Links 2018-07-09

My new series focusing on policy summaries made me realize that while the political world and Twittersphere may not discuss policy much, there are groups of people who research policy professionally and have probably covered some of what I want to do with my “Policies in 500 Words or Less” series.  So after looking around, I found that the Cato Institute has an excellent page called the Cato Handbook for Policymakers. It contains a ridiculous 80 entries of policy discussions including a top agenda of important items, a focus on legal and government reforms, fiscal, health, entitlement, regulation, and foreign policies. I will definitely be pulling some ideas from that page for future policy summaries.

I recently found the YouTube channel of Isaac Arthur, who makes high quality, well researched, and lengthy videos on futurism topics, including space exploration. I’d like to take a moment to highlight the benefits of a free and decentralized market in the internet age. Adam Smith’s division of labor is incredibly specialized with the extent of our market. Arthur has a successful Patreon with weekly videos on bizarre and niche topics that regularly get hundreds of thousands of views (24 million total for his channel), and they are available completely free, no studio backing necessary. Such an informative career could not have existed even 10 years ago.

The 80000 Hours Podcast, which was recently mentioned in our top podcasts post, had Dr. Anders Sandberg on (broken into two episodes) to discuss a variety of related topics: existential risk, solutions to the Fermi Paradox, and how to colonize the galaxy. Sandberg is a very interesting person and I found the discussion enlightening, even if it didn’t focus much on how to change your career to have large impacts, like 80000 Hours usually does.

Reason magazine’s July issue is titled “Burn After Reading”. It contains various discussions and instructional articles on how to do things that are on the border between legal and illegal, such as how to build a handgun or how to make good pot brownies or how to hack your own DNA with CRISPR kits. It’s an impressive demonstration of the power of free speech, but also important to the cyberpunk ideal that information is powerful and can’t be contained.

George Will writes in support of Bill Weld’s apparent aim to become the 2020 Libertarian Party nominee. I admit I wasn’t hugely impressed with Weld’s libertarian bona fide’s when he was running in 2016, but I thought his campaigning and demeanor was easily better than Gary Johnson’s, who was already the LP’s best candidate in years, maybe ever. I think a better libertarian basis paired with Weld’s political skills would be an excellent presidential candidate for the LP.

Related: last week was the 2018 Libertarian Party National Convention. I don’t know if it’s worth discussing or whether it’s actually going to matter, but I have seen some good coverage from Matt Welch at Reason and Shawn Levasseur.

I read this very long piece by Democratic Senator (and likely Presidential hopeful) Cory Booker at Brookings. It was a pretty sad look at current issues of employment, worker treatment, and stagnant wages. There was a compelling case that firms are getting better at figuring out ways to force labor to compete through sub-contracting out labor to avoid paying employee benefits. This leads to monopsony labor purchasing by large firms, squeezing workers who don’t have the same amount of market bargaining power. He also mentions non-compete clauses and growing differences between CEO pay and average pay for workers. I don’t have good answers to these points, although his suggestion of a federal jobs guarantee seems very expensive and likely wasteful. His proposed rules about stock buybacks also seem to miss the point. Maybe stricter reviews of mergers would work, but perhaps larger firms are more efficient in today’s high tech economy, it’s hard to know. Definitely a solid piece from a source I disagree with, which is always valuable.

Somewhat related: Scott Alexander’s post from a couple months ago on why a jobs guarantee isn’t that great, especially compared to a basic income guarantee. Also worth reading, Scott’s fictional post on the Gattaca sequels.

Uber might have suspended testing of self driving automobiles, but Waymo is going full steam ahead. They recently ordered over 80,000 new cars to outfit with their autonomous driving equipment, in preparation for rolling out a taxi service in Phoenix. Timothy B. Lee at Ars Technica has a very interesting piece, arguing the setbacks for autonomous vehicles only exist if you ignore the strides Waymo has made.

Augur, a decentralized prediction market platform similar to Paul Sztorc’s Hivemind (which I’ve discussed before), is launching on the Ethereum mainnet today. Ethereum has its own scaling problems, although I’d hope at some point sharding will actually be a real thing. But for now, transactions on Augur may be pretty expensive, and complex prediction markets may remain illiquid. That may mean the only competitive advantage Augur will offer is the ability to create markets of questionable legality.  Exactly what that will be remains to be seen, but this is an exciting development in the continuing development of prediction markets.

 

A Few Thoughts on Bitcoin

I have been aware of Bitcoin’s existence for a while, and while I was excited about it a few years ago, it had somewhat dropped off my radar. Perhaps because over the past few months, Bitcoin has seen a big increase in value, I started to revisit it and analyze it as a technology. My experience has been nothing short of breathtaking.

A few years ago, Bitcoin was pretty cool. I even wrote a paper about it, discussing the huge potential of the technology and decentralized, autonomous transactions could totally upend the banking industry. But back when I first got into Bitcoin, I was also interested in Austrian Economics, which I’m largely over now. Their focus on control of the money supply and dire warnings about the Federal Reserve weren’t really borne out by the rather mundane economic growth of the last few years.

Nonetheless, the Bitcoin community has been working on without me, and it has paid off: you can now use Bitcoin to purchase from all sorts of retailers, including Dell, Overstock.com, Newegg, and more. You can also buy all sorts of internet specific services, which to me seems like the clearest use case. These include Steam credit, VPNs, cloud hosting, and even Reddit gold.

The price has jumped up to over $1000 at the end of April 2017 (that’s over $18 billion in total market value of all Bitcoins), and it was briefly even higher a month ago on speculation the SEC would allow for a Bitcoin ETF. The ETF was rejected, but the potential of the currency remains. And technologically, Bitcoin is far more impressive than it was, most notably with a concept called the Lightning Network.

This technology would allow for instantaneous Bitcoin transactions (without having to accept risky zero confirmation transactions). These transactions would have the full security of the Bitcoin network, and would also likely allow massive scaling of the Bitcoin payment network. Drivechain is another project with great potential to scale Bitcoin and allow for applications to be built on top of the Bitcoin blockchain. It would create a two-way peg, enforced by miners, that allowed tokens to be converted from Bitcoin to other sidechains and back again. This would allow experimentation of tons of new applications without risk to the original Bitcoin blockchain.

Hivemind is particularly exciting as a decentralized prediction market that is not subject to a central group creating markets; anyone can create and market and rely on a consensus algorithm to declare outcomes. If attached to the Bitcoin blockchain, it also wouldn’t suffer from cannibalization that Ethereum blockchains like Augur can suffer from.

Mimblewimble is another interesting sidechain idea. It combines concepts of confidential transactions with (I think) homomorphic encryption to allow for completely unknowable transaction amounts and untraceable transaction histories. It would also do this while keeping the required data to run the blockchain fairly low (the Bitcoin blockchain grows over time). It would have to be implemented as a sidechain, but any transactions that occur there would be completely untraceable.

And there are even more cool projects: Namecoin, JoinMarket, the Elements Project, and of course other cryptocurrencies like Ethereum, Monero, and Zcash. This really makes the future of Bitcoin and cryptocurrencies seem pretty bright.

However, we’ve skipped a big point, which is that most of these cool innovations for Bitcoin can’t be done with Bitcoin’s present architecture. Moreover, the current number of Bitcoin transactions per block has just about maxed out at ~1800. This has resulted in something called the Scaling Debate, which centers about the best way to scale the Bitcoin blockchain. Upgrades to the blockchain must be done through consensus where miners mine new types of blocks, institutions running nodes approve of those new blocks, and users continue to create transactions that are included in new blocks (or else find another cryptocurrency). Before any of that can happen, developers have to write the code that miners, validation nodes, and users will run.

Right now, there is a big political fight that could very briefly be described as between users who support the most common implementation of the Bitcoin wallet and node (known as Bitcoin Core) and those who generally oppose that implementation and the loose group of developers behind it. I certainly am not here to take sides, and in fact it would probably have some long term benefits if both groups could go their separate ways and have the market decide which blockchain consensus rules are better. However, there is not much incentive to do that, as there are network effects in Bitcoin and any chain split would reduce the value of the entire ecosystem. The network effects would likely mean any two-chain system would quickly collapse to one chain or the other. No one wants to be on the losing side, yet no side can convince the other, and so there has been political infighting and digging in, resulting in the current stalemate.

There will eventually be a conclusion to this stalemate; there is too much money on the line to avoid it. Either the sides will figure out a compromise, the users or the miners will trigger a fork of the chain in some way and force the issue, or eventually a couple years down the road another cryptocurrency will overtake Bitcoin as the most prominent store of value and widely used blockchain. A compromise would obviously be the least costly, a chain split would be more expensive, but could possibly solve the disagreement more completely than a compromise, while another cryptocurrency winning would be by far the most expensive and damaging outcome. All development and code security that went into Bitcoin would have to be redone on any new crytocurrency. Nonetheless, Litecoin just this week seems to have approved of Segregated Witness, the code piece that is currently causing the Bitcoin stalemate. If Bitcoin’s stalemate continues for years, Litecoin is going to start looking pretty great.

Obviously it’s disappointing that even a system built on trustless transactions can’t avoid the pettiness of human politics, but it’s a good case study demonstrating just how pervasive and pernicious human political fights are. Ultimately, because cryptocurrencies are built in a competitive market, politics cannot derail this technology forever. And when the technology does win out, the impact on the word will be revolutionary. I just hope it’s sooner rather than later.

 


Bitcoin featured picture is a public domain image.

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