Bootstrapping a Decentralized Autonomous Corporation, Part 3: Identity Corp

In the first two parts of this series, we talked about what the basic workings of a decentralized autonomous corporation might look like, and what kinds of challenges it might need to deal with to be effective. However, there is still one question that we have not answered: what might such corporations be useful for? Bitcoin developer Jeff Garzik once suggested that one application migh be a sort of decentralized Dropbox, where users can upload their files to a resilient peer-to-peer network that would be incentivized to keep those files reliably backed up. But aside from this particular example, what other applications might there be? What are the industries where decentralized corporations will not simply be a gimiick, but will rather be able to survive on their own merits and provide genuine value to society?

Arguably, there are three major categories where this is the case. First, there are the natural monopolies. For certain kinds of services, it simply makes no sense to have many hundreds of competing offerings all working at the same time; software protocols, languages and to some extent social networks and currencies all fit into this model. However, if the providers of these services are not held in check by a competitive market, the question is, who does hold them in check? Who ensures that they charge a fair market price for their services, and do not set monopoly prices thousands of times above what the product actually costs to produce? A decentralized corporation can theoretically be designed so that no one involved in the price-setting mechanism has any such incentive. More generally, decentralized corporations can be made invulnerable to corruption in ways unimaginable in human-controlled system, although great care would certainly need to be taken not to introduce other vulnerabilities instead; Bitcoin itself is a perfect example of this.

Second, there are services that violate government laws and regulations; the use of decentralized file-sharing networks for copyright infringement, and to a much lesser extent the use of Bitcoin on sites like Silk Road, are both examples. As Satoshi Nakamoto put it, “Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.” Finally, there are those cases where a decentralized network can simply maintain itself more efficiently and provides better services than any centralized alternative; the peer-to-peer network used by Blizzard to distribute updates to its massively multiplayer online game World of Warcraft is perhaps one of the purest examples.

The rest of this article will outline one particular idea for a decentralized corporation that can potentially open up a number of new possibilities in cryptocurrency, creating designs that have vastly different properties from the cryptocurrencies we see today while still staying close to the cryptocurrency ideal. The basic concept is this: Identity Corp, a corporation whose sole purpose is to create cryptographically secure identity documents for individuals that they could sign messages with, and are linked to individuals’ physical identities.

What’s The Point?

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Bootstrapping An Autonomous Decentralized Corporation, Part 2: Interacting With the World

In the first part of this series, we talked about how the internet allows us to create decentralized corporations, automatons that exist entirely as decentralized networks over the internet, carrying out the computations that keep them “alive” over thousands of servers. As it turns out, these networks can even maintain a Bitcoin balance, and send and receive transactions. These two capacities: the capacity to think, and the capacity to maintain capital, are in theory all that an economic agent needs to survive in the marketplace, provided that its thoughts and capital allow it to create sellable value fast enough to keep up with its own resource demands. In practice, however, one major challenge still remains: how to actually interact with the world around them.

Getting Data

The first of the two major challenges in this regard is that of input – how can a decentralized corporation learn any facts about the real world? It is certainly possible for a decentralized corporation to exist without facts, at least in theory; a computing network might have the Zermelo-Fraenkel set theory axioms embedded into it right from the start and then embark upon an infinite loop proving all possible mathematical theorems – although in practice even such a system would need to somehow know what kinds of theorems the world finds interesting; otherwise, we may simply learn that a+b=b+a, a+b+c=c+b+a, a+b+c+d=d+c+b+a and so on. On the other hand, a corporation that has some data about what people want, and what resources are available to obtain it, would be much more useful to the world at large.

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Bootstrapping A Decentralized Autonomous Corporation: Part I

Corporations, US presidential candidate Mitt Romney reminds us, are people. Whether or not you agree with the conclusions that his partisans draw from that claim, the statement certainly carries a large amount of truth. What is a corporation, after all, but a certain group of people working together under a set of specific rules? When a corporation owns property, what that really means is that there is a legal contract stating that the property can only be used for certain purposes under the control of those people who are currently its board of directors – a designation itself modifiable by a particular set of shareholder. If a corporation does something, it’s because its board of directors has agreed that it should be done. If a corporation hires employees, it means that the employees are agreeing to provide services to the corporation’s customers under a particular set of rules, particularly involving payment. When a corporation has limited liability, it means that specific people have been granted extra privileges to act with reduced fear of legal prosecution by the government – a group of people with more rights than ordinary people acting alone, but ultimately people nonetheless. In any case, it’s nothing more than people and contracts all the way down.

However, here a very interesting question arises: do we really need the people? On the one hand, the answer is yes: although in some post-Singularity future machines will be able to survive all on their own, for the forseeable future some kind of human action will simply be necessary to interact with the physical world. On the other hand, however, over the past two hundred years the answer has been increasingly no. The industrial revolution allowed us, for the first time, to start replacing human labor with machines on a large scale, and now we have advanced digitized factories and robotic arms that produce complex goods like automobiles all on their own. But this is only automating the bottom; removing the need for rank and file manual laborers, and replacing them with a smaller number of professionals to maintain the robots, while the management of the company remains untouched. The question is, can we approach the problem from the other direction: even if we still need human beings to perform certain specialized tasks, can we remove the management from the equation instead?

Most companies have some kind of mission statement; often it’s about making money for shareholders; at other times, it includes some moral imperative to do with the particular product that they are creating, and other goals like helping communities sometimes enter the mix, at least in theory. Right now, that mission statement exists only insofar as the board of directors, and ultimately the shareholders, interpret it. But what if, with the power of modern information technology, we can encode the mission statement into code; that is, create an inviolable contract that generates revenue, pays people to perform some function, and finds hardware for itself to run on, all without any need for top-down human direction?

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