Creating local marketplaces with OpenBazaar

OpenBazaar is a global online marketplace for anything and everything. Unlike centralized marketplaces such as Amazon, Alibaba, Craigslist, eBay, Mercado Libre, and nearly every other online marketplace you can think of, OpenBazaar is a decentralized marketplace. Being decentralized means that there is no single company or web host that controls OpenBazaar. It also means that there is no single company or web host that can be targeted to shutdown OpenBazaar. This has some interesting benefits for buyers and sellers who choose to use OpenBazaar.


One benefit – perhaps the most important – is that there is ultimate freedom regarding what people can buy and sell on OpenBazaar. While centralized marketplaces are forced by law to have policies that restrict the types of items that people can buy and sell, and will often take down listings to enforce these policies, OpenBazaar has no such policies. In fact, OpenBazaar fundamentally can’t have such policies; even if the developers of OpenBazaar tried to build such policies into their software, the policies could easily be circumvented by end-users because the code that runs OpenBazaar is open source and freely modifiable. So in theory and in practice, users can create listings to buy or sell anything they want and the only way that their listings can be taken down is if their internet goes down or the computer they use to run the OpenBazaar software is turned off. And even then, there is a possibility that the listings stay online. OpenBazaar is very resilient against censorship and downtime.

Another benefit is that OpenBazaar users have a lot of creativity regarding how they use the marketplace to promote and discover products. Listings on OpenBazaar can be given tags such as “books” or “gardening” so that they show up in searches for these types of items. If users add the “Local pickup” shipping option and also put their location as a tag on their listings, for example tagging with a zip code and the name of their city or state, then it makes it easy for people in their area to find their listings, contact them, and plan to meet up for a local sale.

This turns OpenBazaar into an unstoppable alternative to popular local-focused marketplaces such as Backpage and Craigslist.

Here is an example of what such a local marketplace listing could look like with the appropriate tags:


With this, anyone looking for the book “An Agorist Primer” by the author Samuel Edward Konkin III in the Beverly Hills, California area could easily find it and meet up with the seller to buy the book in person with cash.

Although this use of OpenBazaar is not currently officially supported, OpenBazaar developers could develop this concept further and give users the ability to search for similar listings within a certain distance from their location, such as all zip codes or cities within 10 miles. This way users would only need to enter their location and a search term to pull up all similar listings near them and connect with their local buyers or sellers.

There are some products or services that may be legal in various jurisdictions but are still suppressed by centralized marketplaces for one reason or another. With the previously mentioned benefits of OpenBazaar in mind, here are a few ideas for local marketplaces for otherwise suppressed goods and services that could thrive on OpenBazaar if users add these tags and their location tags to related listings:

#bookfair – a local marketplace for buyers and sellers of books and comics

#glassmarket – a local marketplace for buyers and sellers of functional glass art

#localcoins – a local marketplace for buyers and sellers of digital currencies

#gunshow – a local marketplace for buyers and sellers of firearms, ammo, and accessories

#redlight – a local marketplace for buyers and sellers of sexual products and services

#silkroad – a local marketplace for buyers and sellers of cannabis and entheogens

… and many, many more local marketplaces like these are possible. Give it a try and let me know what you think about this idea in the comment section below.

P.S. OpenBazaar is not the only decentralized marketplace out there. Check out the full list I maintain of other decentralized marketplaces that you can try this out with. You are also welcome to add any decentralized marketplaces to the list that you think are missing by creating an issue or sending a pull request.

Decentralizing capitalism

Last week, I blogged about Universal Basic Income (UBI), a system that would pay everyone an equal amount of money just for being alive. I mentioned that one of the main reasons I support UBI is because it has the potential to decentralize capitalism by enabling more entrepreneurship and enabling more people to participate in the economy. In today’s post, I want to look closer at this idea of decentralizing capitalism, including why that’s important and how we might go about doing it.


First, let’s establish a definition of “capitalism.” Wikipedia says:

Capitalism is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets.

The meaning of “capitalism” in the context of this post is actually-existing capitalism. Actually-existing capitalism is an economic system enshrined in law that closely resembles the system described by Wikipedia, but includes targeted (or sometimes blanket) interventions by governments that distort the “free market” nature of “pure” capitalism. This is what economists call a “mixed economy”. These interventions include: reducing protection for private property rights in some areas and increasing protection in others, inhibiting the price system is some areas and strengthening the price system in others, protecting voluntary exchange in some areas and prohibiting voluntary exchange in others, and more.

The end result of these government interventions in the economy is an incredibly centralized version of capitalism. This is the system that we’ll discuss here and that we aim to decentralize since this is the system that we live with today.

Why decentralize capitalism?

The main outcomes I hope to achieve by decentralizing capitalism are to increase individual freedom and reduce economic inequality. Increasing individual freedom is important because it means that people will have more opportunities to make a living and do things that make them happy. All human action is ultimately in pursuit of happiness, and the less freedom people have, the less options they have for making themselves happy. Reducing economic inequality is important for social cohesion and economic growth. Studies have shown that communities with high levels of economic inequality are less healthy and experience slower economic growth than communities with more equal wealth distributions.

With more individual freedom and more equitable wealth distribution, human society will be better equipped to flourish in the face of increasing complexity.


The first centralizing force that must be minimized or eliminated to decentralize capitalism is government regulation. In a 2010 study, the Small Business Association (SBA) found that the annual total cost of federal regulations in the U.S. amounts to over $1.7 trillion. The hidden costs not included in the study are the opportunity costs to businesses that could afford to comply with regulations, as well as the opportunity costs for businesses that simply could not get started due to these regulations.

Proponents will say that regulations exist to protect businesses and the public from harmful business practices. However a consequence of regulation is often to raise the barrier to entry in any given industry by increasing the costs of starting, running, and growing a business. This results in many businesses failing sooner, or never getting started at all, centralizing economic power in the businesses (and their shareholders) that can afford to comply with regulations.

In addition to regulations that inhibit industries, there are also regulations that are designed to completely eliminate industries. The most prominent example would be drug prohibition, which in practice has not eliminated the drug industry but simply transferred control of it to criminals who often grow their market share and resolve disputes using violence and coercion. The costs of drug prohibition to society are great, and include not only the direct financial costs of enforcing prohibition but also the human costs that result from criminal records and violence in communities. These costs are mirrored in other prohibited industries.

Without one-size-fits-all government regulations determining what people can and cannot do to make a living, regulation would be left to individuals and their communities to create and enforce. “Peer regulation” would enable the same kind of innovation in regulations that we see in other industries, as the process of creative destruction and evolution is applied to regulatory standards and equilibrium is eventually reached.

Just as people can choose today whether they prefer Uber or Lyft’s standards for driver selection and passenger ratings, people will be able to choose from a variety of regulatory models and certified (or un-certified!) vendors when they’re deciding where to take their business. Without a mandatory barrier to entry, more businesses could start and grow. With more businesses, there will be more ways for people to make a living and more products that exist to provide happiness and solve problems.

Intellectual property

Another centralizing force that must be minimized or eliminated to decentralize capitalism is intellectual property (IP). IP includes copyright, patents, and trademarks, and is designed to create artificial scarcity of fundamentally abundant information such as software code, manufacturing processes, music scores, or even product concepts such as phones with rounded corners.

In the U.S., IP protection is enshrined in law by the “copyright clause” of the Constitution. This clause gives the government the power to protect IP to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” While it may appear that at least part of this clause is contradicted and superseded by the “free speech clause” of the First Amendment to the Constitution, the courts have not supported this conclusion and so IP remains in force in the U.S. and throughout the world thanks to native laws and treaties upholding IP protection.

The effect of IP laws is the artificial restriction on the distribution and use of information and the centralization of control over the distribution and use of information in the hands of IP owners. Anyone who wishes to use IP owned by someone else must pay licensing fees to the owner of the IP and any intermediaries involved in the transaction. IP protection is expensive to gain, defend, and comply with, and in the end results in fewer opportunities for inventors and entrepreneurs and less innovation in the marketplace of ideas and inventions.

Without IP, people would be free to copy and share information about creative works and industrial processes. Innovation would flourish as people begin to reuse and remix obscure or popular ideas, and there would be no artificial barrier to creating new solutions to challenging problems. New entertainment, new products, new services, and new processes would proliferate, and profits in the information economy would be diffused to millions or billions of creators instead of being centralized in the hands of a relative few “rights” holders. Again, more equitable income distribution, and more opportunities for happiness.


IP protection is a form of rent-seeking that creates scarcity where there is none. But what about rent-seeking where there actually is scarcity? The way capitalism has been constructed, property can be owned by an individual from the moment they take ownership until the day they die, whether they actually use the property themselves or not. For example, real estate. It’s not unusual for some people to have several houses around the world, which they might stay in only a few weeks or months out of the year. The rest of the time, the house is either rented out or it stays empty, save for a groundskeeper or cleaning crew that keeps dust from gathering.

Another example is farmland. Many farmers own hundreds or thousands of acres of land, far more than they could actually farm themselves. So instead they hire farmhands to help them work the land. These farmers get paid a fixed wage, and the farmer reaps all of the profits remaining from the operation. The result is that farmland becomes centralized in the hands of fewer and fewer farmers through the consolidating forces of competition, while farmhands continue to make meager wages by comparison.

A solution to the endless centralization of land and other property ownership in the hands of fewer and fewer rent-seekers is to eliminate legal protections for absentee owners and restore respect for the homesteading principle as a means of acquiring property. The system of property rights we have today is artificially constructed by the state, and could be changed to prevent the accumulation of property by absentee owners.

After abandoning property for some period of time – and to be fair, any period of time chosen would be as arbitrary as the indefinite period granted today, but could still certainly be made more fair and equitable – the owner would give up their exclusive rights and the property would then be open to homesteading by others. In more popular areas, this process could be managed in a way that prevents potential would-be homesteaders from fighting to claim newly-abandoned property while still giving everyone a fair chance at property ownership. The result would be more people who have a chance to homestead property as our ancestors did hundreds or thousands of years ago rather than paying rents on property they’ll never own, and property ownership would instead be more equitably distributed in the hands of people who are actually using the property.

That’s not all, folks

These three changes to the economy – the elimination of government regulations, IP protection, and rent-seeking – are neither perfectly conceived nor the be-all-end-all to decentralizing capitalism. It’s likely that the system that would result from these changes could hardly even be called capitalism at all, especially if our benchmark is actually-existing capitalism instead of the idealized capitalism described by Wikipedia. But what I am certain of is that the system would be more fair and equitable, while retaining the best features of capitalism that allow for innovation, progress, and the flourishing of human society. And that’s really what we want, isn’t it?

Email is probably the most popular decentralized messaging protocol. Add yourself to my email contacts if you would like to stay in touch!

What universal basic income is and why I support the idea

There’s an idea that’s been picking up steam in the circles I run in, and that is the idea of a universal basic income (UBI) for everyone. Essentially, everyone would get paid the same amount of money every month, at a minimum. Patrick Kulp published a post on Mashable yesterday with more information about UBI called “Could 2017 be the year people take universal basic income seriously?” I recommend you check it out if you want the full scoop on what UBI is and who else is supporting the idea.

I think UBI is a good idea for several reasons. The first reason is one that I hadn’t considered before prominent UBI proponent Scott Santens mentioned it in an interview on my podcast, which is that UBI is a way of decentralizing capitalism. The argument goes that by giving everyone a UBI, you increase the odds that people will start or invest in businesses, or at the very least engage in more saving or consumption – all activities that keep the engines of capitalism running smoothly (here, I mean capitalism in the broadest sense – individual property rights, free trade, investment and accumulation of capital, wage labor, etc). The goal of decentralizing capitalism can be achieved in many ways, but UBI seems to be a relatively straightforward way and one that is gaining momentum.

Another reason I support UBI is because it is so simple. Many welfare programs come with lots of fine print about who can apply and what they can spend the money on. This leads many people to fall through the cracks or fail to have their actual needs met. Unconditional, universal basic income would solve this problem and empower the people receiving the money to make the decisions about what is most important to them – not a far-removed bureaucrat. If we rolled the money from most if not all existing welfare programs into a UBI program, we would be able to massively simplify and streamline their administration, cutting down on costs, eliminating waste, and accomplishing a whole lot more good in the process.

The last reason I’ll discuss here today about why I support UBI is because I believe that one day most material production of goods and services will be fully automated, and perhaps even immaterial production as well thanks to artificial intelligence. This will eliminate a lot of jobs. Without jobs, where will the money come from to buy the things that robots are producing? A UBI will provide people with the money needed to maintain a basic standard of living, to continue purchasing basic necessities from automated industries. A UBI might not even be needed at all eventually, if people come to own all of the robots through collective or capitalist ownership models. But a UBI could help smooth the transition.

So where does the money come from to pay for a UBI? In most implementations or theories I’ve seen of UBI, it is the government who is cutting the check. The money would come from existing welfare programs, or from newly raised taxes. I personally don’t think either of these approaches is the best way to implement UBI long-term (for reasons I might expound upon in a future blog post, or the comment section if prodded), but if it’s the quickest path to implementation then as a first step I would support rolling over tax revenues currently allocated towards inefficient welfare programs into a UBI program.

I’d personally like to see UBI come right from companies, since that’s ultimately where tax money comes from anyways. Why have the government as a middleman? We could use software like Group Income to ensure that everyone pays in fairly, and everyone gets paid out fairly. Then everyone could have an extra $XXXX per month to spend (or not spend!) on whatever they thought was important.

UBI is one of those ideas that seems so crazy it might just work, and I’m happy to lend my support in whatever small way I can.

Email is probably the most popular decentralized messaging protocol. Add yourself to my email contacts if you would like to stay in touch!

How to Decentralize Uber

It has been an oft-cited example that Ethereum can be used to create a “decentralized Uber,” and there have been several (as-yet unsuccessful) attempts to do just that. But what does creating a decentralized Uber actually entail? In this post, I propose that a) Ethereum is overkill for the task at hand, and b) decentralized Uber is not as sexy as it sounds, and may or may not actually make sense in the real world.

What Uber Is Today

Uber is a business that bundles several services together to create a seamless transportation application:

  • Technology development. Uber employs engineers and designers to make sure that all of Uber’s technology works to their standards, including server- and client-side applications for drivers and passengers. Uber also does R&D to test new business models, new app features, and new products.
  • Order matchmaking. When people press the button on their Uber app to catch a cab, their GPS location is broadcast to Uber’s servers where the order is algorithmically matched with a driver whose own Uber app is also broadcasting their GPS location to Uber’s servers. Once the order is matched and the driver accepts the order, the driver is told where the passenger is located. The passenger can also see where the driver’s car is at and follow their movement to the passenger’s location. Both are provided a communication link to each other via a proxy phone number so they can resolve any issues while the driver is en route to pick up the passenger.
  • Payments. Once the ride is over, credit/debit card payments are processed through the Uber application using a third-party payment processor called Braintree, a subsidiary of PayPal.
  • Insurance. While drivers are required to carry their own valid insurance with minimum coverage amounts, Uber also provides an umbrella insurance policy that covers any gaps while passengers are riding in the vehicle. In some states, companies like Uber and drivers that use their network are mandated by law to carry an insurance policy that meets certain minimum coverage levels.
  • Quality control. Uber checks to make sure drivers have a valid driver’s license, runs background checks to make sure drivers do not have a violent criminal history or a poor driving record, verify that drivers have valid insurance with enough coverage, and monitor both driver and passenger ratings to ensure that quality standards are being met by members of Uber’s network.
  • Customer service. If the driver or passenger has a serious problem with the transaction, they can escalate the issue to Uber customer service for resolution. Customer service is also responsible for following up if the driver or passenger reports a forgotten item in the vehicle.
  • Ancillary benefits and services. In addition to all the core services mentioned, Uber also uses its scale and reach to negotiate bulk discounts on many ancillary services for drivers such as healthcare, automotive maintenance, cell phone plans, and other products and services. Uber helps drivers obtain vehicle financing so that they can acquire a car to drive for Uber, and also lobbies governments to enact policies that are favorable for Uber (and usually, by extension, drivers and passengers) or oppose policies that are not favorable.

What Decentralized Uber Is Not

Decentralized Uber is not everyone broadcasting their location onto a blockchain and getting matched up by algorithmic oracles based on location proximity and bidding on the best price for a ride.

  1. Putting people’s current location and destination on a public blockchain is bad for privacy and personal security. People already get upset when they’re faced with the realization that Uber can track all of its users in real time.
  2. Putting people’s current location and destination and bids for fares on a public blockchain does not scale well and will be really expensive.
  3. Ridesharing is an inherently local service, so orders do not need to be broadcast to the whole world.
  4. Bidding for fares is a concept tried by the failed ridesharing startup Sidecar and has proven to add too much friction to the process. It is also an inherently different model than the intentional simplicity of Uber’s “press one button to hail a cab” model.

In short, Ethereum is not needed to build a decentralized Uber because most user interactions in a decentralized Uber app would happen off-chain, and Bitcoin supports all the on-chain interactions needed today.

What Decentralized Uber Could Be

Decentralized Uber – let’s call it “Doober” – is an unbundled Uber, with the possibility for redundancy in some areas to prevent there from being a central point of control or failure. Different companies can each be used for app development, background checks, GPS monitoring, insurance, matchmaking, payments, customer service, and additional benefits and services, and then aggregated together with the Doober app. These services could be re-bundled where it makes economic sense to do so, though it is possible many parts of the system will remain decentralized for economic or practical reasons.


The blockchain is indeed a key component of the Doober application, but not in the way that has been previously envisioned. Doober uses the blockchain only for identity and payments, delegating the task of order matchmaking to a network of private servers called Matchmaker servers. Drivers and passengers can then choose which servers they trust with their location data.

Blockstack is a key-value store database that uses the blockchain as a decentralized mechanism for determining the order of database updates. Think of it like a global file directory with a trusted root in the blockchain e.g. or Blockstack is the glue that binds all of our unbundled services together in a decentralized way where the user remains in control.

Blockstack would be used to register a unique identity on the blockchain – called a “blockchain ID” – and link that identity to: public keys for message authentication and encryption; reputation ratings from other drivers and passengers; official endorsements for statements like “I have a valid driver’s license,” “I have valid insurance with this much coverage,” “I do not have a violent criminal history,” etc; and a link to a GPS API endpoint – all the components needed for a Decentralized Uber-like system.

How Decentralized Uber Could Work

  1. Register a blockchain ID like “” then link the blockchain ID to the Doober application.
  2. Link a public key, called an “ID Key,” to the blockchain ID and use the corresponding private key to sign and decrypt messages linked to the blockchain ID. This is how messages from the blockchain ID owner are authenticated. The ID key will go into Blockstack like
  3. Have an identity verification service sign tokens indicating that the person who controls the blockchain ID has provided proof of a valid driver’s license, insurance with adequate coverage, and no history of violent behavior or car accidents. Link these tokens to the blockchain ID. These tokens will go into Blockstack like
  4. Register for a unique GPS API endpoint service with the blockchain ID and link the unique GPS API endpoint to the blockchain ID. This endpoint will go into Blockstack like
  5. Register an account with a Matchmaker server. The account will be linked to the blockchain ID and is authenticated with the ID Key. Each Matchmaker can have different policies regarding driver and passenger requirements e.g. background checks, insurance, minimum reputation ratings, etc. Drivers and passengers can register with multiple Matchmaker servers, and servers could federate for redundancy and scale. Users will give permission to each registered Matchmaker to access the user’s GPS location only when the Doober app is on and waiting to give or receive a ride.
  6. Passengers can broadcast orders to multiple servers at the same time. If an order is matched on multiple servers, then the customer can either manually choose which order they want to commit to, or they can set automated policies to choose for them. Drivers will then get pinged by the Matchmaker server(s) when they get a ride request, and can accept or deny the request.
  7. Payments can take place on-chain or (more likely) using a Layer 2 system like the Lightning Network. The Matchmaker or other pre-determined arbitrator could be a signatory on a multi-sig transaction between the driver and passenger to prevent either from getting ripped off. Of course, they could also use any other agreed upon payment method.
  8. Issues are resolved either by insurance companies or Matchmaker customer service (or both, or some other third party – this can all be negotiated manually or automatically beforehand via the Doober app). Matchmaker servers can broker reputation exchanges and keep track of the complete reputation history to ensure that quality standards are met. Drivers and passengers can link their reputation history to their blockchain ID so that it is easily portable. If the reputation rating of a driver or passenger falls below a pre-determined threshold, the Matchmaker can suspend or delete their account. Matchmaker servers can gossip the reputation ratings of blockchain IDs with other Matchmaker servers to help prevent hit-and-run/exit scam scenarios.

As you can see, there are quite a few steps involved, but really not that much more than is involved with signing up for Uber today. Whether decentralizing Uber like this is worth the extra friction for customers or actually solves any real problems is up for debate.

I think there’s value in giving people more choice about who they share their data with, and breaking people out of silos and proprietary networks gives them more leverage to control their online relationships. The fact that there can be redundancy between Matchmaker servers via federation could make the Doober network more resilient against censorship in jurisdictions that do not have a favorable view of companies like Uber. Then the targets of regulators will have to be drivers and passengers instead of big companies like Uber, the same way end-users of BitTorrent are the target of copyright enforcement instead of BitTorrent Inc. Is this is a good thing or a bad thing? Maybe time will tell.

Anyways, that’s how I would decentralize Uber.

Email is probably the most popular decentralized messaging protocol. Add yourself to my email contacts if you would like to stay in touch!

The Key Decision-Makers in Bitcoin

Over the past year, there have been intense debates about the future of the Bitcoin network. These discussions have mostly revolved around the topic of scaling Bitcoin, and several proposals have been put forward to address the question of how the Bitcoin network will scale to be used by the billions of people and machines we have on this planet. These scaling proposals are not all mutually exclusive, but nearly all of them involve a fundamental change to the Bitcoin protocol that would require what is called a “hard fork.” A hard fork is a change that would cause there to be multiple competing Bitcoin networks, all but one of which would die off as a majority of users decide to use the strongest network.i

Because of the potential to split the network, such fundamental hard fork changes are not deployed often. Planned hard forks require an orchestrated software upgrade by multiple stakeholders in the Bitcoin network. Since Bitcoin is a decentralized system that is not controlled by any central authority, whether or not such an upgrade is deployed and adopted by the network is determined by several key decision-makers that must agree to the change: Bitcoin developers, economic Bitcoin nodes, bitcoin-holding users, and bitcoin miners.

Bitcoin Developers

Bitcoin developers are the first group that must be convinced that a hard fork change is necessary. If the maintainers of popular Bitcoin implementations do not accept a proposed change, the only remaining options are to fork an existing Bitcoin node software repository or start developing a new implementation from scratch. Convincing developers of an existing implementation can be politically challenging, and starting a new implementation from scratch is a herculean task. Forking an existing project is the easiest route, but still requires convincing a majority of the network to use the fork in order for the change to be adopted by all Bitcoin users.

Economic Bitcoin Nodes

Economic Bitcoin nodes are full nodes that accept Bitcoin in exchange for other forms of value and include Bitcoin exchanges, wallets, payment processors, and businesses that accept Bitcoin in exchange for goods, services, and other currencies. If economic nodes do not upgrade their full node software when a hard fork change is introduced, then blocks that are produced by miners who do choose to upgrade will not be considered valid by nodes that have not upgraded and the blockchain will split. To everyone on the old chain, miners producing blocks with the new software will lose the block reward to a competitor producing valid “old chain” blocks. The economic majority will only choose to upgrade their software if they believe the change is a) beneficial for the long term value of Bitcoin and/or b) acceptable to most of their bitcoin-holding customers.

Bitcoin-Holding Users

Bitcoin-holding users that rely on the services of economic Bitcoin nodes have a choice of where to take their business. If an economic node such as an exchange, wallet, or merchant upgrades their Bitcoin node software to implement changes that their customers do not agree with, then those customers may choose to do business with another economic Bitcoin node instead. However, it is not always obvious what version of the Bitcoin software an economic Bitcoin node is running and so the best way for bitcoin-holding users to have influence over changes to the Bitcoin protocol is to run and rely on their own Bitcoin full node for block verification and transaction broadcasting. If a hard fork upgrade is proposed that a bitcoin-holding user does not want implemented, then they may voice their concern to the economic Bitcoin nodes they do business with in hopes of dissuading them from implementing the upgrade. Similarly, bitcoin-holding users can lobby the economic Bitcoin nodes they do business with to implement a hard fork change if that change is beneficial to them.

Bitcoin Miners

In the early days of Bitcoin, economic Bitcoin nodes were either nonexistent or not that important, and the roles of “full node” and “mining node” were largely bundled together. Bitcoin miners would use low-power laptop and desktop computers and did not have much of a reason to sell the bitcoin they mined to cover operational expenses. Since then, the price of bitcoin has risen dramatically and bitcoin mining has evolved to become a large-scale industrial operation. Bitcoin miners now rely on economic Bitcoin nodes to convert bitcoin into value that is then used to cover the costs of bitcoin mining. While a hard fork change will never be implemented if miners do not upgrade their software to support the change, miners will only upgrade their software if a majority of the economic Bitcoin nodes have also implemented the change.ii

It is a common misconception that Bitcoin miners are the final decision-makers about what version of the Bitcoin software is the “dominant” version that drives consensus in the Bitcoin network. The reality is that Bitcoin miners are just one of many stakeholders which must be convinced to upgrade their software, and for game theoretical reasons are actually most likely to be the last to upgrade their software in the event of a hard fork change being introduced. Most Bitcoin miners operate on thin margins and are therefore very conscientious of their revenue and costs. They will only run software that produces blocks that are accepted by a majority of the economic nodes in Bitcoin, who in turn will only upgrade their software if the change supports the long-term value of Bitcoin and/or is acceptable to most of their bitcoin-holding customers. Coordination is therefore required among all of these stakeholders to debate the merits of proposed hard fork changes and make hard but necessary decisions to ensure that the Bitcoin network continues to grow to support widespread usage.

Making Progress

If the Bitcoin protocol does not evolve to accommodate growing demand and new use-cases, then growth could stall and the unmet demand will be serviced by another competing network instead, potentially harming the long-term value of bitcoin and bitcoin mining equipment. It is therefore in the best interest of Bitcoin developers, bitcoin miners, bitcoin holders, and economic Bitcoin nodes to implement changes that support the growth of the Bitcoin network while maintaining Bitcoin’s key innovation as a decentralized solution to the double-spending problem.

iThe alternate networks may not die off if the hard fork change proposed is a change to the mining algorithm itself. In this case, there is a possibility that the miners on the old chain will continue mining and serving the users who prefer the status quo to the new mining algorithm.


ii A hard fork change could be implemented without miner support if the change is a change to the mining algorithm itself that renders the previous network of miners obsolete.

Email is probably the most popular decentralized messaging protocol. Add yourself to my email contacts if you would like to stay in touch!

From Platforms to Protocols

Last night I attended a great Sharers of San Francisco meetup organized by Chelsea Rustrum, an author and sharing economy consultant based here in the city. The event featured two presentations, one by Chelsea and another by Felix Weth, founder of the Fairmondo cooperative. The topic of this meetup was value creation and distribution, exploring ways that people can take part in the monetary wealth generated by the platforms they participate in. There were echoes of the recent Platform Cooperativism conference throughout the event. People are definitely interested in an alternative to the “Death Star” platform model that is taking up increasingly large parts of the economy.

At the meetup there was a lot of interest in the coop model of Fairmondo, with some attendees mentioning alternative methods of distributing monetary value back to platform members using automated smart contracts e.g. blockchains. A common desire that was expressed was for members to have a say in the direction of the platform, and for the platform itself to express the values of its members. It was pointed out that the challenges of scaling a cooperative with this model are not unlike the challenges of scaling democracy itself. And if the American experiment has shown us anything, it is that democracy does not scale well. How to reconcile these desires for both democratic participation and scale to compete with the likes of the platform Death Stars?

I believe that there is a third option which breaks the “capital vs democracy” dichotomy of corporate and cooperative platforms, and that is open protocols. An open protocol is a set of rules enforced by code which anyone can implement and integrate into their application. Open protocols can also be forked or upgraded at-will if they no longer serve the interests of their users. Protocols govern the interactions between users without the need for third-party enforcement; protocols are self-enforcing and are usually governed by meritocratic rather than democratic processes i.e. changes are made based on the technical merit of a proposal rather than popular support alone (though technical merit can lead to popular support). The requirement for technical merit when deciding how to change a protocol can make protocols less susceptible to the corruption present in corporate settings and more resilient against the challenges with democracy present in cooperative settings.

The primary benefit of open protocols over both corporations and cooperatives is that an open protocol is owned by no one. There is a creator of the protocol who sets the initial parameters, but users are completely free to adjust the parameters to their own liking after the protocol is released. In the case of protocols which have strong network effects, the process for changing a protocol can be difficult once adoption reaches a certain threshold, since coordination between all necessary parties can be difficult without a central coordinating authority. Open protocols thus tend towards simplicity rather than complexity, making it more likely that more people will use the protocol since there are less details to debate over. Any advanced features that users desire are built on top of the protocol instead. Consider the history of TCP/IP vs OSI; TCP/IP, despite being a technically inferior protocol, won the network effect because it was “good enough” for most people who wanted to join the Internet.

Within the past decade or so, many open protocols have been invented that can be used to assemble platforms that can replace the corporate Death Stars. Here are a few of my favorites, with additional examples that are still in development:

Bitcoin – a protocol that can be used for transferring value, alternative to money transfer platforms like PayPal (see also: Ethereum, ILP)

Bitmarkets – protocol for trading goods and services, alternative to marketplace platforms like Amazon (see also: OpenBazaar, DropZone)

IPFS – protocol for file storage, alternative to cloud storage platforms like S3 (see also: StorJ, Sia, SAFE network, Syncthing)

Ripple – protocol for creating mutual credit networks, alternative to lending platforms like Prosper

Tent – protocol for content sharing, alternative to social media platforms like Facebook (see also: DattTrsst)

WebRTC – protocol for real time communication, alternative to video messengers like Skype (see also: Tox)

XMPP – protocol for asynchronous instant messaging, alternative to communication platforms like Slack (see also: MatrixTelehash)

Is there a protocol that you like which you think can help break the proprietary network effects of the corporate Death Star platforms? Leave a comment below and let me know!

Email is probably the most popular decentralized messaging protocol. Add yourself to my email contacts if you would like to stay in touch!