The problem Bitcoin solves

The problem that Bitcoin solves is the reversibility of electronic payments. In the seminal Bitcoin whitepaper, Satoshi Nakamoto wrote,

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments…

Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes…

With the possibility of reversal, the need for trust spreads… A certain percentage of fraud is accepted as unavoidable.

These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

The solution that Nakamoto devised to solve the problem of reversible payments was,

… an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.

Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

The result was Bitcoin, which has continued to deliver as a solution to the reversibility problem since it went live over eight years ago. The means by which Nakamoto solved the reversibility problem was by eliminating the need for a trusted third party that could willingly or unwillingly reverse transactions. In place of a trusted third party, Nakamoto used a chain of cryptographically-signed transactions secured by proof-of-work to order and validate payments. And thus, the blockchain was born.


Today, the blockchain is used to securely order and validate more than just payments. People have figured out how to use the blockchain as a way to prove that a digital file existed at a certain point in time, creating a so-called “proof-of-existence“. People are also exploring how to use the blockchain to track ownership of all kinds of digital assets including domain names, game tokens, stocks and other financial instruments, and even real property titles.

The reason that people are using Bitcoin for these transactions instead of any other system for recording ownership information is precisely because of Bitcoin’s security. At the time of this writing, Bitcoin block makers, or “miners”, collectively calculate over 30 billion SHA-256 hashes per second at a cost of approximately $15,000 per block using hundreds of millions of dollars worth of bitcoin “mining” computers. It would thus be extremely expensive to reverse a transaction with even one confirmation, ensuring strong security for transactions that are included in a block added to the most difficult valid blockchain.

For users to benefit from all this security, they must run their own full node and verify that their transactions are included in the most difficult valid blockchain. Then they can decide based on their risk preferences when to consider their payments “settled” based on how many confirmations they have. The more confirmations a given transaction has, the less likely it is to be reversed.

If you need strong assurances that when you receive a payment, that it can’t be easily reversed, then Bitcoin can solve your problem. If you need to be certain that when you create a record of ownership or proof-of-existence, that it will still be there when you go back to find it in ten years, then Bitcoin can solve your problem.  But if your problem doesn’t need sealed-in-stone-forever security, and you can get away with using a plain old database to record your transactions, then Bitcoin – and the blockchain – isn’t for you.

Addendum: what about bitcoin (the currency)?

When Satoshi created Bitcoin, he really created two distinctly valuable products that by necessity are joined at the hip: the first blockchain, and the first cryptocurrency. If the blockchain was created to solve the reversibility problem, then bitcoin was created to solve the blockchain’s incentive problem.

The proofs-of-work that are used to secure the blockchain require energy to create, and energy costs money. Since Bitcoin could not rely on any third parties to operate, no third party payment mechanism could be used to pay miners for the energy they spent generating proofs-of-work. A new payment mechanism had to be created – bitcoin.

By paying miners using a currency that is issued and transferred exclusively by the blockchain, Nakamoto provided an incentive to miners to protect the integrity of the chain. If any miners attempt to subvert the integrity of the blockchain by colluding to reverse transactions, then they would also subvert the value of the block reward, throwing away money on the table and threatening their investment in specialized mining computers.

The bitcoin currency therefore ensures that incentives are aligned between miners and users so that the implicit promise of irreversibility is upheld. Even after all the bitcoin is mined, miners will continue to prefer to be paid in bitcoin for transaction fees because it is a highly liquid digital asset free of counterparty risk.

Although bitcoin solves interesting problems on its own – such as providing a new “safe-haven” asset class to investors – its value is derived entirely from the security of the blockchain and the ability for users to easily verify that security. Without these properties, bitcoin as a currency would be no more interesting than WoW Gold or Linden Dollars. It’s important to remember that bitcoin is a means to an end, and not the end itself: an irreversible electronic payment system.

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

Book highlights: Organisation of the Organisationless

The book highlights I’m sharing today are from a book called Organisation of the Organisationless, written by Rodrigo Nunes and published by Mute. This book “shows how social and technical networks can and do facilitate strategic action and fluid distributions of power at the same time.” There are two key insights that I pulled from the book, although the content is really great throughout:

  1. Networks are not and cannot be flat.
  2. Network-systems are not leaderless, they are leaderful

Networks are not and cannot be flat

This insight says to me that the natural state of a network is hierarchical. This can be seen in all kinds of networks, even, I would argue, networks that intentionally try to structure themselves as flat through the implementation of various kinds of egalitarian rulesets. There will always come to be “super nodes” that have more influence than others. The best it appears we can do is to try and limit the kind and amount of damage that any one of these super nodes could do to the network should they be compromised or otherwise go rogue.

Network-systems are not leaderless, they are leaderful

Although there is no one in charge of network-systems, they are not leaderless. They are in fact “leaderful”, in that because anyone can take on a position of leadership since there is no one in charge to stop them, the network ends up with many leaders with varying degrees of influence. This is similar to one of Rick Falkvinge’s Swarmwise tactics, which is to empower everyone in the swarm to take initiative and not wait for direction or ask for permission before acting.

I really enjoyed reading this book and thinking about how its insights applied not only to activist networks like Occupy and the Arab Spring, but also computer networks like Bitcoin and Bittorrent. I’ll be writing more about these ideas in the future. In the mean time, enjoy the highlights!

“Organisation of the Organisationless” book highlights

A network logic structures the everyday lives of most people, from the way they work to how they interact in their leisure time, so that networked organisation is literally what ‘comes naturally’ to them – which makes it easy to understand why they would see formal organisation as an avoidable, unnecessary risk.

It is important to keep descriptive and prescriptive theories apart not because the first are ‘real’ while the second are made-up (both are theories, and therefore constructions constantly tested against reality), but because we need to keep our ideas of ‘how things are’ as distinct as possible from our ideas of ‘how things should be’ if we are to get a clearer sense of how, if at all, we can make the former into the latter. The effect that such a project should produce is neither bafflement nor surprise, but recognition: if anything discussed here is at all hidden, it is hidden in plain sight, and quite often it is the interference of prescription on description that will have kept it from view.

[R]egardless of whether one is for or against them, whatever solution to organisational and strategic problems can be expected today will in all likelihood come from within networks. This is not just because distrust of formal organisations is justifiably at an all time high, given the acute crisis of representation laid bare by the financial debacle, and the feeble response offered by most of the institutional left. It is also, and more crucially, because networked organisation is an everyday reality for everyone, including those who oppose it on principle, and is widely perceived as rendering formalised ties, if not obsolete, then at least not unavoidable. To put it somewhat more dramatically: even if a return to the party-form were found to be the solution, the party would no doubt have to emerge from existing networks.

It may be that, for the sake of clearing the way, the time has come to be openly polemical and say once and for all that networks are not and cannot be flat; that prefiguration cannot be a goal in itself; and that an idea like horizontality may have moved from a fresh, critical antidote to outdated ways of organising, to becoming an epistemological obstacle. ‘There comes a time when the mind prefers what confirms its knowledge over what contradicts it, that is, the answers over the questions’,8 and an ‘intellectual and affective catharsis’ may be needed to set it in motion again. Get rid of horizontality and replace it with what – the central committee? Democratic centralism? Evidently not. The point is not to abandon horizontality, prefiguration and other ideas, which are worthy ones even if their use might be only regulative, but to get rid of precisely the binary scheme by which to criticise or relativise one thing is necessarily to slip into its opposite.

To decide that, because absolute horizontality is impossible, unaccountability and authoritarianism are justified, would be acting like the man who, ‘on realising that the mind is not eternal or immortal, … preferred to be mad and to live without reason.’

One of the distinctive traits of the present moment is precisely the way in which our heavily mediatised environment drastically enhances the reach, velocity and insistence (capacity to continue producing effects) of information and affect. This is more than a quantitative difference; it is a change in degree that produces a change in nature. It makes a huge affective difference that developments can be followed in real time, both because little of the affective charge is lost, and because response time is reduced: a sense of urgency can be produced even over large distances, and acting on it is an immediate possibility.

The combination of affective synchronisation, strength in numbers, and seeing those with whom they have strong ties join the protests lowers the thresholds of participation for ever more individuals, generating a cascade effect that is perfectly performative: because something is happening, I join in and get others to join, ensuring that there will be more of whatever is happening.

The amplitude of an event of this kind will be proportional to how successfully it taps into a social malaise that has brewed for some time without finding any outlets, such as the social impacts of economic stagnation, as in Europe and the US, or the social costs of economic growth, as in Turkey and Brazil. The more public the expression of this malaise becomes, the more people are likely to see the need and the possibility of moving from indignation to action. The more people manifest a disposition to act, the more widespread it becomes.

While ‘clicktivism’ has been (rightly) criticised from different quarters, when this kind of process approaches a critical threshold, there is a growth in the number of ties and a progressive strengthening of ties that amounts to an overcoming of ‘clicktivism’. This could be described in Facebook terms as a passage from ‘like’ to ‘share’ and ‘friend’, then ‘comment’ to ‘confirm participation’, and finally actual participation in actions, online and offline, at which point new, non-digitally-mediated, strong and weak ties will be created. At the same time, the expanding digital layers of the network-system function as a space in which ideas can be circulated and ‘tested’ (through metrics such as ‘likes’ and retweets) as potential candidates to the role of ‘structural germs’ which provide focal points and basic protocols for collective action.

The choice for either dispersion or unification is not inscribed in advance in the notion of a network-movement. On the contrary, the idea of network-movement opens the possibility that several ways of combining the two – swarming, distributed action, diversity of tactics, institutionalisation, forking, even (why not?) parties – can be selected according to what the occasion requires. Once these are considered in the context of a network-system, the point is not what solution is valid for the whole, but what solutions work within the whole. There is no need to find a single answer to what everyone must do – it is no wonder these should appear unlikely, given the number of variables being dealt with, but instead the need to find the mediations which, through their interaction, enhance the whole system’s capacity to act. The point is to create something more than mere alliance building (where the parts, understood as constituted groupings of people, are supposed to stay the same, only co-operating punctually) and less than a one-size-fits-all solution (e.g., the idea of the party). This is about strategic interventions that can attract both constituted groups and the ‘long tail’ that does not belong to any groups, pitched not as exclusive but as complementary, whose effects can reinforce each other.

[N]ode degree (the number of ties each node has) is subject to a power law, a statistical distribution generating a curve in which a relatively small number of highly connected nodes (hubs) is followed by a sharp drop to a long tail of nodes with slowly decreasing node degrees. Among the first to observe the same phenomenon across various different kinds of networks were Albert-Lázló Barabási and Réka Albert, who proposed in 1999 a model of network formation that directly connects growth and scaling: as (most) networks expand, they produce this kind of statistical disparity. So this would be the bad news: our networks are not only unequal, they are so by mathematical necessity, and this is directly connected to how they develop. The consequence is inescapable: if by ‘horizontality’ we mean a situation where each node would have exactly the same degree or weight in a network as every other node at any given time, networks cannot give us that. That they cannot is not contingent or accidental, nor a temporary condition to be overcome, but an intrinsic property of what they are and how they grow. This does not come without good news, however. Firstly, the presence of power laws is widely recognised by scientists as a likely sign of a Distributed Networks and Distributed Leadership self-organising system. (Though, it must be stressed, networks do not appear to self-organise their way out of power laws.) Secondly, this kind of network – called scale-free because it has no ‘average’ nodes to speak of – occupies ‘a sweet spot between the unbuildable and the unusable’, in that it is because of highly connected hubs that clusters can communicate with each other through counterintuitively short paths between distant nodes, the so-called ‘small-world’ effect. This also makes scale-free networks ‘highly resistant to random damage, since the average person doesn’t perform a critical function’ and so only a selective attack to several hubs at once could take them down. This places the network-systems of current struggles somewhere between the last two models put forward by Paul Baran, the ‘decentralised’ (each cluster presided over by a hub) and the ‘distributed’ (mesh- like).

[T]he proliferation of ties constantly produces redundancy, creating alternative paths between nodes that counteract the tendency for hubs to become critical to the network’s functioning. This continuous internal differentiation entitles us to describe them as distributed, even if, especially in their sparser peripheries and among small-degree nodes, we have something closer to a decentralised architecture. To sum up: these are not horizontal movements, but distributed network-systems – whose participants may or may not espouse the ideal of horizontality – which are subject to continuous internal differentiation. Regardless of what individuals’ ideas about decision making, leadership and representation might be, and the practices that they derive from these, their general and most constant framework of interaction is best described, from the point of view of the system, as distributed leadership. It is not that there are no ‘leaders’; there are several, of different kinds, at different scales and on different layers, at any given time; and in principle anyone can occupy this position. That is, they are not leaderless but, if the poor wordplay can be forgiven, leaderful.

The potential for real-time diffusion and amplification that exists today has enabled a diffuse vanguardism in which initiatives can snowball exponentially and produce impacts far exceeding their original conditions.

Assemblies may or may not happen against the background of distributed leadership, which, being a property of the network-system, must happen; excessive focus on them amounts to reducing the network-system to the movement-system, and the movement-system to only one of its expressions. A successful initiative is not one that manages to capture the support of the entire network-system, but one that attains sufficient support to produce at least the effects it intends; success is relative to scale.

A clearer picture of power relations in a network-system can only emerge once we introduce considerations as to the quality of ties – their nature and intensity.

The simplest quantitative way to evaluate leadership as a network property is node degree: the more ties, the more capacity to influence other nodes. In directed networks – those in which ties are unidirectional, as in the internet, where a link in a webpage points to another webpage – a distinction can be drawn between out- and in-degree. This, in turn, determines a distinction between hubs and authorities, hubs being nodes with a high out-degree (they point to several other nodes), authorities being nodes with a high in-degree (several other nodes point to them).

These quantitative measures, however, indicate a potential, not necessarily its exercise. In fact, an important conclusion that follows from the dynamic nature of networks is that the continued existence of potential is to some extent dependent on its successful exercise. If a hub ceases to interact and route relevant traffic, its ties might go dormant or disappear, and traffic may be routed around it, reducing or eliminating its importance in connecting different clusters. If it routes bad traffic (spreads false information, misleads its ‘followers’, supports negative initiatives), it might have, if not necessarily a quantitative decrease in degree, a qualitative loss in trust or reputation.

Characteristics that are less strictly relational (capacity to inspire and motivate, charisma, empathy) evidently also come into play.

Leadership occurs as an event in those situations in which some initiatives manage to momentarily focus and structure collective action around a goal, a place or a kind of action. They may take several forms, at different scales and in different layers, from more to less ‘spontaneous’.

The most important characteristic of distributed leadership is precisely that these can, in principle, come from anywhere: not just anyone (a boost, no doubt, to activists’ egalitarian sensibilities) but literally anywhere.

More often than not, large assemblies result from initiatives, not the other way round.

Distributed leadership is therefore to be understood as the combination of a topological property (the presence of hubs) and two dynamic ones (hubs can increase and decrease, and new hubs can appear or, alternatively, nodes can ‘lead’ without necessarily becoming a hub or authority in the process). If the first of these entails that networks are constitutively unable to become the perfectly flat, totally transparent, absolutely horizontal media they are sometimes posited as at least potentially being, the latter two indicate the measure of democracy they can be said to have. Individual networks can of course be more or less democratic according to how distributed leadership potential is, and how open they are to new initiatives and hubs emerging. It is only if we understood ‘democracy’ as synonymous with ‘absolute horizontality’ that they could be called undemocratic. Horizontality, despite being an impossible goal to achieve, has its use as a regulative principle, indicating the need to cultivate the two dynamic properties of distributed leadership.

There is a place for strategic interventions which are not aimed at totalising the network-system, but do not leave things in the hands of a blind ‘process’ that is presumed virtuous.

In any collective sport, a good team is neither one in which one player organises the whole game, nor one in which each player does their own thing, but one in which all players are equally aware of all the movements on the pitch, and capable of occupying whatever spaces need occupying – even when that means staying put.

It is through an awareness of a diverse ecology of agents and interactions and the political potentials offered by the conjuncture that interventions can be devised.

Not everyone needs to back an initiative, although it requires support proportional to its aims; but what is backed is not a group or position that exists outside the strategic wager which the initiative embodies, but the wager itself. This amounts to occupying the vanguard- function, or being a vanguard, without vanguardism.

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

Book highlights: “Swarmwise” by Rick Falkvinge

This year I started highlighting passages in books I’m reading on my Kindle. I have wanted to share these highlights in some way that is useful to other people, so I decided that I would start posting them here on my blog along with any useful commentary that I might have to add. I have tried formatting the highlights as best as possible for this medium. Kindle does not include precise page numbers with highlights, since book pages can change based on the size of the font and the screen the book is displayed on. If you want to look up any of the highlights in your own copy of the book, you can use the search bar in your ebook or PDF reader to find them.

The first book I’d like to share highlights from is called Swarmwise by Rick Falkvinge, founder of the Swedish Pirate Party. This book is a blueprint for launching a “swarm” organization, based on Falkvinge’s firsthand experience launching the first Pirate Party. He provides lots of practical advice throughout the book, including do’s and don’ts for prospective swarm leaders.

It is interesting to compare Falkvinge’s advice and experiences in Swarmwise with what has been happening (or not happening) in a swarm that I have participated in for a few years now, the Bitcoin network. For example, he says:

I believe that leaderless swarms are not capable of delivering a tangible change in the world at the end of the day. The scaffolding, the culture, and the goals of the swarm need to emanate from a founder.

Bitcoin had a founder, Satoshi Nakamoto, who provided some degree of leadership and direction in the early days. But Satoshi has since left his leadership position in the organization and did not leave a detailed roadmap behind for how Bitcoin would continue to evolve. The closest thing Bitcoin has to a “leader” today is Wladimir van der Laan, the lead maintainer of Bitcoin Core, who took over after Gavin Andresen, Satoshi’s successor, left his position as lead maintainer in 2014.

As people have begun to question the priorities of the Bitcoin Core developers, competing development teams have emerged that seek to make fundamental changes that would split the network away from Bitcoin Core. Of course, this is how it could have turned out even if Satoshi had stayed. No one was forced to follow Satoshi, and some people could have decided that his choices were not correct and that other strategies and tactics should be pursued instead, leading to similar hard-fork debates. Still, it has been educational to watch the drama that has played out in the leadership vacuum left by Satoshi’s absence.

I could provide similar Bitcoin-related examples for many of the other highlights I pulled from the book, but in the interest of brevity I will stop here and let you enjoy the highlights.

“Swarmwise” book highlights

Focus in the swarm is always on what everybody can do.

[S]ome work will be a duplication of effort since many people will be working on the same thing when nobody gets to tell other people what to do — but the result will be several solutions that are tried in parallel, and the swarm quickly learns which solutions work and which don’t.


The typical support functions needed are PR/media, activism, swarmcare, and web.

People should not be appointed to these positions just because it’s fun to have a title; rather, the organizational chart should lag slightly behind the observed reality.

If you’re not taking care of yourself, you’re not taking care of your swarm.

On the flip side of that coin, understanding, patience, collegiality, and passion are values that you want to show. Be aware of your own mood, and know that the swarm copies you — whether you are behaving in ways that set the swarm up for long-term success or catastrophic infighting, the swarm copies your behavior in more detail than you can notice consciously.

One value that you must absolutely communicate for the swarm to work is trust. You need to trust in people in the swarm to further the swarm’s goals, even if they choose a different way of doing so than you would have chosen, and even if you can’t see how it could possibly work.

[I]f three activists agree that something is good for the organization, they have a green light to act in the organization’s name.

Asking permission is asking somebody else to take accountability for your actions.

If something doesn’t go as intended, the swarm learns from it and moves on. On the other hand, if something is wildly successful, it gets copied and remixed across the swarm with new variants to get even better.

Control the Vision, but Never the Message

People’s friends are better marketers toward those people than you, for the simple reason that they are those people’s friends, and you are not.

[I]f you have a large assembly of people who are forced to agree on every movement before doing anything, including the mechanism for what constitutes such agreement, then you rarely achieve anything at all.

If the swarm were allowed to start discussing its purpose in life, then it would immediately lose its power to attract new people — who, after all, feel attracted to the swarm in order to accomplish a specific goal, and not out of some general kind of sense of social cohesion. If the goal is vague or even under discussion, the swarm will not attract people — because they wouldn’t see the swarm as a credible or effective vehicle for realizing their goal. After all, the goal of the swarm is uncertain and unclear if it is under discussion, so what goal would we be talking about in the first place?

The scaffolding, the culture, and the goals of the swarm need to emanate from a founder.

I believe that leaderless swarms are not capable of delivering a tangible change in the world at the end of the day. The scaffolding, the culture, and the goals of the swarm need to emanate from a founder.

I also believe in competition between many overlapping swarms, so that activists can float in and out of organizations, networks, and swarms that best match the change they want to see in the world. One swarm fighting for a goal does not preclude more swarms doing the same, but perhaps with a slightly different set of parameters from a different founder.

“If you see something you don’t like, contribute with something you do like.” This rule is absolutely paramount, and it is you who must enforce it.

[P]eople getting angry with you is a symptom that you’re starting to cause change, that you’re starting to succeed in your mission. This is expected and should not be feared.

When people in the swarm get criticized by the public and by influential people, that is a sign you’re on the right track. This is not something to fear, this is something to celebrate, and everybody in the swarm must know this.

If somebody says you’re all morons and clowns, that’s a sign you’re on the right track. If they get angry with you, that’s even better. This doesn’t mean you can’t listen to feedback and learn from it. But it should never, ever, be feared. This is paramount.

Having that folder with more information as a backup for the flyer helps in this scenario, too.

Ideally, the handers-out carry two stacks of items to hand out: one flyer, which is the main event of the day, and one folder with more information about the swarm to give to people who ask for more information. Some will.

[S]ome people will inevitably crumple up the flyer or tear it to pieces and throw it with contempt in the street. Make sure that everybody in the activity picks up such litter and throws it in proper trash cans — otherwise, people will register the swarm’s colors and symbol as trash in the street, and associate negatively from there.

Accountability and authority must always go hand in hand as they are delegated. The takeaway here is that authority and accountability must always follow each other in the concept of responsibility.

The trick, then, is how to communicate the vision. If I had to give a quick answer to that question, it would be “with all the passion you can muster, from the depths of your heart, through the fire of your voice and the determination of the depth of your eyes.” You need to be positively radiant with your desire to change the world for the better, and, above all, communicate three values:
— We can do this.
— We are going to change the world for the better.
— This is going to be hard work for us, but totally worth it.

A subtle but important part of leading a swarm is to always talk in “we” form.

Keep saying “This is hard work”, “This will change the world”, “We can do this.” We are going to change the world for the better: Keep repeat- ing your vision of how fantastic the world will look after the swarm has succeeded in its ambitions, and how great it would be for humanity as a whole.

[A] swarm built on distrust would quickly be devoured from within by its own negative feelings, and collapse, splinter, and fragment into irrelevance.)

This is going to be hard work: One key value you must never falter on is your honesty. You must always communicate the situation of the swarm and its place in the world exactly as you perceive it, even if that means telling people that the swarm has problems or isn’t gaining momentum. (However, you should always think of at least one way out of a bad situation, and communicate that, too — as in we can do this.) The key point here is that people should not think that changing the world for the better is going to be easy or come lightly. You said totally possible. You didn’t say easy.

A key tool in project management is the timeline. Between now and success, you will need to set subgoals to be met that are spaced about eight weeks apart.

The key to shipping on schedule at the end of a project is to stay on schedule every day. This doesn’t mean that a failure to adhere to the schedule is a failure of the swarm; rather, you as a project manager should have anticipated possible deviations in both directions from the start and allowed for them in the plan. When making development plans, it is typically prudent to leave 10 percent of the time of every subgoal unallocated for unforeseen events. Only you can know how this translates to your swarm, but the key is to adjust the schedule and the plan every day to account for changes in a fluid reality.

Make all the targets visible and show the progress toward them.

Anything that you measure in public, people will strive and self-organize to improve.

You should pay particular attention to the fact that as you increase the number of metrics visualized, the tasks that don’t get measured at all will get less priority. Some of them may be important.

It is a vital part of the leadership role to personally train those who regard you as their leader. When somebody is entirely unskilled in an art, you need to give direct, specific, and explicit instructions.

You need to assess every individual you work with here — you need to assess where everyone is on this scale in his or her specific context. He or she may be in several different places at once if he or she is working in multiple contexts.

Finally, the fourth and final stage is when somebody is self-motivated and self-reliant. At that point, he or she has more or less ascended to be your equal and doesn’t require much in the way of maintenance. The only important thing is that you periodically recognize him or her when he or she walks an extra mile.

The third stage comes when somebody is proficient in the skills needed, but still not in his or her comfort zone. He or she has the skills and the ability to deliver, but just doesn’t know it yet. This makes for yet a third type of leadership, which basically is endless encouragement.

The next stage and type of leadership is applied when people have mastered the basic actions, but are getting frustrated over their lack of context. They don’t see the road ahead and don’t feel progress. At this stage, you need to drop the direct handholding leadership and encourage and explain why these actions lead to positive results.

At this stage, you need to focus on the actions to take and how to do them properly, rather than explaining their purpose in the greater scheme of things.

Groups, too, will pass through stages. When new people first meet in a working environment, you can observe them being very polite and friendly with one another.

Over time, as these individuals learn to work together, they also explore where their limits go, and these limits of people’s roles will start to collide and flow into one another. This is when they start fighting between themselves over rules and culture in the group. This is a significant step forward from overfriendly politeness and shows that the group is well on its way to becoming a well-functioning team.

Finally, in the third phase, you see nothing of the clearly marked distances that were there at the outset. A functioning team can be observed by everybody seeming to know what to do without any- body spelling it out; the group has learned how to work together. (If new people are added to the mix, the group temporarily reverts into determining roles, culture, and boundaries.) You need to be aware of these group phases in group psychology, and, in particular, you need to know that a small amount of conflict is actually a step of progress. A group that remains polite to each other has not learned to work well together.

People that are polite to each other have not yet learned how to work as a team.

The swarm must have mechanisms for conflict resolution, for decision making, and for reward culture. There are many ways to accomplish this. A traditional voting democracy is one of the worst.

So, in effect, there are two good ways to resolve conflicts in a swarm. The first is organizational, and means that we negate the possibility of one person determining what another can do in the first place. Nobody gets to tell anybody else what to do. This is the norm for a swarm. Some people call it a “do-ocracy.” The second effective method is a consensus-making decision process where everybody can veto the way forward. This method is much more costly, but can (and should) be used in rare and carefully selected scenarios where the number of people concerned is graspable – typically 30 or less. Be careful with establishing consensus decisions as an organizational requirement, though – it would be extremely cheap for an adversary to kill the operational ability of the swarm by putting one person in the group to veto every significant decision.

[A] swarm is legitimate only because it lets every individual include himself or herself on his or her own terms in order to further the swarm’s goals. Therefore, “democratic legitimacy” is a contradiction in terms in a swarm organization. The process of voting actively reduces the legitimacy of decision making and involvement, and should be avoided as much as possible.

Asking permission is asking somebody else to take accountability for your decision.

For if it doesn’t matter how many safeguards you put in place against PR gaffes, there is no point to bother with such safeguards in the first place. Instead, you can focus on optimizing the swarm for speed, trust, and scalability, and we can communicate to the swarm that mistakes will happen, and when they do, we fix them, learn from them, and move on. My approach for a very basic sanity check was to have three people agree on an idea as good for the swarm. One person can come up with ludicrous ideas, but I’ve never seen two more people agree on such ideas.

By communicating clearly that in this swarm, you’re not only allowed to make mistakes, but expected to do so from time to time, you encourage the bold attitude required to change the world. You need not only your own crazy ideas, but the crazy ideas of many others to succeed, and you need to create the climate where they are welcome and rewarded.

You must let the unknown be tried and evaluated to find the good stuff.

We have discussed the importance of optimizing the swarm for speed — as in minimizing the time from somebody’s idea to somebody’s action. But to truly outrun the competition, you need to minimize the iteration cycle — the time from a failure to the next attempt at succeeding. Make it possible to learn and try again, learn again and try again, and so on, and communicate that this is not only allowed, but expected.

[I]t’s not necessary to speak of failures, as most people won’t see a failure — they will see something that went reasonably OK, but which can be done even better the next time. That’s also the appropriate mind-set for maintaining a positive attitude.

Activists make friends and change the world, and that’s it, from their perspective.

The swarm is a disorganization by design. Some would prefer to call it a self-organization. In either case, there’s nobody assigning everybody to boxes, tasks, and activities. That’s why the organization works so well. Organizing it in the manner of organizational astronauts kills the swarm’s ability to function as a swarm. You need to make absolutely clear to these people that the swarm works by its own consensus, that decisions are made organically by individual activists flowing to and from initiatives of their own accord, and that this swarm is your initiative; if the wannabe fixers and organizational astronauts don’t want to play by the swarm’s rules, they need to use the law of two feet themselves, and go somewhere else. Watch out for organizational astronauts that want to “fix” the organization.

At the end of the day, we have a structure that can handle budgets and money, and that is the supporting scaffolding structure we discussed in chapter 3. It becomes the duty of the officers of the swarm to distribute resources in the most effective way to support the end goals through the initiatives of the activists. In this particular aspect, the swarm will resemble a traditional top-down organization in terms of allocating its resources in a decentralized manner. You, in control of the swarm’s formal name and resources, allocate budgets to officers, who subdivide their budget in turn. With this said, once the swarm has any money to speak of, a sizable chunk of it should be devoted to supporting individual activists’ initiatives where they can reclaim expenses. The swarm lives and dies with the creativity and initiatives of its activists.

It follows that we reward exemplary activist behavior with our attention, and completely ignore things that we want to see less of. Anything that we focus on in the swarm, for whatever reason, will grow in the swarm.

So what behavior do we want to see growing? Initiatives. Even initiatives that fail. Supporting others. Actually, this one is quite important. I frequently emphasize that helping others excel is just as valuable as excelling on your own. Creativity and sharing ideas. Helping people get along. While these are just examples, the criteria for rewards tend to converge on three key factors — helping the energy, the focus, and the passion of the swarm.

[I]f you should ever need to repurpose or regoal the swarm, you need to get a very high level of buy-in for this. You need to be aware that there will be a high degree of pushback, as your new goal or method isn’t why people have joined. The costs will be high, but sometimes, it will also be the only way through, if the swarm has learned that the initially pictured goals or methods for attaining them weren’t possible. In such a scenario, voting may be the only way through. In doing so, you will create losers, many of whom will leave the swarm permanently with a bitter aftertaste. But if the alternative is to accept the failure of the swarm as a whole, it is still the preferable option.

This brings up a number of problems. How do you determine who has the right to vote in a loose network? Everybody who wants to? Everybody who has left his or her contact details as an activist? Anybody who is a paid-up member of something? The last option will certainly be perceived as offensive to a lot of activists, for example — that influence can and must be bought and paid for, rather than deserved through effort and ideas, which is the swarm way. In such a process, it is absolutely imperative that everybody is feeling included. This sounds easier than it is. There are many ways to exclude people in practice from influencing the final outcome. If you call a physical meeting in a specific location, you exclude the people who are unable to get to that location on that time, for whatever reason. If you choose to discuss and vote during several hours on a Saturday, you are excluding parents who prefer to spend time with their kids. If you instead pick evening hours on weekdays, you will exclude people who work late. If the issue to vote on is reasonably complex, you are excluding people who can’t take themselves the time to absorb the details of it.

[Y]ou need to identify the reward mechanisms within the subgroup that has formed around the maverick. Odds are that they’re forming a group identity around not being recognized as individual activists. You can shatter this identity by recognizing good contributors in the group who are hang-arounds of the maverick; odds are that there are several good contributors in that group who are just temporarily wooed by the maverick’s charisma. If you pick away a couple of key people in this group and recognize them for good earlier work — unrelated to the maverick’s yells — you will isolate the maverick, and the disturbance will lose critical mass. Always remember that an organization is people, and that attention is reward.

You should keep reminding the entire swarm about the organization values regularly, as part of your heartbeat messages, which we’ll be discussing in the next chapter — both to reinforce the values to old activists and to introduce them to new activists. Describe one value in every or every other heartbeat message. Needless to say, you also need to practice what you preach.

You also need leadership guidance and tons of empty positions in the organization that new activists can fill…

Above all, we need to defend two things in all our actions:
— The organization’s focus. We’re going to make the parliamentary threshold. Everything we do must be aimed at that.
— The organization’s energy. It is incredibly easy to get drained of energy if you start feeling negative vibes. There is a need for a constantly reinforced we-can-do-this sentiment.

Monkey see, monkey do. We are role models. We act just the way we want other people in the organization to act.

Attitudes are highly contagious, so, therefore, we make sure to have a positive and understanding attitude. We spread love, trust, energy, and enthusiasm.

[A] decision that makes harmfully large portions of the organization upset about the decision in itself should be rescinded. This calls for an independent striking of a balance between making independent decisions and our dependence on the trust of the affected to keep making decisions…

Decisions shall be used to strengthen the organization’s energy and focus, and a decision that makes harmfully large portions of the organization upset about the decision in itself should be rescinded. This calls for an independent striking of a balance between making independent decisions and our dependence on the trust of the affected to keep making decisions, and the grayscale is quite large.

In a swarm, nobody can or should be told what to do. We do not have any kind of mandate to point at people and tell them to do things. Rather, we must inspire them to greatness.

We reward our colleagues as often as we can, both in public and private, when they display a behavior we want to reinforce. In particular, this goes for activists who advance their colleagues. We praise and reward individual brilliance as much as helping others to shine. This is important.

Every behavior that gets attention in an organization is reinforced. Therefore, we focus and give attention to good behavior, and, as far as possible, we completely ignore bad behavior.

Even if we have great tolerance for mistakes and bad judgment, we do not show tolerance when somebody shows disrespect toward his or her colleagues, toward other activists. Condescending argumentation or other forms of behavior used to suppress a co-activist is never accepted.

If the bully continues despite having the behavior pointed out, he or she will be shut out from the area where he or she disrespects his or her peers, and if some friend reinvites him or her back just for spite, we will probably shut off the friend, too. We have absolute-zero tolerance for disrespect or intentionally bad behavior against co-activists.

We communicate using the model “When you perform action X, I feel Y, since I perceive you think Z,” possibly with the addition “I had expected A or B.” An example: “When you give the entire budget to activism, I feel frustrated, as I feel you ignore our needs for IT operations. I had expected you to ask how much it costs to run our servers.” This creates a constructive dialogue instead of a confrontational one.

We never say “Many people feel…” or try to hide behind some kind of quantity of people. Our opinions are always and only our own, and we stand for them. The one exception is when we represent an organization in a protocolled decision.

We try to keep administrative weight and actions to a minimum, and instead prioritize activism. It is incredibly easy to get stuck in a continuously self-reinforcing bureaucratic structure, and every formal action or process needs to be regularly questioned to evaluate how it helps activism and shaping the public opinion.

We build social connections. We meet, and we make others meet.

We develop our colleagues. We help everybody develop and improve, both as activists and leaders. Nobody is born with leadership; it is an acquired skill. We help each other develop our skills, even in our roles as officers and leaders.

Having fun in the swarm is crucial to growing the activist base. Having fun in the organization is crucial to success. You need to make sure that you and your colleagues, all several thousand of them, have fun.

Success in a swarm doesn’t happen smoothly and fluidly. It happens in hard-to-predict enormous bursts. You may have spoken about a subject for a good year or two, seeing no return on your efforts at all. Then, something happens, and more or less overnight, tens of thousands of people realize you have been right all along and join your swarm for the fight.

However, we should not confuse persistent day-to-day grinding with a refusal to see roadblocks for the uptake of the swarm’s ideas. If people tell you that your website is confusing, that the officers of the swarm are inaccessible, or that new people who come to gatherings aren’t feeling welcome, those are real issues and should absolutely not be taken as a sign to just keep doing what you’re already doing. Everybody needs to listen for real blocks to adoption of the swarm’s ideas, all the time — but it’s when there are no such blocks coming, and there’s still no momentum, that everyday motivation can be hard to muster up. It is precisely at this point that one must keep grinding.

Don’t ever risk trading your swarm culture for temporary cash. Keep one value base.

Every single challenger party I spoke to that had failed pointed out the creation of several parallel organizations with their own legal identity as the one reason, or one of the primary reasons, that the party had failed. There’s an important lesson to learn from that. So keep your swarm to being one legal entity (if you bother to make it a formal legal entity at all).

The real strength of the swarm comes from cross-using online and offline friendships. Offline friendships are much, much stronger than online friendships and connections.

Thus, we need to use the reach of online tools and communication to make people want to talk about the swarm’s goals in their respective offline environments, where the possibility of recruiting new activists is much, much better than on a random web page.

[T]he people who are most active can’t recruit any new activists to the swarm themselves by talking to their friends. The people leading a swarm must be acutely aware that they cannot directly influence a single individual directly to join the swarm.

To enable such recruitment at the edge, a couple of key components must be communicated to the entire swarm at regular intervals in heartbeat messages.

Send a weekly letter with newsflow, sample rhetoric, urgency, and confidence.

Activation is a gradual process with many steps on the activation ladder.

The metric that matters is how many people you can mobilize to take action.

A lot of people in general want to be on the winning team in most contexts and will adapt their behavior to match it. Therefore, if you can make your swarm look like the winning team, regardless of your actual strength, 90 percent of your work is done. In marketing, this principle is based on the mantra that “perception is reality” — in other words, what’s real is what we perceive to be real. But the mechanisms go beyond that idea; perception also shapes reality… Control perception of who’s the winning team, and you become the winning team.

In the Swedish Pirate Party, a significant portion of our homepage was devoted to “People blogging about the Pirate Party.” Anybody who mentioned the Pirate Party’s name in a blog post — no matter in what context — got their blog post highlighted and linked from our front page. This could be accomplished fairly easily with automated processes.

People will behave as you behave on public discussion boards about the swarm’s ideas. Teach them to be polite and friendly, no matter how harshly and viciously attacked, and you’ll win wonders. Politics is a spectator sport, and so is arguing your case anywhere on the Internet. As they say in other spectator sports, “win the crowd.”

You need to be able to send a press release in 25 minutes, from idea to transmission.

[B]e provocative. If you’re not making somebody angry, you’re probably not doing anything useful. Have fun and make your adversaries angry at the same time: this does not only lead to more activists in the swarm, as we saw in chapters 7 and 8, but it also makes you really enjoy your work in the swarm. Plus, it guarantees you a load of media. Oldmedia just love provocative. Let’s take that again, because it is important: if you’re not making somebody angry, you’re probably not doing anything useful. Don’t be afraid of people yelling. That’s a sign you’re doing something right.

Gandhi once said, “First they ignore you, then they ridicule you, then they fight you, then you win.” This is eerily accurate in oldmedia’s portrayal of any disruptive or provocative swarm.

A key concept in dealing with oldmedia is “owning the issue.” Basically, it means that your swarm needs to be so tightly associated with the issues you drive or things you sell that whenever oldmedia come across a story on the topic, they call you for comments.

When working with oldmedia, the swarm needs one outward face, and one face only. This would typically be the swarm leader or founder (you). It is important to realize that this is an avatar face — it is not you as a person, but a face that represents a larger and very specific movement.

As your swarm starts to rise to prominence and success, you personally will invariably do so, too. This was probably never a goal of the swarm as such, but it is the way oldmedia’s logic works — they need a face to associate with every movement or organization, and if the movement is successful, so is that particular face. The danger lies in not realizing that people will regard everything you say as having much more weight than you place on it yourself at the time you say it. If your swarm is political, anything you do — or don’t do — will be interpreted as a political statement, everything from your choice of groceries to your pick of vacation resort.

Getting visibility in society is hard. Keeping it is even harder. As the founder, it is your job to explain that when things appear to be at their peak, all those lavish jobs and expensive toys are farther away than ever. At that point in time, the swarm has two of its toughest challenges ever to overcome — to remain steadfast on the extroverted track, despite the distracting glimmering riches on the horizon, and the fact that the visibility and success will fade even if the swarm continues exactly on its current course of action, and this can be a very tough thing to face emotionally.


You want to provide artificial light and heating to a billion people in developing countries? Or clean water? A swarm can make it happen. How about teaching five billion people rational thinking and scientific approach, in an attempt to end religious conflicts? Totally within grasp. Don’t shoot for the moon. Shoot for Mars!

Change doesn’t just happen, I say. Somebody always makes it happen. The final words of this book will therefore be the same words that close my presentations and workshops about cost efficiency in management and volunteer activism: Do you want to be that person?

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!