Dawn of Autonomous Corporations, Powered by Bitcoin

http://btcgeek.com/dawn-of-autonomous-corporations/

by sidko • 13 years ago

203 202 13 years ago

fchollet• 13 years ago

With AI and advanced automation, and possibly crowdsourcing, it becomes credible that any type of economic value could eventually be produced in a decentralized fashion. And one can imagine that such autonomous corporations would evolve to be so competitive (since they can afford to) that they would put all profit-driven concurrents out of business.

The economy would eventually transform into a landscape of owner-less providers of economic value, perfectly "efficient" in the capitalistic sense. That might even happen sooner than fully decentralized governments.

m0th87• 13 years ago

For starters, markets cannot be perfectly efficient unless P = NP: http://arxiv.org/pdf/1002.2284.pdf

clienthunter22• 13 years ago

Interesting read. Did you write it?

stanfordkid• 13 years ago

do you really take that paper seriously? In human systems epsilon of the best approximation is pretty relevant. If N (time scale) is millions of years and epsilon is tenths of cents for the reduction to work then it is functionally irrelevant.

javert10• 13 years ago

That paper is probably using a bogus definition of "efficient" (albeit probably one commonly accepted by economists---those people can be very slippery).

It defines "efficient" as: "current prices fully reflect all information available in past prices."

Well, all information available in past prices, is not all information available. So, even hypothetically, this is not true "efficiency."

Of course, asking for "efficiency" to be that _kind_ of thing is wrong, anyhow. When I invest in bitcoin months ago, all the information available to me was available to everyone else.

OvidNaso• 13 years ago

This is about informational efficiency, very different from the physical efficiency he is talking about.

VMG• 13 years ago

Irrelevant. This is about relative efficiency, not absolute.

api• 13 years ago

Mood music: http://www.youtube.com/watch?v=y3VNkSos_vo

olalonde3• 13 years ago

There is an article on that topic in the Bitcoin wiki: https://en.bitcoin.it/wiki/Agents.

I am deeply interested in the subject and would love to discuss the topic and brainstorm some possible implementations with like minded people on Freenode (#bitcoin-agent).

simondlr• 13 years ago

Love the idea of Bitcoin Agents. Been reading up heavily on schemes to automate transactions on a trust-less level, including proof of sacrifice to establish automatic identities (https://bitcointalk.org/index.php?topic=140711).

CrunchyJams• 13 years ago

This article is a scaled-down version of the original one in Bitcoin Magazine by Vitalik Buterin. You can find it here:

http://bitcoinmagazine.com/7050/bootstrapping-a-decentralize...

pre• 13 years ago

Cheers, that three-parter is way better.

AJ007• 13 years ago

It brings a new meaning to paying your monthly bills when failure to do so brings death.

adamb_4• 13 years ago

Fascinating concept. It would need a very specific kind of product for such a cooperation to be able to withstand human competition though. The OP mentions a storage service & autonomous cars, but I'm thinking that a good candidate would be a product with such thin margins, supporting human labor could not be feasible.

olalonde3• 13 years ago

It does not necessarily have to withstand human competition though.

Let's say there is an agent A whose source is on Github and which makes X BTC/month. If the agent is programmed to pay out dividends to shareholders and auto-update its code, (large) shareholders have a shared interest in improving the agent.

Likewise, an ambitious developer could fork agent A and try to improve it. If he can convince a lot of people that his agent will beat out the other agent, he can get people to invest in it in order to bootstrap agent B (assuming the agent requires an initial investment).

If agent B is more profitable than agent A, people will start investing time and money on it and abandon the other agent.

PS: Agents would not necessarily need investors assuming they can bootstrap themselves to profitability. This is just a possible scenario. However, I think is likely that agents who rely on some form of human input are more likely to beat the competition.

drcode3• 13 years ago

Yeah, only a few people have come to this realization:

   1. It's IMPOSSIBLE to have a corporation without money
   2. So far it's been impossible to receive money online anonymously

Therefore:

   3. Corporations can't be anonymous

Bitcoin finally gets rid of this barrier and makes anonymous corporations possible (whether autonomous or human-operated)

adamb_4• 13 years ago

I don't believe the OP is suggesting the company doesn't make money, rather there's no specific group of people who partake in the profits.

Why does the money received need to be anonymous?

kaonashi4• 13 years ago

Presumably to avoid prosecution for tax evasion.

drcode3• 13 years ago

Why does the money received need to be anonymous?

Well, since I was talking about an "anonymous corporation" in my comment, it would be kind of necessary for it to receive money anonymously.

I agree OP is talking about something slightly different.

betterunix6• 13 years ago

Anonymity is not really a feature of Bitcoin, and in fact the design of Bitcoin makes anonymity difficult.

sillysaurus24• 13 years ago

People keep saying this, but it's just not true.

Use a tumbler. Done.

GauntletWizard• 13 years ago

No, but pseudonymity, with no appreciable tie to a 'real name', is, and therefore if you can pay for your business expenses with Bitcoin and find some way of extracting the value without providing a name (i.e. buying commodities to dead-drops, via silk road, etc), you can run a corporation entirely pseudonymously.

jafaku3• 13 years ago

You are not attaching any form of ID to the transactions. Bitcoin is anonymous.

The fact that the NSA can track you down by various means is a whole different thing. And by that logic nothing in the Universe is anonymous, since it's deterministic and it doesn't lose information, so theoretically everything could be traced back to its origin.

gaadd33• 13 years ago

I think there are enough legal structures in various jurisdictions that make creating an anonymous corporation somewhat easy. http://www.economist.com/node/21563286 is a pretty good article on it. The book "Treasure Islands" (http://www.amazon.com/gp/product/B004OA6420/ref=as_li_ss_tl?...) is a pretty good read about offshore banking/tax havens and the price put on secrecy.

waterlesscloud• 13 years ago

Cstross has an interesting take on autonomous corporations in his novel Accelerando.

BoppreH• 13 years ago

Reminds me of Charles Stross "Accelerando", where autonomous corporations take over the world and humans are driven away from it because we can't understand Economics 2.0.

spiritplumber2• 13 years ago

http://www.antipope.org/charlie/blog-static/fiction/accelera... It's here in full, if anyone wants to read it.

triplesec• 13 years ago

here it comes. Merely accelerates the ineluctable march of capital, which you can conceive of a conceptual mathematical-material virus kept in check so far by social forces and technological constraints.

BillyMaize• 13 years ago

Daemon/Freedom was an amazing two book series to look at as well, one of my favorite books of all time.

Cogito• 13 years ago

The author believes that Bitcoin is the first of many future 'autonomous corporations' that are defined by their nature; they run themselves.

Of Bitcoin in particular it says

    this corporation has revenues, expenditures and profits.
    However... no one owns this entity, it owns itself
    ...it provides a payment protocol and employs miners to maintain that protocol. 
    The employs are rewarded with ‘stock’ that is split at most into 21 million units

I really like this concept, but I struggle to link it to the thesis that Bitcoin removes 'the major missing piece of the equation – payments'.

I think Bitcoin is able to be distributed and autonomous by its nature, and that any future autonomous corporations will similarly need to be autonomous by nature. Thus, while allowing for the kinds of payments and receipts an autonomous corporation will require, I don't think Bitcoin is the only thing such a corporation will need, nor the most important.

Instead, it will be innovative solutions that by their nature require decentralisation and autonomy that eventuate in this 'next generation of corporations'. Bitcoin will be an important model going forward; I'm really looking forward to solutions to other problems that surely will be inspired by it in the coming years.

drcode3• 13 years ago

Right: The bitcoin blockchain already meets all of OP's criteria!

tdaltonc3• 13 years ago

Before bitcoin, a corporation needed a person to open bank accounts, sign off on payroll, write checks to suppliers, etc. With bitcoin, a set of algorithms can do all of those things. A profit making system doesn't need any human contact anymore.

_delirium• 13 years ago

For better or worse, the degree of autonomy that this "autonomous corporation" has is exceptionally weak...

adamb_4• 13 years ago

Interesting conjecture. Care to elaborate?

spiritplumber2• 13 years ago

I think an autonomous corporation is more likely to happen thusly:

* Person comes up with a business model. * Person automates it as much as possible, eventually automating all of it. * Person ends up being in a car accident.

There's no reason why the AI he wrote shouldn't be able to keep "living" (aka paying its bills) for a while, if the idea was of the right sort.

seiji• 13 years ago

More concrete example:

Make something that scrapes content and SEO-izes it. Add affiliate links. Run on AWS. Make payout to affiliate commissions to the same account that pays AWS. Make the system capable of growing/shrinking its AWS capacity on its own. bam. self-perpetuating and potentially self-optimizing/growing income with zero outside intervention (except for when google corrects around it).

mcphilip• 13 years ago

I think this is an interesting example but it doesn't address the concerns that a single actor could modify the program behavior at will, making the system hard to trust if multiple parties are trying to benefit from it. I believe a key idea of autonomous corporations is the inability of a single participant to alter it's function without consensus of other participants.

Does anyone have an example other than the BTC blockchain that provides a valuable service guaranteeing consensus is required for changes to the system's behavior?

candydance• 13 years ago

I was thinking about this too. That "pay us 300 dollars in bitcoins to get a key to your data" virus could be like that.

If the payment -> key sent part was automated then money would just build up in the bitcoin account over time.

moyix• 13 years ago

You could also automate the backend – set it up so that the botnet could draw on the BTC account to purchase new VPS hosting for its command and control servers, migrate when the old ones get taken down, etc.

Of course, without the creativity to come up with new C&C mechanisms, the pattern of migration and purchases might eventually become predictable enough to stop the botnet.

jandrewrogers• 13 years ago

An important property of corporations is that they are always resolvable to a natural person. This is true even in jurisdictions like Nevada where the corporate laws allow arbitrary levels of blinding and indirection. The "autonomy" would be illusory.

Basically, you can't do much that is interesting unless a computer system ultimately resolves, or is imputed by law to resolve, to a specific natural person.

(EDIT: People are missing the point. What you call it is immaterial. All the handwaving aside, these "autonomous systems" including the ones described by the author are legally not autonomous. It is not possible under the law to construct such a thing. You may claim that it is "autonomous" but no government will recognize that claim as suggesting legal independence from a natural person. True AI would make this weird but we do not have AI today and the underlying fact still remains.)

dusklight• 13 years ago

Could you give some examples please?

judk• 13 years ago

Shareholders

polarix3• 13 years ago

Then I suppose we shouldn't call it a corporation. Does "Autonomous Economic Systems" sound better to you?

DannyBee3• 13 years ago

Yes. Corporations are legal fictions, and have their own set of legal rules. Besides being resolvable, they exist somewhere. They are registered/incorporated/created/etc. There is some jurisdiction. There is usually an agent.

There are all sorts of agency/etc laws that would have to be built to support such a system.

Corporation is literally the wrong word for what this describes.

westicle• 13 years ago

I think you missed the point of the article.

What you are saying is literal and descriptive. Currently corporations are always resolvable to a natural person. I think the author's point is that new technology (including bitcoin) can effectively cut out the middle-man.

Therefore, future legal (or quasi-legal) entities will be able to be structured in novel ways. Maybe it won't be a corporation by the standards we're used to. But bitcoin itself is an example of this structure - de-centralised and not "owned" or "managed" by any particular individuals.

olalonde3• 13 years ago

An important property of corporations is that they are always resolvable to a natural person.

Just like an important property of cars is that they are always driven by a natural person?

The "autonomy" would be illusory.

Until we have strong AI, any autonomy will be illusory (i.e. humans will out compete agents at writing agents). I still find the word meaningful to distinguish such types of mostly autonomous corporations from traditional corporations.

You are probably right for now regarding how the legal system would currently handle such corporations.

eriksank6• 13 years ago

Who exactly will have the ability to enforce laws against a swarm of decentralized systems? In all practical terms, it does not look like "laws" can take out crypto-currencies at all. Jim Bell shows that the opposite is not true. I think that BTC is the beginning of the end of politically-centralized "law" as we know it.

betterunix6• 13 years ago

"In all practical terms, it does not look like "laws" can take out crypto-currencies at all"

Perhaps, but the law can certainly stunt the growth of such currencies, to the point of keeping them small, niche, and irrelevant for the majority of transactions. I suspect that this is already the case, without any modifications to the law.

sans-serif2• 13 years ago

Yes, but practically, does it matter as long as the autonomous systems continue to provide sufficiently lucrative reasons for real people to sustain its operation, e.g. by continuing to mine or maintain the network under the governments' radar?

Swannie2• 13 years ago

Actually, that's really really not true, outside of the USA.

It's trivially easy to set up a USA corporation that is: managed by a laywer, that is is owned by a trust in the Caymans, or a similar secrecy jurisdiction, where the beneficiaries of that trust, a.k.a. the owners, are unknown - protected by client-attorney privilege. For an added layer of security, this trust's beneficiaries could be another trust that is governed by bearer bonds. That is, whoever owns the bond, an actual piece of paper, is entitled to the benefits of that trust. They are only legal in some countries.

Make this harder to follow, and you have a series of shell companies in many countries, all with secrecy jurisdictions, and I've just described how organized crime can own lots of very legal and real looking USA companies, with almost 100% chance that you'll never find out who is controlling them. Ones that make large political donations to lobby groups and politicians - not bribes you understand.

EDIT: I think you're all missing the point that this can be done today with the right lawyers and enough USD, but bitcoin just makes it easier. Though the fact that bitcoins can be traced MUCH easier than the flow of USD, is somewhat of a downside.

Torgo• 13 years ago

Bitcoin makes it cheaper, too. You can't do what you wrote without quite a bit of money.

swswsw3• 13 years ago

Interesting read to me, I did not know this. Good to read from someone who knows much more about corporate structure than I do.

I want to add one important point. Bitcoin not only makes it much easier to setup this kind of autonomous corporation, it also makes it transparent and verifiable by outside. It does so through being open source. And since no one actually owns it, it is completely transparent.

telephonetemp• 13 years ago

An important property of corporations is that they are always resolvable to a natural person

To play up the SF angle a bit, this might change when lobbyists start accepting Bitcoin.

ethanazir• 13 years ago

There is a HUGE difference between resolvable to 'a natural person' v. 'a specific natural person.' This difference is basically the gist of the article.

droneStrikes3• 13 years ago

There's one major flaw in this spectre of the unstoppable killing machine known as the "autonomous corporation":

If the whole premise of its autonomy rests solely on it's ability to engage in metered economic exchanges by way of some kind of bitcoin-style protocol, then an "autonomous corporation" MUST, by definition, persist on a distributed global network of continously available computers. So, if this entity has that dependency, then who's providing the hosting?

He who opts in on hosting the protocol, carries a say in the fate of the entity, thus this is no more "autonomous" than any other body of distributed human decision making. Whether it be voting, the purchase of publicly traded shares, or the organization of a bond to fund a bridge to nowhere.

It comes down to this: In order to mine bitcoins, or rather, add value to the system, you have to be constantly connected tothe internet. You can't mine a bitcoin in isolation. You can't power up a stand-alone, air-gapped machine, and mine bitcoins and expect them to have value when you connect it to the internet.

If you can't mine your own bitcoins in a vacuum, then very obviously, this requires you to interact with the world at large, over public networks. Those other systems must be available and complicit in such activities. That certainly doesn't fit my definition of "autonomous" in the sense of some massive force-of-nature style artificial intelligence boogey man. These systems need to be switched on, activated and tended to by someone. Someone will eventually want to extract value from these economic crypto-currencies.

So, here we are, coming back to the drone/remote control debate. Is a drone really "autonomous" when there's a pilot manning a set of remote controls from a bunker? Similarly, is this truly an "autonomous" corporation, when there are people deploying agents onto client hosts and services onto servers, all with the goal of gaining wealth? However you want to encapsulate the skill sets involved, that still requires expertise, and human intervention in my book, and certainly doesn't sound autonomous at all, to me.

Autonomy is a relative term. Whose autonomy are we talking about, here? And autonomy from "what" precisely?

polarix3• 13 years ago

Here's a related question: is anything in our society currently autonomous?

yen223• 13 years ago

At the risk of sounding like a hippie - mother nature. Forests, savannahs, and oceans have been doing their thing long before humans arrived, and will continue doing their thing long after we perish.

droneStrikes3• 13 years ago

Good question.

erikpukinskis• 13 years ago

Decentralized hosting is coming. We already have

* Messaging (https://bitmessage.org/wiki/Main_Page)

* Hash table (http://en.wikipedia.org/wiki/Kademlia)

* Name service (http://dot-bit.org/Main_Page)

The only other thing you really need to be able to program arbitrary services is a decentralized work queue.

And I'm not suggesting that those particular protocols are the final solutions for these tasks, but they are proofs of concept that are being iterated on by a lot of very smart computer scientists.

droneStrikes3• 13 years ago

A lot of very smart computer scientists then, are the ones who claim stewardship of the system.

Let's say the computer scientists die, and leave these systems behind. If their legacy is ignored, it will not persist in humanity's absence. Unless people continue to employ these tools, the tools will not spring back to life and animate themselves for their own sake.

Just because you have an idea, and you throw up a wiki, and some client code on github, does not an A.I. make. This all sounds so much like it's just a Simple Matter of Programming (SMOP).

http://everything2.com/title/Smop

As humans, we generate the electricity, we manufacture the chips and lithium-ion batteries. We buy the remote controlled quad-copters, and send them flying through the air. We turn the radios on and off. We plug in the network switches and routers, and administer the servers and prevent them from overheating. These things don't produce and care for themselves. There's a person on the other end, no matter how much they attempt to obfuscate their identity, or piggyback on crowdsourcing. Even with distributed peer-to-peer crowdsourcing, you still need peers and you still need a crowd.

Are there self-replicating computers out there, building 3D printed copies of one another, fabricating their own solar cells, growing legs, walking themselves over to wall outlets, plugging in, and then executing block transactions for the sake of their own desire to be a bitcoin node?

How, then, is this autonomy?

skizm• 13 years ago

Just like the decentralized nature of the internet kept large companies and the government from taking it over. Oh wait...

mmanfrin• 13 years ago

  only way to deal with those corporations will be through 
  Bitcoin (that’s right, they won’t, or rather can’t, accept 
  fiat like US Dollar)

Bitcoin is fiat.

oleganza6• 13 years ago

It is not a fiat in a sense "imposed by the ruler". The point of fiat is that someone has control over it. Bitcoin is exactly like gold: people simply agree that it has some value for them, without anyone forcing them to accept it as payment.

vinceguidry• 13 years ago

It's pretty much the opposite of fiat. A fiat currency can have its value directly manipulated by the issuing state through excessive currency issue or regulation, manipulation by 'fiat'. Bitcoin is only worth what people think it's worth. It's not regulable in the sense a national currency is and the supply is controlled not by state actors, but an algorithm.

olefoo• 13 years ago

This is a bad idea, just as bad and pernicious as autonomous robots with authority to commit lethal violence on their own say so.

When they ask how the humans went extinct, the answer will be; gradually and then suddenly.

tdaltonc3• 13 years ago

If it can only profit by providing a service for which people are willing to pay, it might not be able to get out of hand.

logn• 13 years ago

a service for which people are willing to pay

... people are willing to pay for terrible things, especially if they're provided by autonomous businesses. And people will do anything for money including working for an autonomous business doing terrible things. And who's to say that an autonomous business providing a nice service, such as electricity, won't keep trade secrets and also needs no human workers (thus robots could be doing, in secret, some terrible deed hated by humans to provide a resulting service liked by humans... and that secret business plan might have been concocted by an algorithm with no human intervention).

DennisP3• 13 years ago

Until one day it can profit by providing a service for which other autonomous corporations are willing to pay.

gonzo• 13 years ago

20 years ago at Fringeware, Paco Nathan (is pxn on HN?) had the idea to form a corporation with a board of directors, put an AI on the board, then have all the human directors resign.

wsetchell• 13 years ago

I don't think autonomous 'corporations' are anything new. If you replace Bitcoin with the gold market , most of the statements in the article still apply.

""" Gold can be thought of as the first real autonomous ‘corporation’ although you probably don’t see it that way. Think about it – it provides a payment protocol and employs traders to maintain that protocol.

The idea is the same – this corporation has revenues, expenditures and profits. However, once again, no one owns this entity, it owns itself. """

bdegman• 13 years ago

I think you're probably right. Except in this case, bitcoin was actually designed. Gold and gold deposits just naturally had the right characteristics to work as a currency.

eriksank6• 13 years ago

The existing, politically-controlled system of finance and corporations has numerous and powerful enemies, hellbent on bringing it down, in whatever way possible. Furthermore, even without enemies, it is patently clear that the fiat money system is happily busy destroying itself: raising debt ceilings, engaging in quantitative easing, and so on. The libertarian movement is probably one of their smallest enemies in terms of headcount but at the same time it really looks like the most powerful one. If you read the original paper by Satoshi Nakamoto, you can see that the entire purpose of bitcoin is exactly to bring the current system to its knees. I hope that BTC succeeds in doing that and save its supporters from being dragged along in the quagmire, before the current fiat system finally destroys itself.

eru4• 13 years ago

[...] the current fiat system finally destroys itself.

You have high hopes.

eriksank6• 13 years ago

The currency of the Roman empire got debased (silver content of coins) until it became worthless. The combination of raising the debt ceiling and the practice of quantitative easing do exactly the same today. Eventually, even the imperial Roman treasury ("fiscus") began to refuse its own coins for payment of tax liabilities. They switched over to paying taxes in kind. So, yes, in my impression, history is indeed repeating itself.

oleganza6• 13 years ago

Fiat system will end without help of Bitcoin. Bitcoin is here as a place where to run when things start falling apart (without it, some other regime's currency would prevail).

Gold is not a solution since it needs to be stored and moved by someone. We tried that in growing ecenomy of 19th century and it lead to a banking cartel and legalized fractional reserve lending. I think gold will collapse with fiat currencies for the exact same reasons: counter-party risk. No one wants to trade in gold/silver coins because they can't be moved and protected like bitcoin.

ceejayoz• 13 years ago

Bitcoin's ease of movement comes with significant disadvantages, too. If I want to steal a ton of gold from a bank, it's going to take a pretty good plan. Stealing some Bitcoins just takes a zero-day.

eru4• 13 years ago

Why should the fiat system end? The US dollar's reign might end, but there are plenty of more reasonable fiat currencies. (Schweizer Franken, or the Singaporean Dollar for example.)

spullara• 13 years ago

We normally call these _viruses_.

icebraining4• 13 years ago

Yeah, my first thought was that these already exist as computer worms. Though the difference is that they could actually play "by the rules" instead of using computer time against the owner's wishes.

tdaltonc3• 13 years ago

It's a understandable analogy, but an autonomous profit making systems wouldn't need to act like a corporation. Depending on what it's decision making system is like, it could have behavior for which we don't a prior from which to make an analogy.

clienthunter22• 13 years ago

If Bitcoin ever graduates to anything more than a toy currency (last count was a billion or two USD globally?) then it's going to have to deal with graduate level problems. The business cycle is a thing I'm afraid, and the management of a recession to prevent it's becoming a depression is as close to a fusion of science and art as you'll ever see. The necessity for this isn't going to change as long as the human brain continues to function as it does.

In good times people want more money - a discussion on what they should want is irrelevant, lets stick to the facts - and in bad times people want to protect what they have (aggressively so). Now consider that what makes times good vs bad is not determined by money - it's determined and prolonged by some other shock like an asset misvaluation, the destruction of a massive crop, or some combination of external factors underlying the real or nominal non-money thing.

Let's say it's a rice crop. Those dependent on rice freak out, and push all their money into safe assets, those dependent on those dependent on rice do the same. The chain reaction continues until all the economy's money is tied up in safe assets, not being spent, and everyone is sat at home waiting for it to blow over. If policymakers do not intervene correctly at this point, this situation will become a depression, and much misery will ensue.

So what do we do? We make safe assets more expensive to lower the risk/reward ratio for commercial activities: we make bank holdings very unrewarding (lower interest rates), we devalue the money in circulation and provide liquidity in one move (print money), and government invests in big infrastructure (liquidity, jobs, momentum, signalling etc). All of this is designed to keep things moving and ward off a depression. And it works - this is why we abandoned the gold standard.

So given that Bitcoin means nothing to rice, or most other external factors, and not to the rigidities that exacerbate recessions - how exactly do we deal with this in the described autonomous utopia?

I very much agree that the regulators of currency leave a tremendous amount to be desired, but unfortunately this appears to be one of very few economic problems where decentralisation is not the answer.

gwern• 13 years ago

If Bitcoin ever graduates to anything more than a toy currency (last count was a billion or two USD globally?)

This isn't a response to any of your points, but I'm deeply amused to see someone still calling Bitcoin a 'toy currency' at a market cap of $2b. Many people were calling Bitcoin a toy currency when the market cap was more like millions. Truly, people can differ in opinions a great deal.

clienthunter22• 13 years ago

I knew I'd get called out on that no matter how I worded it. I have nothing against Bitcoin, but in regard to the points I made - yes, it's a toy currency: it's magnitude is nowhere near enough to be even close to relevant to the business cycle. There are many circumstances where the phrase "Bitcoin is a toy currency" would not apply, this just isn't one of them.

kaonashi4• 13 years ago

It's for this reason I feel that Bitcoin itself is a failed experiment. To the extend that people come to rely on it, we will see increased volatility.

Other crypto-currencies such as http://freico.in/ have seemed to at least tried to address this issue.

clienthunter22• 13 years ago

From the article:

the privileged position held by money compared with capital goods, which is the underlying cause of the boom/bust business cycle

This is far from accepted wisdom.

javert10• 13 years ago

This is a completely backwards view of the economy.

There is a reason there are rice futures: those that depend on the price of rice, which is people that _sell_ rice, can hedge.

There is a reason India is constantly running out of onions: Online futures are illegal. http://en.wikipedia.org/wiki/Onion_Futures_Act

There is a reason we need to have a global economy for food production. Bad weather in one region? Import from elsewhere. (Same applies to all commodities and services.)

The economy works quite well naturally, but for massive government invervention, such as what you are proposing, which would have massive unforseen consequences (such as improverishing people, which punishes the poor the most).

By the way, were it not for abandoning the gold standard, the US would not be able to finance a perpetual state of war. (It would have to pick wars with terminal conditions and actually win them.) It would also be much harder to finance 1984.Net.

The typical response to this is for me to get screamed at about how I am obviously wrong because all economists disagree with me and because it's just obvious. I don't think that's a legitimate response.

clienthunter22• 13 years ago

Rice was an example that was palatable to both my lazy fingers and I hoped to those who may not have appreciated a jargon filled response. It does not detract from the clearly presented general case which you are more than encouraged to investigate, I have done my part in spelling it out for you.

but for massive government invervention, such as what you are proposing

I am not proposing anything, I am merely describing. The issue at hand is not readily solved by the markets, which in this situation a) are in a state of risk aversion and b) possess very bad quality information that is difficult to reason about. This is classic market failure that is documented in places better than my mind - go forth and google.

If you are so used to receiving that response that you describe it as "typical" then I would suggest that you are either quite the revolutionary thinker, or that you are, in fact, typically wrong. Which do you think it is?

aclevernickname5• 13 years ago

By the way, were it not for abandoning the gold standard, the US would not be able to finance a perpetual state of war.

you're correct, but a few things:

1) the gold standard never fully went away; while we implemented Keynesian fiat money, we then pegged it to Oil production, hence the term "Petrodollar". It was a little amusing that we went to war in Iraq (under the WAR ON TERROR banner) immediately after Hussein switched to the Euro as the default currency. [1] Even in it's weakened state, the Petrodollar is still the main currency of choice.

2) The Gold Standard switch is the tip of the iceberg. We should be talking about the US Bankruptcy. Check out the Trading with the Enemy Act of 1917 (specifically, the 1933 amendment) [2], and House Joint Resolution 192 of June 5th, 1933 [3]. Those two acts set up the perpetual state of war in the US, though some would say it happened when congress went sine die during the civil war.

3) Fiat money is _awesome_ in a world in bankruptcy. Since 1933, people/citizens are the source of all money. we live in a world of abundance now since the industrial revolution, and in the next 20 years, as machines take over all the old grunt-labor jobs, we're going to have a glut of people unable to do the jobs they were trained to do. under any resource-backed economy (gold, oil), this would be catastrophic. However, this is why we have institutions like the Bank of International Settlements in place, to post bonds and discharge debt for insolvent countries/corporations. Money is debt, as the Youtube video tells us. We're now in a world where a Promise to Pay (an IOU) is in fact the money itself [4]. In this world, everyone that has a "Sophisticated Investor" level of understanding of the game can act as their own BIS, effectively becoming another Carnegie, Rockefeller, Warburg, or Oppenheimer.

I suspect you're a lewrockwell.com reader, or at least one who follows a more libertarian leaning (correct me if wrong). Back when I was championing the gold standard, I used to say a lot of the same things. Much of what they said was right, but was missing the massive caveat that it was only correct within the confines of HJR-192. Gold/Silver is only payable for private commerce outside the jurisdiction of Wickard v. Filburn [5] nowadays. Michael Badnarik, former Libertarian Presidential Candidate, teaches a common law class that explains many of these concepts, so that you can preserve and exercise those pre-1933 rights [6].

[1] http://content.time.com/time/magazine/article/0,9171,998512,...

[2] http://www.law.cornell.edu/uscode/text/12/95a

[3] http://www.focusoncommerce.net/index_htm_files/LAW%20-%20Hou...

[4] http://en.wikipedia.org/wiki/Negotiable_instrument

[5] http://www.lawnix.com/cases/wickard-filburn.html

[6] https://www.youtube.com/watch?v=a-a_yR1jzHY

gnaritas2• 13 years ago

The economy works quite well naturally

That's an ideological statement and an axiom of your belief system, it is not however reality nor something everyone agrees with. That's why people scream at you, you are being ideological but speaking as if it's a fact. Markets fail, they do not always work well naturally, and government is not always the problem.

grinnbearit3• 13 years ago

We make safe assets more expensive to lower the risk/reward ratio for commercial activities: we make bank holdings very unrewarding (lower interest rates)

Wouldn't this force people already worried about the future to buy into less abstract stores of value like houses? Wouldn't that just end up monetizing houses eventually leading to a bubble? Isn't the risk/reward ratio an indicator for the health of an economy and isn't skewing it treating the symptom not the cause?

we devalue the money in circulation and provide liquidity in one move (print money)

But we use this newly created money to buy assets which the market had no interest in buying inflating their price and funding contractors at the expense of everyone else.

and government invests in big infrastructure (liquidity, jobs, momentum, signalling etc)

But unlike market investors, there's no worry about ROI. Building these large infrastructure projects may pay off but theres no downside and they could just end up making a few people very rich.

And it works - this is why we abandoned the gold standard.

I thought the gold standard was abandoned because Nixon refused to convert France's dollar holdings back to gold in 1971.

clienthunter22• 13 years ago

Wouldn't this force people already worried about the future to buy into less abstract stores of value like houses?

It forces people to spend/invest money primarily, which keeps the economy growing, prevents job losses etc. Houses are one form of investment, but they're no less tangible than many others from the point of view of your average investor.

But we use this newly created money to buy assets which the market had no interest in buying inflating their price and funding contractors at the expense of everyone else.

This is not about magicking up new demand, it's about restoring the previous demand before the fear set in. Inflation is a reality, yes, but it's not inherently a bad thing - in these situations there's an acceptable level where the benefits outweigh the costs.

But unlike market investors, there's no worry about ROI. Building these large infrastructure projects may pay off but theres no downside and they could just end up making a few people very rich.

It barely matters if they pay off at all, the end product in this kind of capital expenditure is much less important than the process of doing it. Making a few people rich is the usual outcome of high-value expenditure, why would that be any less true in a recession? It's a nothingness on the scale of rescuing a flailing economy.

I thought the gold standard was abandoned because Nixon refused to convert France's dollar holdings back to gold in 1971.

I'm not a historian. It's certainly why we don't go back to it, and why not a single country on the planet uses a fixed monetary system anymore.

theschwa• 13 years ago

The chain reaction continues until all the economy's money is tied up in safe assets, not being spent

If people put their money in savings, isn't the bank still spending it? Investing in things like new businesses? Couldn't the same thing happen regardless of the currency?

clienthunter22• 13 years ago

No, the banks are scared of investing too.

Edit: sorry, incomplete response. Yes it happens in every currency, the difference is they have mechanisms for handling these issues.

polarix3• 13 years ago

Consider that with bitcoin the "safest" asset is also the most liquid (easiest to exchange).

clienthunter22• 13 years ago

In a recession in a Bitcoin economy, Bitcoin wouldn't be the safest asset. That's also not quite the same meaning of liquidity.

Sammi• 13 years ago

So what do we do? (1.) We make safe assets more expensive to lower the risk/reward ratio for commercial activities: (2.) we make bank holdings very unrewarding (lower interest rates), (3.) we devalue the money in circulation and provide liquidity in one move (print money), (4.) and government invests in big infrastructure (liquidity, jobs, momentum, signalling etc).

I clearly see how 3. is not possible with Bitcoins, but how are the others not possible?

DennisP3• 13 years ago

That's a real effect, but implicit in your description is an assumption that there's only one standard currency, like dollars or gold.

An alternative is to allow anyone to issue currency. Worgl, Austria got itself out of the Great Depression by doing just that, creating a currency with built-in devaluation (until Austria's central bank shut it down).

We already have multiple bitcoin-style currencies, and it's easy to create more. Some even devalue, much like Worgl's currency. So I don't think this is likely to be a problem, unless somebody is silly enough to make bitcoin the only legal tender.

clienthunter22• 13 years ago

This is an novel thought, but I don't see how this does much to mitigate agent expectations as regards the valuations of real assets, which is the underlying issue here. Theres also the question of how practicable such a scheme could ever be with global capital markets.

chad_oliver2• 13 years ago

As an aside: the title image depicts the Sky Tower in Auckland, New Zealand.

slackson3• 13 years ago

Do you know what relation this has to bitcoin or autonomous corporations?

chad_oliver2• 13 years ago

None, as far as I can tell. It was probably just selected because it's a pretty picture.

swswsw3• 13 years ago

On the comment section of the article, someone is asking the exact same question. :)

The author answered: "I liked to shot of the tower … looks like it’s reaching out into space and time!"

http://btcgeek.com/dawn-of-autonomous-corporations/#comment-...

slackson3• 13 years ago

Bitcoin autonomous corporations could use prediction markets to choose code changes.

spuz• 13 years ago

Could you elaborate? I don't see how prediction markets could help decide what code to use.

slackson3• 13 years ago

Betting on profits of the agent conditional on various code changes. "Agent profits will increase X% by date Y, given code change Z." If code change Z isn't chosen, money is refunded to the people who bet in the market. If it is chosen, then it stays open until date Y, where it pays off depending on the eventual profits.

oscargrouch• 13 years ago

change the same logic as mining of bitcoin, and transfer it to work:

i mean, mining in this case will be work.. and the amount of work would say how much payment that work diserve..

but how to calculate work in a generic manner without being too linear.. like hours/work.. i mean.. pay for creativity, ideas, less tangible things..

and about other investments. how they would be decided? this requires a good amount of algorithms..

sans-serif2• 13 years ago

I for one welcome our new autonomous corporation overlord, which would hire people via TaskRabbit to become its shareholders, and hire lawyers via emails to protect its interests. It would commission new servers on various cloud providers on the fly to avoid being shut down. It would generate revenue by running a SilkRoad that cannot be stopped. It would employ security guards and hitmen to stop people going after it. It would commission black hat hackers to help it infiltrate various intelligence networks, and rely on Mechanical Turk to translate human language into something that makes semantic sense for it to act upon.

rheide• 13 years ago

That's scary, but it sounds like something that could actually work. Very good.

bthornbury• 13 years ago

This is incredibly interesting. Corporations essentially crowdsourced the way bitcoin is. I disagree that these applications will reside in the cloud however, because those are essentially provided and administrated by a central entity.

It's more likely that such an autonomous corporation would provide a cloud service. The protocol could be designed like bitcoin to reject hosts that don't meet certain criteria (such as latency or security). With Homomorphic encryption techniques being advanced these types of clouds could even be somewhat secure.

icebraining4• 13 years ago

A single cloud service is provided by a central entity, but the application could be spread out across many such services (e.g., a distributed system running on EC2, Rackspace, a bunch of no-name VPSs and even home computers by offering a downloadable application that did something useful in return).

lingben• 13 years ago

It is difficult to keep reading when 'fiat' is used as an expletive.

dkuntz2• 13 years ago

The aside in the third sentence really bugged me. It seemed to imply that Bitcoin isn't a fiat currency, but considering it, like the US Dollar which it mentioned, doesn't have any intrinsic value, isn't it also a fiat currency?

bencoder• 13 years ago

Depends what is meant by being "fiat". Most people consider fiat to be government/state created money rather than just having no intrinsic value. 3 definitions listed here: http://en.wikipedia.org/wiki/Fiat_money

I think the intrinsic value argument is pointless. Gold for example, has some value outside of it being a medium of exchange, but the price of gold is very divorced from its usefulness in industry or its attractiveness so the fact that it has "intrinsic" value doesn't mean much.

etherael5• 13 years ago

a blockchain that finances its ops by access to aquaponic food dispensaries would be an interesting future innovation. Similar to current cryptocurrencies, but the "backing" is that the dispensaries will take the currency for purchasing produce, and the mining process itself is linked to the creation and maintenance of those AP microfarms.

atmosx3• 13 years ago

The conviction some commentators have that somehow Bitcoin is more secure, ethical and predictable than FIAT (central-bank-controlled) currency is hilarious.

Given the fact that 98% of BTC belong to 2% of portfolios and there's a way stronger anonymity compared to fiat currency (you all know who Bernanke is and where his power comes from) and early adopters can drive easily the market up or down. Personally I believe that's the main reason BTC didn't fall after SR bust. Because, what most believe is not controlled is TOTALLY controlled (big players didn't opt out).

That said I can see how BTC is useful and has awesome qualities, especially for people who understand technicalities of a digital currency and how money works.

However, BTC is a hoarding system. Much like gold and nothing like fiat. BTC is not inflationary, by design. Inflation is the first quality a fiat currency must have, in order make people willing to spend.

phaemon3• 13 years ago

Inflation is the first quality a fiat currency must have, in order make people willing to spend.

If that were true, no-one would have bought an iPhone and Apple would be penniless (USD etc are deflationary relative to technology items).

clienthunter22• 13 years ago

"Deflationary relative to technology items"

Sorry, what?

atmosx3• 13 years ago

That is true and should (at this point in history) be taken for granted.

The iPhones in Europe had for years the same price. So I don't really understand your example. Could you elaborate ?

kybernetikos• 13 years ago

Nice idea, I've been looking forward to the 'self-operating-business-in-a-shrinkwrap-box' for quite a while, and this discussion sounds a lot like the kinds of things Charles Stross likes to put in his sci-fi stories.

Still, keeping a private key safe for a distributed corporation will be a challenge. One attack I can think of - set up a fake hosting company that claims to offer cheap hosting, wait for the corporation to move some of its agents there, then bam, you've got the private key. That kind of thing might be difficult to pull off, but if any of these corporations controlled significant assets, then the amount of resources an attacker would be prepared to expend would be very high.

I suppose it suggests a mechanism where spending resources requires the cooperation of a number of agents that must be contracted with different hosting companies, and perhaps a period of warm up, where for the first x months, an agent might do useful things but would not be given power to control money.

pyoung2• 13 years ago

Hmm, I am trying to imagine what the system would look like. Seems like you could borrow some of the features of Bitcoin to create a control structure. Maybe require some type of proof-of-work/approval process by a network of shareholders to approve financial/business transactions. That way, anyone could attempt to participate on behalf of the corporation, but only transactions brought forward by trustworthy agents that are deemed to be beneficial for the corporation are approved. Essentially you would adopt the trust model of bitcoin but apply it more broadly.

return0• 13 years ago

Any kind of libertarian community/market/state will need to shield itself from all other political states in the world just as well. An army would be required for that, yet it's not clear if libertarians would collectively defend themselves.

swswsw3• 13 years ago

One thing to note is that bitcoin not only made this autonomous system possible, it also made it transparent to outside (through open-source and public blockchain). In that sense, it could be considered more trustworthy than an actual corporation.

snambi• 13 years ago

Systems don't work by themselves. You need a person(s) somewhere. That person has to live somewhere, unless he is in space or in the middle of ocean.

Dawn of Autonomous Corporations, Powered by Bitcoin

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