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Last updated March 31, 2022

Money is a form of shared truth

Sources: Money Language in Kernel and Shelling Out in Kernel

Money is old. “We have yet to discover a civilization that didn’t have money. So, we know it’s at least as old as civilization.”

Money is a language through which to communicate value. Then, was does this mean for decentralization? No one should control the expression of economic value in exactly the same way that no one controls the meaning of words: they are arrived at consensually through common use.

What money is, how it is created, and who gets to distribute it goes to the very heart of the ways in which we are all incentivised to act

Incentives can be thought of as the social, political and neurobiological primitives which define what kinds of behaviours we express.

Programmable money provides utility which makes it much more than just money for the internet: it turns it into the internet of money.

Money allows specialization, allowing goods and services to be transformed into a intermediary representation that is accepted by society.

Master-slave vs Peer-to-peer

Difference between hierarchical and decentralized methods.

Question is “who is the slave”? Supposedly the those that need to follow the interfaces that the master dictates, there is no ‘ownership’.

What does this mean in the context of efficiency in systems? Consensus takes a long time. Decentralized methods are hard to get right. Is the tradeoff worth it? At what point do we trade good user experience with rights of data ownership?

# Money and Speech

Free as in beer or free as in speech? – Richard Stallman

Freedom of speech means that our ability to speak is free, but that doesn’t mean we can say whatever we want (e.g. hate speech and defamation).

Similarly for web3, access to the network is unrestricted (you only need a connection), but saying anything meaningful (e.g. state changing on the shared public record) has an associated cost. Thus certain behaviours we agree to be malicious (like creating fake transactions) are not disallowed, but just economically unsustainable.

Wouldn’t this favour the rich? Well yes, but we can mitigate this by using weighting like quadratic voting/funding which values number of unique contributions more than dollar amounts.

# Taxes

Laffer curve: as the tax rate increases, the rate at which revenue increases slows down due to increased avoidance, evasion, and disincentive to engage in the taxed activity.

This can be applied to the rise and fall of empires: “governments that overburdened their taxpayers, such as the Soviet Union and later Roman Empire, ended up on the dust-heap of history, while governments that collected below the optimum were often conquered by their better-funded neighbors.”

(Although, might not be 100% valid)

# Dispute Resolution

Most pre-modern cultures, ranging from the Iriquois in America to the pre-Christian Germanic peoples, decided that payment was better than punishment

Curious if the main reason is that you need to keep track of whether someone has served their punishment or not and memory historically has been unreliable. On the contrary, you don’t need to remember whether you were paid because you can just count your money.

The question applied to web3: can we advance the aims of rehabilitative justice using a shared and common historical record for better accountability?

# Engineering Money

Money-as-a- protocol really allows us to do is program incentives at scales never before possible

Money, in this context, is not a concrete thing, its an abstraction to communicative values, as a language, and as a technology. It is a classifier for things that exhibit behaviour that lets us use it for

  1. Store of Value
  2. Medium of Exchange
  3. Unit of Account

More importantly, there are tradeoffs in the above properties. Gold is a great store of value but sucks as a medium of exchange (interesting tangent, the traditional heuristic that money should have inherent intrinsic value which is separate from the money but the truth is almost the opposite. If the medium used to express transactional relationship has its own value, its not a very functional abstraction).

Historically, like physical materials, we’ve just accepted properties the way they are and just built what we could with them. However, also like physical materials, we’ve found ways to engineer the fundamental properties that we want.

However, it feels liek we run into a weird catch 22 here where it is debatable whether the new ’engineered money’ actually does have the properties we claim to have so it holds us back from developing/accepting it any more. I think this is in large part due to money being a combination of both technical protocols and social contracts

Andreas’ argument is that we can use abstract monetary protocols which we can engineer to change gradually higher-order social contracts.

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