Philosophy of Blockchain

This contemplation on blockchain technology aims to offer various perspectives on the matter. It includes philosophical inquiry, mathematical models of reality and examination of significance in structuring of human life and interactions. To reach a philosophical understanding, repeated areas of philosophy (epistemology, ontology, axiology) elaborate on conceptual resources that contribute to understanding of blockchain. It also includes a metaphilosophical framework to investigate the foundational dimensions of emerging novelties with vast societal impact.

Foundations

Blockchain technology — distributed ledger technology — is a system of secure transfer of information and assets via the Internet without involvement of a third-party intermediary. What is a third-party intermediary? It is anything or anyone that stands between the sender and a receiver of said information and assets. This can be institutions, governments, companies or individuals that execute, validate and chronologically record transactions and operations in the centralized database. Blockchain bypasses this operational cluster and executes transactions in an append-only database, which is tamper-resistant and available 24/7 on demand.

When we say blockchain, most think Bitcoin or decentralized payment system, which is its most known and obvious application. But blockchain can be applied to any known system that contains intermediaries, which can be removed and turned into a nodal system of distributed network. Everything, every asset, every product and service, even people and their identities are units holding value that can be turned into a token, connected to the network and become a part of one huge system organism or interconnected tokens.

The underlying software protocol allows information transfer between two parties directly within seconds, providing the means to record and transmit, while ensuring these are not multiplied or copied. Once the value has been digitized and turned onto a smart asset, it can be recorded, searched, sold and purchased and coordinated with a high degree of automation, speed and assurance.

Algorithmic Trust

The transformative impact of the Internet created a new subject of philosophical engineering and the philosophy of the Web. It discusses philosophical themes regarding emerging technologies, the advent of blockchain and the new perspectives on what this new era of network computing brings.

The original concept of the Semantic Web, before everything went under the wings of the global tech giants during the second phase (Web 2.0), was indeed a simple distributed network. Now, with Web 3.0 integrating blockchain, we are returning to this concept in a much more elaborate way. We now have the intelligence — artificial intelligence — that is built directly into the network to perform the value transfer. It means that the network performs the operations by itself. It is a sophisticated protocol that automatically validates, identifies, confirms and directs transactions within the network. In the case of most networks based on peer-to-peer transfer, there is a proof-of-work protocol (also referred to as mining), where there is a competition between agents that compete to secure and maintain the network by contributing their computing resources. What this process does is to create algorithmic trust — a form of trust that significantly differs from a traditional typology of trust between human agents.

Traditional (centralized) systems involve human agents to verify and validate transactions. As we increasingly progress towards global system complexity of enormous measures, there is an incapacity growing that is needed to maintain optimal functioning. The ability of non-automated human intermediaries within institutional structures to perform a high-quality verification and validation within a short or immediate time frame is at this point infeasible. This renders said intermediaries ineffective and obsolete.

Does this render all human-operated systems and brick-and-mortar institutions obsolete? Certainly not. But as clearly observed in today’s world affairs, all dysfunctional human-operated systems and institutions are being threatened by being replaced by more effective solutions, such as blockchain. And despite the large-scale blockchain adoption is still experiencing, and will be for some time, repeating phases of learning and adaptation, it has been revealed that traditional systems are not able to offer transparency and efficiency such as other systems that will eventually replace them. And since we talk about replacement — not integration, we can observe the reactions of the old system being endangered, emitting signs of deep entropy that is now making its way out to the light.

The Philosophical Question

The Web prompted us to rethink many aspects of our being-ness. Who are the selves of the human agents online, what is the relationship between our “real“ selves and  our “digital“ selves or how do we understand the digital collective that the Internet is. How do we approach the concept of materiality, embodiment, spatiality, temporality? What is possible and how is the possibility of something extended and changed? Contemplating blockchain also invites many considerations of change and possibility.

From an ontological perspective, blockchain provides us with the ways of a concise examination of what blockchain is, what it does and what are the dimensions of the impact. Secondly, the epistemological approach is to ask what this technology is helping us to understand about our current status quo. This can be new ways of knowing, asking about current standards of proof of knowing or corresponding standards of what we understand as truth. Whether or not we need to expand our knowledge to completely understand what blockchain is. Thirdly, it is axiology dealing with ethics and aesthetics, that is societal valorization and the application of elegance and beauty of the system.

The Conceptual Discourse

The examination of blockchain invites many conceptual resources and fields, such as mathematics, cryptography, system science, economics, governance and identity specifications. Conceptual metaphors are in this case quite helpful, as it is a tactical way of describing similarities and associations between a conceptual model of something that is new and unknown and something else we know (e.g. „blockchain is similar to xyz, a concept of digital money“). We try to understand the system by identifying similarities with other systems we know. Even though they may differ in the principle, it helps create new ways of knowing (epistemology). It provides a foundation for generalized conceptualizations of blockchain technology that point at a greater framework and roughly formulates capacities afforded by this system protocol. Another type of a conceptual metaphor is to understand blockchain as something that is not entirely new, but only a new version of something that already exists. As opposed to the impact of a disruptive innovation, we see it as a category of innovations as something that provides a reconfiguration of parameters of functioning. The meta view on blockchain as a new occurrence is to view it as a tool of managing statistical and algorithmic methods of organized consensus as well as a new element of phenomenological reality.

Basic Implications

Safety — Complexity, Correspondence and Statistical Significance

Statistical complexity can be measured by the information inscribed in the system defining the system dynamics and it can be used as a system-predictive measure. In blockchain, the process of cryptographic winning to validate a new block of transactions introduces a high ratio of randomness (high entropy), but should not qualify as a complex system due to a high degree of order caused by the organized consensus. High entropy, high order systems are not complex, they are systems of formal measures with flipping-coin mechanism characteristics. On the other hand, some blockchain consensus methods (e.g. in bitcoin) use the double pendulum with low randomness due to simple construction (low entropy), but high disorder (high complexity). To further analyze this could potentially determine whether blockchain is a complex or non-complex system which has direct implications in terms of chaotic behavior and the probability of maintaining systemic equilibrium resistant to crashes, thus offering safety.

Identity — Signification and Performance

Notional system technologies [1] name and operationalize identities within a context. In this regard, citing blockchain-based digital assets (artwork, designs, personal expressions etc.), the notational system of digital symbols represent identities (see Tokenization of Reality). The notational system of symbols that is unambiguous, but semantically differentiated, is helpful to specify the distinction between identities on blockchain (tokenized identity) that arise from the context of the network. This points at the need of identity management as a crucial element to introduce into digital systems as it may be needed for detailed layering of the identities inscribed as tokens into the blockchain system.

Property — Institutions and Social Agreements

Blockchain technology heavily touches upon novelty forms of property. In the social context, blockchain can be considered as a self-sufficient institution and suggests that it has necessary conditions to compose the institution of property without reliance on the means of a traditional legal system. In the light of the Essentialist Theory of Property [2] emphasizing the aspect of separability and exclusion, and the Recognitive System of Property Rights [Hegel] highlighting universal access, blockchain eliminates some criteria mentioned in both of these theories. Firstly, it is the need for a third-party authority enforcing exclusion rights, and secondly, it is a system of transparency facilitating identification of property rights and how they are administered based on people’s understanding of boundaries and recognition of a particular property. In the context of blockchain, a system of cryptographically secured tokens with the ability to register, own and transfer assets (both digitally-represented physical assets and digital assets) across the system is a protocol that could supplement and eventually replace the traditional mechanism of record ownership.

Value Record — Validation, Representation and Reference

Validating origins of identity entering the blockchain network suggests a need for a mechanism that administers the recordings of value that represents physical assets in the digital distributed ledger. It is an issue of continuity-validating instance because the entity that is supposed to be represented has to go through a validation process that creates a linkage between the off-chain and on-chain connection. In some cases, this process can be prolonged due to the necessity of the presence of another off-chain entity that confirms the existence of the entity being recorded. It is a validating instance that requires building a bridge between the physical asset and its digital representation working as a control coupling mechanism of virtual gathering of value. The implication for this might be development of critical tools of value record as well as novel mathematical models as a venue for computational systems performing said valuation.

Trust — Cyber-Human Collaborative Systems

In a world that is becoming increasingly interconnected and networked in both physical and digital systems, humans create a collaborative link with technology requiring crucial trust-producing mechanisms. Blockchain are exemplary for producing cyber-physical systems interconnecting physical and virtual components of reality, which fosters a phenomenon of merging and mutual agglomeration of human and technological elements and properties, generating an entirely new systemic realm. What is relevant in terms of blockchain application in this regard are attributes related to the consensus mechanism (voting, transactions, distributed informing). This supports the notion of blockchain consisting of autonomous interconnected systems that create an entirely new global entity, when it comes to both concept and operations. The future phases of global development would consist of “system of systems“ — multiple interconnected systems (physical and virtual + human and technological + established and emerging) undertaking activities on an autonomous basis, but also collaboratively. As the world progresses towards complex cyber-physical systems, complexity science offers methods of examination and predictive analysis of the implication of this systemic merging as well as the nuances of potential collaborations and ways of coexistence based on trust.

Authority — Institutional Restructuring

Blockchain triggers the shift from authority from institutional to computational systems. With blockchain, authority is taken away from institutional actors to the instrumental control of a software. Engaging with political ontology of authority, we can compare the context for production of authority by centralized system vs. blockchain and find out that with blockchain the governmental authority is displaced and state disappears as a redundant intermediary of the control protocol. It has two main implications: first — state and institutional bodies have lost the position of qualitative contributors of the production of order, and second — that navigation of our reality is being increasingly directed by computational and computer-made elements. Authority is therefore transferred under an operational standard generated by computational systems instead of human-operated.

References:

[1] Nelson Goodman’s Aesthetics—A Critique

[2] The New Essentialism in Property

[3] Hegel on Property and Recognition

Title credits: badcodec