New Technologies of Freedom

0:00:04 Paul Matzko: Welcome back to Building Tomorrow, a podcast about the ways tech and innovation can create a freer, fairer and more prosperous future. You know what, I’m tired of begging for my rights, tired of pleading with bureaucrats and politicians to please, pretty please, give us our freedoms back, and yet it’s so very easy, even in libertarian circles, to get a kind of tunnel vision when it comes to expanding liberty, as if the only way to do so is by going through the political process, by asking, negotiating with the state, but what if instead we just built a free society without first asking permission.

0:00:44 Paul Matzko: We live in a time of breathtaking innovation with emerging technologies that fundamentally challenge state control over everything from currency to identification. There’s a new book out titled New Technologies of Freedom, published by the American Institute for Economic Research with the support of the Mannkal Education Foundation that I really can’t recommend highly enough. It shows the ways that technologies like smart contracts, artificial intelligence and cryptocurrency will work in unison to allow a new and radical kind of digital citizenship.

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0:01:25 Paul Matzko: Matthew and I are joined today by two of the book’s authors, Darcy Allen and Chris Berg, both are research fellows at the Blockchain Innovation Hub, which is housed at RMIT University in Australia, both are also accomplished economists who have written widely on the economics of emerging technology. Welcome to the show, gentlemen.

0:01:43 Chris Berg: Thank you so much for having us.

0:01:44 Paul Matzko: Now, let’s start with a real basic question, what are these new technologies of freedom that the book title refers to?

0:01:52 Chris Berg: So the new technologies of freedom is describing a suite of frontier technologies from crypto currencies and blockchain to artificial intelligence, machine learning, and across the wide technological revolutions that we’re currently experiencing or are forecast to shortly experience. Our observation about those technologies is that they provide an enormous opportunity for liberty, they provide us with a suite of techniques, tools and mechanisms by which we can start paring back some of our lost liberties from the state and forging exciting new ones as well.

0:02:37 Paul Matzko: Now, this is, it tends to be kind of blockchain heavy, that’s not the only thing, you have artificial intelligence in here, but there’s a big section on cryptocurrency, on smart contracts, on other blockchain tech. So when you went about selecting the topics within this vision of what the future of liberty could be like, how did you decide what went in and what didn’t when it came to emerging technology?

0:03:05 Chris Berg: Look, it was always gonna be blockchain heavy because blockchain is, I think, a very exciting and powerful new technology. We call it an institutional technology because it provides a new way of coordinating human societies, and we can talk, we can talk at great length about that, but what we’re talking about here is really, it’s not just AI and blockchain, it’s also the communications technologies that underpin them, like 5G communication, it’s the Internet of Things technologies that allow us to put full-​fledged computers and so many more devices that we’ve had and connect them to all the other computers and devices in the world as well. So it is this quite significant array of technologies. Now, I think blockchain is particularly important because that’s a sort of underlying fundamental institutional technology that we will use to govern and control so many of these other ones as well, but it is important to point out that we are interested in and looking for the opportunities in this enormous wave of technological change that’s coming down in the next five to 10 years.

0:04:22 Matthew Feeney: I had a question from a specific, I suppose, libertarian angle, because working in emerging technologies, I’m often worried about the implications of new technologies on civil liberties and other features of our lives, but I’m struck often that there maybe isn’t such a thing as a good or bad or libertarian or dictatorial technology. It’s all about the application. So what do you say to people who might say, well, the Internet of Things is very exciting, but it could be used by government for surveillance or artificial intelligence has many interesting applications for freedom, but could also possibly be used in weaponry. What do you say to those kind of criticisms?

0:05:12 Darcy Allen: Well, I think it’s entirely right that these technologies can, of course, be used for good and bad, and there are a lot of challenges that we see in the popular press about these technologies. There are huge implications for privacy and our security, and so… But the question is, how do you deal with those challenges? Do you attempt to use the state to try and pare back the technologies and try and insert privacy into them through regulation? I’m personally, and Chris is, I imagine, very skeptical about how that happens in practice, and if that’s not an effective way to solve some of these problems, then the response should be an entrepreneurial response, it should be that the way that we defend against these challenges is that we use these very technologies to solve the problems that we’re worried about.

0:06:03 Darcy Allen: If we’re worried about AI creating challenges around deep fakes on the internet, for instance, then the way to respond to that is to build new platforms to detect those deep fakes and respond to it in that way. So we use this term in the book called adversarial liberty, which is the idea that you shouldn’t use the state to try and implement those freedoms, you should be entrepreneurial about this and respond to this in a decentralized bottom-​up way.

0:06:30 Paul Matzko: Now, you brought up adversarial liberty, at least the place that I know that it was in your discussion of artificial intelligence, and I actually thought it was a… At least for me, it was a kind of a novel approach to either the utopian or the dystopian visions of what AI will mean for the future, where there’s… Super intelligence will take over and Skynet us all in Terminator parlance or there’s nothing to see here, nothing to worry about. Your response kind of mediate the difference, which was not to say there won’t be issues with new artificial intelligences having adverse effects, but that adversarial liberty will… That approach will help mitigate the downside risks. How will that work, how do you envision that happening?

0:07:21 Chris Berg: Yeah, that’s a really good question. So I think this is not always a discussion that is most usefully viewed in the abstract. So the Skynet scenario is not the most likely scenario for the future of artificial intelligence, although it is one that I find you have to directly tackle because people are genuinely concerned about it, and when you bring up artificial intelligence, you need to think about this.

0:07:47 Chris Berg: The adversarial liberty idea, though is, it starts… As Darcy has pointed out, it starts from the observation that these technologies, whether it is artificial intelligence or whether it’s any of the other technologies we’re talking about, are going much faster than any regulator, any policy maker can tackle. I know in Australia and I’m certain in the United States and around the developed world, there’s an incredible lack of knowledge from policy makers and legislators about the really fundamentals of some of these new technologies.

0:08:22 Chris Berg: So we don’t have a choice, right, other than develop our own responses in the community and in the private sector to the negative impacts of these technologies. So we’re not going to have a well-​designed deep fakes law, even if that was desirable. So deep fakes, of course, is the use of artificial intelligence to falsify audio-​visual documents to put a head of some person on somebody else’s body, to falsify audio of some person speaking, so you might think that they’re doing something that they have never done.

0:09:05 Chris Berg: Now, there’s not gonna be a deep fakes law, even if we thought that was desirable, that would be effective at tackling these technologies because they’re just going too fast. They’re just too complicated. So we don’t have a choice but to use the suite of technologies that we have, to use our entrepreneurial capacity to build responses to any of the negative impacts. So when we’re talking about adversarial liberty, it’s a community or a private-​centric response to potential negative impacts of new changes. We have to be building tools to tackle… Building good tools to tackle bad tools.

0:09:53 Chris Berg: A lot of my research in the liberty movement and a lot of my activism in the liberty movement has been focused on freedom of speech. And in the freedom of speech context, the simple line is, “Well, if there’s bad speech, the answer to bad speech is more speech.” I think the answer to bad technological use is gonna be more technological use, it’s not gonna be regulation, it’s not gonna be legislation.

0:10:18 Paul Matzko: That makes sense. So that’s a specific example of how you can essentially have AI systems fighting with each other to both create and to detect deep fakes. Let’s walk this back for a second. At the beginning of the book, you have this… You have this concern which I think will resonate with anyone working in… Like us, working in a libertarian think tank, working in DC policy circles. But I suspect it’ll resonate with a broader set of listeners, which is that libertarians, especially in America, and I imagine in Australia as well, we get caught in this kind of state constricted vision, this trap of allowing the state, even as we oppose it, to constrict our vision of what is possible. That we are so focused on getting freedom for ourselves, clawing back freedom from the state, that we never think beyond that battle.

0:11:20 Paul Matzko: And so we… As you put in your… Really is kind of thesis of the book, you say, “We argue that the liberty movement needs to spend less time begging the state for its freedoms back; rather those interested in expanding liberties need to be more entrepreneurial, building the moneys, institutions and organizations that make us freer.” So why is it so easy for us to get caught in that trap? Where does that problem come from and what can we do to snap out of it?

0:11:50 Chris Berg: That’s a great question. Darcy should tackle this as well because we may come at it from slightly different aspects. But I’ve spent my career before joining academia in the free market think tank world, at the Institute of Public Affairs, I worked there for more than a decade. And so I spent my time in that free market community doing precisely that. So debating public policy and debating legislation, arguing against bad laws and arguing for good laws and so forth. And that’s important work and it’s… It’s not just important work, it’s vital work, because by and large, it’s the state that is the restriction on our liberties.

0:12:33 Chris Berg: But what I think we miss when we have that single-​minded focus is the opportunities to build alternative protections against the state. We spend a lot of time talking to policy makers because they’re the ones that make the policies that make us less free or more free, but we don’t spend enough time thinking about how we can get around those liberty restrictions, how we can make those policy makers’ lives harder to restrict our freedoms as well.

0:13:10 Chris Berg: Now, I’m just excited by the possibilities of these technologies, because suddenly I see that opportunity. It’s not the first time in history that new technologies have provided opportunities for liberty expansion; obviously, the printing press and the rise of mass media communication was an incredible push against state power, but the speed at which these are arriving on our doorstep, the breadth of opportunity that they present for us to act independently and freely in a globalized economy, is it’s just unprecedented, and I think it’s time for us to add the idea that you can build liberty to the liberty movement’s focus, not get rid of the policy focus, but start thinking about how we can build it.

0:14:09 Chris Berg: Now, I’m talking, we’re talking to a incredibly sympathetic audience, your podcast is Building Tomorrow, so I know you agree with this, and to a certain extent, I think this is the manifesto of this show, but it’s something that I think is, the liberty movement more broadly can and should be thinking about.

0:14:34 Paul Matzko: Yeah, we’re the low-​hanging fruit.

0:14:37 Chris Berg: It’s good to have a sympathetic audience first.

0:14:40 Darcy Allen: I might just add to what Chris has said to say that I think that the optimal strategy for the liberty movement has changed over time, and that we need to update to those changes. The logic that legislation is what is holding back some of our rights and our liberties, so we need to repeal that legislation may have been the optimal strategy to expand liberty 20, 30, 40 years ago, but today that strategy looks different, right? It’s truly remarkable that these technologies are available to us and that instead of trying to advocate for having less corruption in courts in developing countries, those people can just decide to sign smart contracts on blockchains and secede from a legal system entirely. We have technologies now that mean we don’t… That monopoly on institutions that we’re so used to, this idea that you live within a particular state within a particular country, and that if you want to change those rules, you have to operate through politics or convince people that liberty is a good idea, that’s changing. It means that you can just start to secede to better institutions and push pressure back on politics that way, which I think is super exciting.

0:16:01 Chris Berg: Can I make one more observation here? It’s a little bit of an East Coast, West Coast thing in the United States. So we are spending, because Darcy and I work in blockchain, which is partly about policy, but also about developing business models and so forth for the new economy, so we spent a lot of time in San Francisco and the Bay Area working with companies to develop new blockchain applications and systems and so forth. And what we’ve discovered is, and this was a surprise to us, I’m sure it’s not a surprise to American listeners, but what we’ve discovered is a parallel libertarian universe that is not very well connected to the East Coast libertarian universe that I’m much more familiar with. And a part of this project is bringing those two communities together. One community is focused on law and legislation and policy, the other community is focused on building alternative liberties and alternative institutions that can bring us back liberties. So I think we as a liberty movement can act more cohesively and we can cooperate better if we bring those two diverse communities together.

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0:17:29 Matthew Feeney: I was wondering what the low-​hanging fruits are in this situation because I’m reminded that it doesn’t seem as if opportunities are equally distributed here, so there’s a lot of what I suppose Adam Thierer at Mercatus would call evasive entrepreneurship, people that just manage to circumvent a lot of existing regulations to build something new, and I’m reminded of Uber’s strategy, which seemed to be to just drop into cities and bet on the fact that people would fall in love with it, and that’s a kind of app-​based technology where it’s perhaps easier to do that, but if you have a really new, interesting idea for a flying machine, it’s much easier for the government to ground you. And so I do wonder where you think this kind of libertarian technological approach is gonna run into the most issues, someone wants to shoot something into space, it’s much harder to circumvent government there, and secondly, if I could just make this a two-​pronged question, also, what do you think about the way to mitigate the risks of private companies turning to government in order to take advantage of new technologies?

0:18:40 Matthew Feeney: I’m reminded back when the metro, back when I used to get on the underground, which seems like an age ago now, but this cryptocurrency exchange called Gemini had ads in the metro and it read, “the revolution will be regulated,” and their entire pitch was look, there’s this new thing, this new blockchain technology, and we’re the ones pushing to get it regulated to make it kosher. So I know it’s two big questions, but I’m interested in your take on both of them.

0:19:11 Darcy Allen: They’re both very big and very interesting questions. I do think, to the first question, that this is unevenly distributed against, between different technologies. So I think this is one of the reasons why I’m so excited about institutional technologies like blockchain because they don’t face as many of those physical constraints or these are technologies that are more born free than not born free, which is I think a term that Adam Thierer uses in his Evasive Entrepreneurship book, which is a fantastic book, by the way.

0:19:46 Darcy Allen: To the second question, this is an entrepreneurial choice that we haven’t… We don’t really talk about enough, so entrepreneurs have a choice, they can either completely try and secede from government regulation as it exists today, and the hottest topic in blockchain at the moment is de-​fi or decentralized finance. What’s happening right now is there is a private financial system being built very, very rapidly where you can loan and earn interest rates and borrow money all well outside the reach of the state, complete evasive entrepreneurship.

0:20:26 Darcy Allen: On the other hand, you see attempts like what we saw with Facebook’s Libra cryptocurrency, which was an attempt to essentially integrate within the regulatory system partly, which failed completely, to be clear, it received massive backlash from regulators. And we don’t often think about this choice, but that’s a very different entrepreneurial choice, you can either try and get inside the regulations and craft them to your own benefit, that’s a risky strategy in itself, and that’s gotta be quite difficult, particularly with the entrenched interests in a lot of these industries, or you can leave completely or secede completely and evade, and that creates a whole lot of other restraints, you can’t rely on the existing legal system, you can’t rely on existing regulation in any way, you have to build an entirely private economy and all the institutions and infrastructure to make that work, so I think it’s a very, it’s a very complicated question.

0:21:31 Chris Berg: We wouldn’t be talking about what we’re talking about if it wasn’t for the pervasive nature of digital infrastructure. So the fact that we are constantly communicated to with each other digitally at all times, 24 hours a day, ’cause we’ve got our mobile phones or our cell phones, we’ve got our always-​on internet connections at home and at work. This is a digital first story. Where it comes into most tension with the state is where it is what we sometimes call the on-​ramps and off-​ramps, the institutions that get us into the digital world, the institutions that get us from the centralized world to the decentralized world, when we’re talking about cryptocurrencies particularly, because governments can regulate banks, they find it very hard to regulate cryptocurrency systems, so what they end up doing is focusing on, well, what is the interaction between the traditional banks and the cryptocurrencies, so we regulate the exchanges. That’s where a lot of these challenges turn up most, but in that sense, your question about what is the low-​hanging fruit, well, the low-​hanging fruit is the digital only decentralized first, global first, unregulated first technologies.

0:22:53 Chris Berg: And in that sense, it’s almost a cliche now, more than 10 years after Bitcoin was invented to talk about cryptocurrencies, particularly in the libertarian community, but it is kind of remarkable to think that 10 years ago, or just over 10 years ago, if you were in the United States, or if you had to use the US dollar, in your wallet you only legally, really had the US dollar, some people tried it in FOREX markets, but that’s a vanishingly small amount of the population, and you had to be very a sophisticated investor to do so. Now we’re in a world where we can seamlessly, and many people do, have not just one or two currencies, but tens of currencies just carrying around on their phone or on their computer or in a cold wallet or something like that. We are in a totally, totally new monetary environment just because of this invention. The consequences of that are going to take time to work out, but it means that some of the traditional mechanisms of state control, like capital controls, the requirement that we will tax you in the local currency, so we’ll print that local currency and spend that local currency, that’s been undermined. There’s so much has changed just because of an interesting digital experiment, a digital only experiment.

0:24:26 Chris Berg: So if we’re talking about low-​hanging fruit, that low-​hanging fruit can have incredible, incredibly significant consequences for political economy and the nature of the state. We talk a lot in this book about much more than cryptocurrencies and we try to expand out from that, because I think in the libertarian movement, as we say, cryptocurrencies is a bit old hat, we’ve all been talking about it for so long it’s been read in, but it is worth dwelling on the significance of just that change, a totally new monetary system developed basically overnight.

0:25:00 Matthew Feeney: Although I wanted, if we could return to something that Darcy mentioned earlier, which was the use of blockchain for smart contracts and law, because many libertarians will say, “Well, I want a limited state, but we still need a government to run the police force and to enforce laws.” And I’m wondering, Darcy, if you could talk through why… What the advantages in that technology are, because it seems at the moment that I could sign a contract with you agreeing to, say, sell some property, and then I could breach that contract and you could show up to a judge who would adjudicate it. So I guess the first question is, what’s exactly wrong with that system, and secondly, why are smart contracts better than that, because at least with a judge with the state at the very end of it, there’s potentially the use of force to make sure I get what is owed to me. How would a smart contract even do that?

0:25:57 Darcy Allen: The answer is that it’s different depending on what problems that people are facing. So before I mentioned that in the developing world, this may make a lot more sense because, of course, the legal systems can be much more corrupt and can suffer more problems. And every institutional choice that we have, whether we decide to use courts to enforce our contracts or whether we decide to use some other decentralized smart contract technology, it’s always relative to how those courts exist. So the first point is that it’s much more useful within developing economies where we already have those problems. These technologies, however, can be built up to much more than just simple smart contract exchanges, and that’s what we’ve seen over the last three to four years in the blockchain space. So the example of a smart contract that people use quite often is something like a vending machine, where you put money in and in response you get a product back, it was an automatically executing contract there.

0:27:04 Darcy Allen: But imagine if that vending machine could also have various owners who could vote on what different products go inside that vending machine, it could hire contractors to clean itself. You start to build these smart contracting technologies up into new types of organizations, what are often called decentralized autonomous organizations, that we don’t even really know what’s possible with a lot of these technologies yet. The other point is that what’s exciting is we can… We’re in a world now where we can choose what institutional system that we want to be part of, right? We don’t have the same preferences. You may well prefer to use a territorial court. And I may well prefer, I see the cost differently and prefer to use a smart contract. So we’re moving into a world where we have institutional choice, which I think is really exciting.

0:28:02 Chris Berg: And that’s been available since the medieval period where you’ve got merchants’ courts, and so forth, but it’s available to us right now. We have the capacity, the four of us on this podcast, to set up an organization completely free of Australian or US corporate law that operates completely differently, that we can have a shared ownership over, that is following nothing but a series of smart contracts. Now, you’re absolutely right that a smart contract isn’t going to physically repossess your home. There’s always gonna be an interaction between the digital world and terrestrial world that will be a site of tension. But that’s true now. What this gives us is on the margin, the capacity to make more certain agreements, more auditable agreements, and more opaque, sorry, transparent agreements. So in that sense, we’ve got a remarkable new add-​on to our world, but that’s an add-​on that we can use for more things that can reduce the… What we call the costs of trust in what is a very, very expensive legal regulatory and political system.

0:29:31 Paul Matzko: I was astonished by a statistic in the book where you say that perhaps as much as $29 trillion in global GDP is bound up in provisioning trust. All the accountants and lawyers and judges and prison guards, anyway, the whole apparatus, all of which exists so that we can trust strangers as we make exchanges of houses and products and currency and so on, can… That is real money. And so even if a relatively small percentage is eliminated because of smart contracts, if we can extend that trust more cheaply, more securely, more transparently, even a small percent of $29 trillion is a real gain, a real gain that doesn’t have to be done by the kludgy system we currently use. So can you explain a little bit more about why trust is so expensive as we currently do it and how blockchains can help beyond smart contracts?

0:30:38 Chris Berg: Yeah, of course. So that’s a piece of analysis done by our colleagues, Michaela Novak, Jason Potts, and Sinclair Davidson. And what they did is they made an assessment just looking actually, it was based on US data, made an assessment of how many people were employed, what percentage of labor force was employed in trust-​based professions, because a lot of what we do in the economy is provide trust over other people’s transactions or over the firms that we operate in. So an accountant will provide to a large extent trust that the financial system of the firm is being well managed. The legal system is obviously partly there to enforce contracts, to make sure… To mitigate against the cost of trusting each other, to make sure that home is repossessed, to go back to our earlier question. We agree to a certain contract, so we’ve got the legal system as a backstop to make sure that everybody does what they say they would do on the contract. The police do this, management does a lot of this, a lot of management is about making sure that staff are doing what they should be doing in the interest of shareholders and so on and so forth.

0:31:55 Chris Berg: So in their analysis, that is just an extraordinary, as you say, $29 trillion globally is dedicated towards trust. Now, that doesn’t mean that we can suddenly save $29 trillion because obviously, we can’t repossess the home online. But it does give us a suggestion about the possibilities of a new suite of technologies that can reduce those costs. We’ve gotta start treating trust as a cost in the economy, it is a very expensive thing to provide. And if we can provide it cheaply, more cheaply, at the margin, we’re going to be a lot wealthier and we’re gonna be able to redeploy those resources to something else. Now, part of that is just ensuring that financial contracts, for example, are executed as written, and that’s a really powerful use case for smart contracts and blockchain technology. Part of that is ensuring that we’ve got a secure… A strong cybersecurity around our digital transactions and our digital activities online.

0:33:05 Chris Berg: And all of those fields we can see strong opportunities for blockchain and artificial intelligence to reduce the cost of provisioning trust in the economy. So that’s what we’re really, really excited about. And that’s a very practical way that we can see the benefits. It’s not just about protecting freedom of speech. It’s not just a cool Hayekian story about how we can have multiple monetary systems in one economy. It’s actually about reducing the cost, the enormous burden that the economy has on providing trust to one another.

0:33:45 Darcy Allen: I might just add onto the end of that, that this has large ongoing implications for liberty as well. So, if we can provide trust using some of these decentralized technologies, we would expect that the structure of the economy would change. We would move away from trust being provided by hierarchy, either by government itself, who is providing property registries, for instance, or by corporate firms, who are providing it through monitoring, and the ledgers that they keep. We would predict that the economy itself would become more decentralized. There will be smaller firms, they would be using trust technologies like blockchain to be networked together. The economy looks different. And that has implications for liberty, because much of the regulatory states that is built up is in response to large corporate hierarchies.

0:34:40 Darcy Allen: So big areas of government policy and intervention, like labor law, like antitrust and competition policy, are premised on the idea that the economy is made up of large corporate hierarchies, and they have too much power. They have too much power to exploit workers, or they have too much power to raise prices. And, as the economy changes shape, because of these new trust technologies that Chris is talking about, we would expect that, at the very least, a lot of those regulatory battles will come to the fore again. And a lot of the justifications for those policies will start to fall away. I mean, there may be some kind of justification for regulating a large centralized firm with competition policy, but does that make sense if you have a decentralized network doing those same activities? Those same power problems aren’t there. So, what I’m trying to get across here is that we’re going to see deep debates come up again about large areas of government intervention, in response to the way that trust is changing the shape of the economy.

0:35:50 Paul Matzko: I mean, I do find that prospect exciting. Decentralization of the economy would be a salutary transformation that would come with, I mean, knock-​on effects that both left and right, that both libertarians and non-​libertarians can be excited about. I suppose there’s a note of… Let me introduce a note of skepticism, which is that so far, a lot of the early corporate adopters of blockchain tech have tended to be big outfits, big supply chain companies, some of the big banks are banding together to use blockchain to ease financial… The cost of financial transactions. Libra is a failed example, that you mentioned earlier. So, so far, a lot of the work has been done to help the large multi-​divisional firms that you talk about in the book. It doesn’t appear to have made them less competitive yet. It’s maybe the “yet” is the key word there, but why aren’t we seeing that happen yet? At what point will the… What will the take-​off point for this decentralization of the economy be?

0:37:00 Chris Berg: So, I’m actually pretty excited by the use of this technology by these large firms, because in part it validates the opportunity for the technology itself. I think the long run effect of the technology is actually to make some of those large hierarchical firms, to de-​hierarchicalize them, as Darcy was describing, because they will discover that if they’re adopting blockchain for a large supply chain, well, they don’t need these big top heavy management systems that they’ve built up over the course of the last century. So that’s really optimistic. But I have to say, though, the most exciting work that’s being done in the blockchain space is not in those big hierarchical large traditional firms, it’s being done in the small startups. It’s being done in the communities that are building these technologies, rather than the Facebooks and Googles of the world. It’s the Ethereum community, it’s the Zcash community, it’s the Bitcoin community, Cosmos. These huge communities, which aren’t organizations, they’re not corporations, but they are networks of small companies, entrepreneurs, of even individual developers, making really compelling things.

0:38:32 Chris Berg: You are right to say that the blockchain revolution hasn’t happened yet. And this is speculation about what we predict will happen. But, to be fair, many of these technologies, not just less… Not just 10 years old, but less than five years old, the first real full-​fledged smart contracts platform can be dated, at earliest, to maybe 2015. It had its five-​year anniversary, this is Ethereum, the Ethereum cryptocurrency network, it had its five-​year anniversary the other day. A lot of this is incoming, but if we’re interested in the future of liberty, we have to look at these green shoots. We can’t just observe that… Well, Google is a very big company right now, Facebook is a very big company right now. It will always be a very big company. We know, in the digital world, how quickly these things change. And we can see, very clearly from here, how those changes are likely to occur.

0:39:34 Paul Matzko: I suppose… We had Finn Brunton, who wrote a book, Digital Cash. We had him on the podcast last year, and he did a very good job, and I think that, to your point of… Take a second to think about how much has changed, even if we’re not at full crypto utopia here, no one would have thought, 20 years ago, 25 years ago… I mean, he goes back to the ’70s and ’80s, the idea behind what would become Bitcoin, Ethereum, become the blockchain eventually. Those ideas were laid out, better part of half a century ago, and they were wild and radical. And no ever thought they would become practical things, practical technologies, it was all in the abstract. So, you know, even to the point where we have Bitcoin, we have Ethereum, we have these platforms for developing new blockchain-​based techs. It might not be what was promised, but it’s a heck of a lot more than people thought was possible, not all that long ago.

0:40:45 Paul Matzko: I do have a question, maybe you can put this in very practical terms for me. There is a lot of talk, the original goal behind the development of cryptocurrency in Brunton’s take is this kind of community of cypher punks and anarchists, utopians, technologists, who had utopian aspirations. The idea was that these alternative currencies would undermine the power and authority of the state as a flip of the way in which fiat currencies empower the state. So maybe you can put some brass tacks to that. How do fiat currencies empower the state? How do these alternative cryptocurrency, alternative payment systems undermine that power in practical terms?

0:41:37 Chris Berg: In practical terms, so historically, there’s been a very tight coupling of the fact that the government, a government, will both print… Will print the currency, it will require you to pay taxes in that currency, and it will spend for public spending in that currency as well. And as governments have gotten a tighter control of that printing system, we’ve seen them grow. That’s really the history of the late 19th to 20th century.

0:42:07 Chris Berg: So there’s a… That’s slightly more abstract than you’re looking for. Let’s talk very practically. We have seen in the response to the Libra cryptocurrency an enormous, enormous panic on behalf of regulators, on behalf of monetary officials, on behalf of policy makers about the possibility that they are going to suddenly lose their monopoly over their currency, that they are going to be the subject of the monetary system, not the object of the monetary system, they’re not gonna be able to drive it any longer.

0:42:45 Chris Berg: Now, Libra is… You described Libra as failed, I’m slightly less pessimistic, but it’s absolutely had to change in some disappointing ways in response to particularly US policy makers and some European policy makers. But what that has shown us is the spectre of governments losing their control. In response, they have been developing these… A lot of governments have developed these new central bank digital currencies that are supposed to provide some of the benefits of… That Libra would have given us as a community, but while maintaining control.

0:43:25 Chris Berg: So we are dead smack in the middle of probably the biggest monetary fight that we’ve had since Bretton Woods, where we’ve got on the one side, central bank digital currencies being developed by traditional central banks, on the other side, we’ve got corporate digital currencies like Libra being developed, being attacked, being criticized, and of course, we’ve got a network of cryptocurrencies.

0:43:51 Chris Berg: So from a very practical sense, that monetary battle is ongoing. Darcy earlier mentioned decentralized finance or de-​fi, which is the coolest, hottest thing right now in the blockchain and cryptocurrency community. And what that shows you is, well, once you’ve got this suite of new financial technologies, what are the financial instruments, what is the financial system you can build using those building blocks? And they are unregulated, they are virtually impossible to regulate, there are new ways of raising funds for capital investment, there are new ways of investing outside the highly regulated exchanges and the terrestrial systems that we’re so used to.

0:44:40 Chris Berg: So at a very practical level, these things are happening right now. It is sort of on our plate, again, back to, we in the liberty movement, it’s up to us to understand this as well. We need to be really well-​informed about the policy battles that are coming down the track because of this rapid innovation. And I think that’s a very useful thing that your project does and that’s what we’re trying to do at RMIT as well.

[music]

0:45:17 Paul Matzko: What’s the inflection point? So again, we’ve had big promises, we’re in the middle of a series of fights over the future of financial processing and cryptocurrency. And there are some signs of… Venezuela where bitcoin mining was a way for folks to arbitrage low electricity prices and the instability of Venezuela’s currency during their economic collapse. I know in China, there have been some… Yeah, there was an uptick of interest in cryptocurrency as a way of getting around currency controls by the Chinese government.

0:46:00 Paul Matzko: But as you note in the book, cryptocurrency is not yet really currency, it’s not really money in the sense that facilitates exchange. It’s more the land of different tribes of HODLers hoarding their… Doing currency speculation. What is the inflection point for a… What has to happen? If we get some sort of massive economic collapse in the US and Australia and the developed world, is that enough at this point for a real take-​off of cryptocurrency as cryptocurrency?

0:46:34 Chris Berg: It depends what you want, right? So are you… Do we want mass adoption? Do we want everybody’s parents to be using this cryptocurrency and would we view that as a success? Or are we excited by the possibility of the people on this podcast and listening to this podcast who are a technologically literate audience, are we excited by the capacity that they as individuals have to take back their liberties? I think sometimes we look at… Because we’re used to looking at things from a public policy lens, we assume that liberty is something that we forge as a large society. I think that’s obviously important, and it is important to care about the liberties of everybody, and it’s important to care about the liberties of people who are not as technologically literate as we might be. But it’s also really exciting that we can do this now, right? This is super cool, so…

0:47:35 Paul Matzko: Yeah.

0:47:36 Chris Berg: We can do these remarkable things, outside the power of the state currency system. We can do it right now, we can communicate and transact with anybody around the world privately, independently, and that is a material advance on freedom, even if it has not been extended as much as I would like to everybody on the planet. Because in part because it’s an early stage technology and early stage technologies take time.

0:48:09 Paul Matzko: Now, I think one of the sections in the book that was most radical and I think will be least familiar to our listeners, is discussion of crypto democracy, crypto succession, and so beyond the currency and aspects of this, you talk about a future in which people can have voice and exit from their current authoritarian regimes, whether that’s, well, in the US or China or wherever, they can form new democratic orders using the blockchain. The one bit in particular that I think will be hard, a hard pill for those who are new to the concept, to swallow, you talk about the buying and selling of tokenized votes.

[laughter]

0:49:01 Paul Matzko: And I think it’s gonna strike a lot of folks as alienating. Think of all the rhetoric right now about dark money and billionaires buying elections, and so when you come in and say, “Hey, we’re gonna have market in votes,” I think folks are gonna have their… They’re gonna get their feathers ruffled by that, so how would… Explain that concept pretty simply and also gear it… How would you explain it to a skeptic? So let’s say I’m like, “This is a terrible idea, it’s just gonna give more power to the billionaire class and I’m gonna vote for Bernie Sanders.” I’m like, convince me that this vision of a future is a thing I should be excited about.

0:49:41 Darcy Allen: I love that you picked up the most provocative part, perhaps, of the entire book, and Chris…

[laughter]

0:49:47 Darcy Allen: That was just there to trigger you. So…

[laughter]

0:49:50 Darcy Allen: Chris and Aaron Lane and I have actually written an entire separate book on this topic of crypto democracy, and our motivation there was to say, okay, so we have this new technology, blockchain technology, what can we expect that the effect of this is on democracy? And our starting point was, well, we think it’s a little bit of a mistake to think that we’re just going to take existing democratic structures, exactly the rules that we have now, and we’re going to put our votes on the internet and do digital voting in some way. We think that it goes much, much further than that, or opens a lot more possibilities. So the basis of this is that, what we’re calling a crypto democracy is using a blockchain-​based platform for people to delegate and trade and cast their votes. And what this means is that people have more property rights in their own vote. So we often talk about you having a right in an election to vote, but if we think of our vote as a property right, it’s actually a very, very highly regulated bundle of rights. You can only walk up and vote once every three or four years for particular candidates. You can’t save that vote for a future election.

0:51:09 Darcy Allen: We here in Australia, we have to vote, we are compelled to vote, by law, right? So what would it look like if we had a lot more rights, property rights attached to our own vote? Well, rather than me just being able to vote for a person within my particular electorate, maybe I could delegate my vote. To Matthew, for instance, perhaps that I don’t want to think about politics, but I have a rough idea that what Matthew thinks is what I think and I want to delegate it to him. Right? Maybe I want to delegate some of my voting rights, so maybe on economic issues to Matthew, and maybe on social issues to Chris. Right? So this is the idea that what does a democratic system look like, where we have many more rights to vote, and we think that it gives you a better… It might integrate more knowledge into the democratic process and help people to form opinions. Now, we’re not advocating for saying that we should definitely be able to buy and sell your vote, that’s a fundamental right that you should have.

0:52:17 Darcy Allen: But now it’s technologically possible that you could do that. These are constitutional level choices of what rights that you have, whether you could buy it or sell it or not, and as you say, most people will be quite skeptical about this. But there is some rationale behind saying that we should implement some market-​like processes into democratic processes, so that we can signify our intensity of preference by buying and selling votes.

0:52:49 Paul Matzko: I kind of set you up for the… With the hardest possible example to start with, I suppose…

0:52:56 Chris Berg: No, but it’s the most enjoyable example, it’s the most enjoyable example. So, I just wanna put it, we buy and sell votes all the time. Right? So first of all we’re not just talking about a representative democracy, we buy and sell votes in corporate shareholder voting all the time, but it’s also the case that in the scenario that Darcy describes where we are delegating our vote to someone else, we do that right now, and we call them representatives and they vote on our behalf, and we pay them to do so.

0:53:30 Chris Berg: We compensate them with taxes so that they earn an income while they act on our behalf in the legislature. It is interesting to think of which direction the money should go given, that they are providing a service so that I don’t have to pay as much attention to politics as I might have to do otherwise, if I had to vote on every single bill. We pay them right now, but should they be paying us for the pleasure? What we’re doing is taking the opportunity that blockchain presents and trying to decompose how the incentives actually function, and the possibilities of coordinating a democracy now that we can treat a vote as not just a thing that you get to do once every three or four years, but as right, like a real right, one which we can dispose of, which we can use, one which we can withdraw our consent for at any time we want. Now, but you might say this is speculative, but what it tells us about these technologies, these classes of technologies, is that they have opened up the opportunity for really radical reform in a way that very few technologies have, historically.

0:54:46 Darcy Allen: I would say this is likely to be applied in elections at the first instance. That’s the first thing that we go to when we think about collective choices and democracy. But we use collective choice decision-​making all around us, we undertake shareholder voting, we vote in unions, we have civil society organizations that vote. I think that this is where some of these experimentations will take place first, and then perhaps filter up into the broader public sphere.

0:55:18 Matthew Feeney: This conversation reminds me of the fact that blockchain really does offer opportunities that we often don’t tend to consider. I think one of my favorite potential applications is the use of blockchain in prediction markets. And I’m reminded of the economist, Robin Hanson has this proposal for a kind of government called a futarchy, which is basically voting on values but betting on beliefs. It’s something I think libertarian should say more, which is that talk is cheap, and once you have to put your money where your mouth is, especially in the context of voting, it offers a lot of interesting potential applications, and that’s one of the more interesting, I think, at least subjectively, I mean, all these is objective, but that’s one of the applications I’m most excited about is the experimentation in governance and the use of prediction markets.

0:56:15 Chris Berg: Yes, that’s right. And to Darcy’s point, we can do this right now, we can set up what we call a DAO or Decentralized Autonomous Organization, I can hop on a website and make a little company, it could be a dictatorship of a company or it could be a crypto democracy in the way that Darcy and I are describing it. We all have one property right to ownership of that company and we can do this and we could do the same for any civil society or organization we want. It just gets harder when it’s about jurisdictional political politics, but again, that’s fundamentally why we wrote the book, because we’re trying to think of new ways to organize ourselves that doesn’t require this begging from the state for all of these fact that we’ve described.

0:57:02 Darcy Allen: And a lot of these experiments that we talk about in the book… We have talked for decades about different types of democratic structures that are possible, that are theoretically possible and now they’re practically possible. So one of the things that we urge in the book is that we talk a lot about special jurisdiction, so things like special economic zones and private cities and so on, we view these as test beds where a lot of these new structures can be trialled, right, and a lot of them will fail, of course, that’s the nature of entrepreneurship. But it’s super exciting, as you say, Matthew, that we can now experiment on governance in a way that we have never been able to before, and that can include in special jurisdictions where you physically move to another location, or you can experiment in governance by staying exactly where you are right now. You could effectively be in a different set of governance rules to your neighbor in many aspects, and that’s very exciting.

[music]

0:58:13 Paul Matzko: Now, one thing I realized while reading the book, it was a very cool thought, you ended with it in the conclusion, was that advances in any of these individual texts we’re discussing, so whether it’s crypto or smart contracts, or civic tech or you name it, it advances the other techs in a virtuous spiral of digital liberalization. For example, the growing economic integration of cryptocurrency and blockchain services will make it more costly for authoritarian governments to completely shut down censorship-​evading blockchains. Which they might still be willing to pay that price, but it makes it more costly for them to do so. Where else do we see that the whole is greater than the sum of its parts effect?

0:59:06 Chris Berg: Well, that’s right. One of the examples, we go into a bit of freedom of speech, particularly looking at China, of course, as the most sophisticated censorship regime probably in global history, and point out that we can read censored material from within China and other Chinese citizens can read censored material as they want, because they have access to the Ethereum blockchain, people have been putting up censored material on that chain, translating it into English so that we can see it as well. And because the authorities don’t want to censor Ethereum network, this large global smart contracting network, there’s nothing that they can do. They would have to take the entire network down, which would be itself an incredible engineering challenge, but also would be very costly for them. Part of this is just… It’s an economic integration story.

1:00:08 Chris Berg: It’s an optimistic story as well. And we in the… Liberals like ourselves have been disappointed to see that economic liberalization and political liberalization didn’t go hand in hand in countries like China or don’t appear to have gone hand in hand. But this is one way that we can see through these digital uncensorable technologies that economic integration with the rest of the world and political integration or social integration, however you wanna describe it, can come together. That we are talking about inherently global networks that are uncensorable, that are liberty-​enhancing or liberty-​preserving. And wherever those networks are, so are the positive liberty benefits.

1:01:01 Paul Matzko: Obviously, you guys are… You’re in Australia, you’re in the Melbourne area, at RMIT, what’s an example of an innovation or policy in Australia that would make us American libertarians jealous?

1:01:14 Chris Berg: Oh, God.

[laughter]

1:01:16 Chris Berg: Well, this is a tough question to ask ’cause, of course, right now, we’re in one of the world’s harshest lockdowns where we’re subject to a curfew, we’re only allowed to go out for one hour a day to exercise. Darcy, is there anything that we can say in favor of Australia?

1:01:31 Darcy Allen: To be honest, after a couple of months of lockdown, I’ve lost all hope.

[laughter]

1:01:40 Chris Berg: There are some things that we do well in Australia. So our surveillance state is not quite as restrictive. We unfortunately now have a data retention law that is bad for Australia, but is actually desirable if you’re in the United States where you’ve had the much more expansive NSA thing. Australia has a reputation globally of being what we call larrikins, anti-​authoritarians, but it’s not really like that. [chuckle] We started as a prison colony and we’ll end as a prison colony. This is my cynical lockdown mentality speaking, so I don’t wanna be too negative. But we have a habit of developing bad laws that get adopted around the world, including things like encryption, anti-​encryption legislation, we invented plain packaging for tobacco products. So there’s not a huge amount that I would tell the US to follow us on. As many challenges as you have, if we have invented something, I would sort of stay away from it.

[laughter]

1:02:52 Darcy Allen: This is precisely why…

1:02:54 Chris Berg: You caught me on a bad day, that’s what I’m saying.

[laughter]

1:03:00 Darcy Allen: This is precisely why we wrote this book, though. We don’t necessarily have to worry about that as much anymore, right? We’ve got the technologies available to us that if you’re interested in privacy, don’t necessarily walk up to parliament and attempt to get privacy legislation, go and download a privacy-​enhancing app, join a community that’s building these applications. So this is really what we’re try to urge the liberty movement to do, is that we’re not even sure those policy debates will continue and they should be [1:03:33] ____ on some margins, but we should be redirecting a lot of our resources to downloading these apps and taking our privacy back ourselves and our civil liberties ourselves.

1:03:47 Paul Matzko: I hope you enjoyed this discussion as much as I did. And do go get your hands on a copy of their book, The New Technologies of Freedom. Until next time, be well.

1:04:05 Paul Matzko: This episode of Building Tomorrow was produced by Landry Ayres for lib​er​tar​i​an​ism​.org. If you’d like to learn more about libertarianism, check out our online encyclopedia or subscribe to one of our half-​dozen podcasts.