Good morning. So, my name is Arthur Breitman. I work on a blockchain
project called Tezos. And I'm going to be talking about blockchains as coordination technology and trying to give a sense
of what it is exactly that they do and what
they can be good for. So, there's a French philosopher, Étienne de La Boétie who wrote the Treaties
on Voluntary Servitude and in this release he
wonders how can it be that you can have a tyrant in power and he's just a single person and you have a population
that could be in the millions. They do not recognize his legitimacy, and so they could very easily topple him but for some reason they don't.
And the question is, well,
is that voluntary servitude? And the answer to this
paradox in game theory is known as a prisoner's dilemma. So, in a prisoner's dilemma, you have two prisoners who are being interrogated. And, again, either decide that, you know they're going to dish on the other one and say, "You know, he did it." Give all the information, in which case they will both get both of them will get a heavy sentence if they both betray each other. If they collaborate, they get a life sentence. And here's a problem, if one collaborates and the other one betrays the one who betrays goes free.
And, so, in this scenario you
might look at this and say well, clearly they would benefit by collaborating with each other and not betraying each other. However, if I don't know what the other prisoner is going to be doing I say well, either they are going to betray me, in which case, I should betray them. I might as well. Or they're not going to betray me in which case I still benefit from betraying them. And, so, both side can
think the same thing and they both betray each other and you get this poor outcome. And this is describe as the fact that what is a Nash equilibrium.
So, a Nash equilibrium is
the equilibrium you have in a game when every side reasons
independently of the other by saying, okay, "They're
going to follow a strategy and regardless of which strategy
they're going to follow I need to find what strategy
I'm going to follow." So, that's a Nash equilibrium. Well, what we would like is something called a Pareto equilibrium. And in a Pareto equilibrium, you're in a solution where you can't make anyone better off by changing things. And, so, clearly in the case of the prisoners, they could be both off by not betraying. So, you don't have a Pareto equilibrium and that's a problem,
how do you get there? Interestingly, the way they can get there is not communication, all right? Even if they can talk to each other, it's not clear that it helps because talk is cheap.
They can keep talking. They can keep exchanging information, but at the end of the day once they've done discussing, they're still going to be faced with the same decision. The one thing that can make
a difference is contract. If they are able to make a contract with each other, they can do credible commitment. A contract with some penalty
for breaking the contract. So, if they can have this
ability to coordinate with something real at stake
with value, with money then perhaps now they
can start coordinating. So, that's a generic idea of how you solve the prisoner's dilemma. And it turns out that you can solve all of these problems in game theories where you have everyone
could be better off if only people collaborated,
but they can't collaborate. All of that, at least in theory, can be solved by contracting.
If you let people have
self-enforcing contracts. Now, the problem is contracts
can be difficult to create and they can be expensive. And, so, one of the interest
of this blockchain is that they allow this type of cooperation. Now, when people talk about
this blockchains network, like Bitcoin for example a very common metaphor is
to look at the internet. And people say oh, look,
it's just like the internet. It's all these people communicating with each other, but I think that what this metaphor misses is that it's not about communication.
It's not about data. It's really about putting
something valuable at stake when coordinating. So, what can you do with something
that needs to coordinate? Well, the first thing you can
do is you can do money, right? So, blockchains are mostly known for powering cryptocurrencies. So, you can build these units. You can trade in those units. And that, it turns out, is a really important building block for contracts. Money is coordination, right? It's the idea that
we're all going to agree that we're going to give
some value to some unit and I'm going to agree to accept it with the idea that someone
else might accept it in the future. Money is the closest thing that we have to some sort of real social contract. You will see a lot of users
of blockchains being discussed because obviously this was a big surprise that you could do money like
this, that it could work. And, so, there's a lot of
hype around blockchains. And there's also a lot of solutions which don't necessarily make sense.
So, one thing to beware of, you'll see sometimes a problem and people will say, "Well, clearly we could solve that problem if somehow we could throw
a new technology at it. We can solve it. So, if there's data on my problem, I'm going to take that data and I will put that data on a blockchain. And since blockchains can hold data and since my problem involves data and since blockchains are good and new, then it's going to solve my problem." And that generally doesn't work.
There's been a focus on traceability, on tracking information. Saying, "Oh, we're going
to put the information on where goods came
from on the blockchain." Most of that doesn't quite actually work because it doesn't tap into the ability of blockchains to work as
coordinating mechanism. So, I think that if you're looking for purported solutions using blockchains you have to look for this
coordination element. And, so, today when you look
at this public's blockchain and the type of things that they do so you have this one side who says, "Look, we can do all of these things but they're not necessarily
compelling applications outside of really money and contracts." And you have another side that looks at this and says, "Well sure you can do money and contracts
with these blockchains, but you could do all of
that with a database, right? You know, why do you need
decentralization at all? Why do you need to go through
the complicated exercise of having a cryptographic protocol, a peer-to-peer network, nodes talking to each other? You could just have a single company doing that or you could have the government run it.
You know, why isn't the government
running a cryptocurrency?" And the conclusion that some people reach is they look at this and say "Well clearly the only
reason you might want to not run this as a
government database is because you're trying to break the law and all this Bitcoin and all of that, this is all for criminals." And that's a very dangerous argument because the argument that
these people are making is that whenever people are trying to reclaim some power to reserve some power for themselves and not completely give it away for the government, somehow they're doing something bad.
And the implication here is that government is always
necessarily virtuous. And we know that's not the case. There's plenty of evidence to that. Governments have killed hundreds of millions of people in the 20th Century. Governments kill people today. A quarter of the countries on Earth are dictatorships. So, the idea that somehow
reserving some rights for the people to protect
themselves is somehow nefarious that itself is an extremely dangerous idea that needs to be fought. So, to conclude briefly on what these blockchains can do, blockchains are good at coordination. And what coordination can enable
is taking diluted interest a lot of people who are in vast numbers and share some interest, and putting it against concerted interest. Thank you..