, perhaps eventually partially or fully replacing some systems such as Medicare or the Social Security Trust Funds.

It is unlikely that this shift will occur through adoptions to new decentralized currency protocols.  If such protocols (requiring donation of a portion of the fee collected per transaction, in a manner similar to a transaction tax) were to be adopted as part of bitcoin itself, there would likely be a strong backlash that would doom such an effort.  It is more likely that a voluntaryist approach will eventually result in communities of practice, in which wallets and various decentralized virtual currency clients will be developed to allow automatic contribution to the public good (concurrent with the development and rise of anonymizing technology), and these will grow in use based on their popularity.  Despite the inevitability of technology which will make financial transactions completely anonymous, there will always be a place for personal identity in many types of decentralized virtual currency transactions.  In fact, it is highly likely that the most popular bitcoin wallets in the future will be those that are developed with features that allow users to select any number of nonprofits, associations, or services that a portion of their earnings will be donated to during every transaction, as well as inclusion of features that will allow the user to either donate anonymously or by disclosing their real identity.  When a critical mass of decentralized virtual currency users is reached, the population will be able to literally 'turn off the switch' and keep their money from being used to fund wars between governmental interests.  Corporations will no longer exist as they do today, but rather, will increasingly become decentralized in a manner similar to bitcoin's implementation. Many jobs will become projects in which anyone can participate, and mechanisms will increasingly become available for people to engage in either exchanges of time or to perform work for decentralized virtual currency.  Ultimately, some communities will develop that will adopt protocols or wallet technologies (such as extensions to wallets that are commonly available) that will require contributions to support that community.  Many (if not most) of these communities will not be bounded by geography, but rather, will be tied together by shared ideas and relationships that transcend any borders, imaginary or real.

So: how will individuals and associations manage resources to maintain and enhance "the public good" at a time when government capabilities to do the same are diminishing?  There are a few ideas and answers here, that will hopefully spark discussion that will better answer this question, and provide more solutions.

Thanks for reading, and I look forward to your comments.

Recommended reads for today:
How gold's value today is similar to what happened in 1975-1976
China's conversion of US dollar debt holdings into gold
Caterpillar, DuPont, Freeport: Big gold miners slow down or cease projects
Why You Should Ditch Citibank and shift to the Information-based Economy: Blast from the (2009) Past
Crowdsourcing and the Currency of Generosity -- The Relationship is the Ultimate Technology
Matrix Theory and Antishock - Touching on the 'Art of Getting Unstuck'

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