Decentralized Crypto-Finance: Blockchains, Automatic Markets, and Algorithmic Trust

A revolutionary set of concepts and underlying technology enablement has arisen in the form of blockchain technology. Blockchains allow the digital payments layer the Internet never had, and more broadly contemplate an era whereby all forms of secure value transfer could take place via the Internet. This includes all monetary assets (the cash or spot market) and all assets and liabilities over any future time frame (the futures and options market, mortgages, debt and equity securities, treasury issuance, and public debt).

The implication is not just that all modes of financial activity could be modernized, but that the very application of finance could be rethought. Scarcity has been the assumption for structuring economic systems for the production and distribution of scarce material goods. This no longer holds in an era of digital services, non-rival goods, and complementarity. Likewise, the governing assumption for the organization of financial systems has been the control or at least prediction of the future value of assets and liabilities. This too could change per the advent of decentralized technology like blockchains. A more rooted assumption that could also change is that any project requires financing, which would necessarily be in the form of debt capital.

One aim is to challenge the monolithic philosophical foundations of financial and economic systems. Within this context, another aim is to investigate the concept of synecdoche as applied to developing a theory of cost, pricing, and valuation that is not derivative of and so many layers away from, but more closely linked to the underlying asset or liability. My thesis is that new mechanisms such as algorithmic trust and automatic markets could allow departure from the mode of finance as currently conceived to alternatives that emphasize access over ownership, topological ranges over point values, and assurity over insufficiency.

Bots challenge Second Life's 3 million residents

Second Life est arrivée. The big news is not about the immersive world's meteoric growth, now topping 3 million residents after having only 100,000 residents a year ago. Neither is Second Life's USD $1 million a day economy making a lot of news.

Interestingly, what is making news is the in-world tension between avatars and bots. With their quicker reflexes, land buying bots have been beating avatars to the punch in purchasing scarce real estate as it becomes available. The land bots are alt instances, additional avatars controlled by the same person in order to be able to access the First Land privilege extended to newbies. Philip Linden recently stated that people have on average 1.25 avatars, suggesting that there are about 500,000 in-world alts.

The real challenge is that the groundswell of new residents has overwhelmed Linden Lab's ability to provide new land resources, thereby triggering a huge digital scarcity. The bots appear to be an example of human ingenuity in attempting to obtain a scarce resource. The bots are not illegal however disgruntled residents have been lobbying Linden Lab to oppose bots and Linden Lab has agreed to look into the possibility of including anti-spam captcha technology in the land-buying process.

The Second Life land buying bot friction is a microcosm of how humans are likely to respond to AGI, particularly if resource scarcity is at all an issue. The strong need of the human to speak out on emotion-driven issues such as fairness, ethics, sentimentality and perceived mistreatment should not be underestimated.

Off to build my bots...