Digital Currencies, Blockchain, Future of Finance Reaction 1

From September 2020// reaction essay for NYU Stern/Law School Digital Currency, Blockchain, Future of Finance course with Drew Hinkes and David Yermack

Week 1 Reaction

The course so far has been full of interesting ideas. I’ve referenced the very first lecture’s examination of the various ways to incentivize/disincentive behavior — through laws, architecture, markets, and norms — in multiple conversations with classmates and friends. The considerations of systems design when thinking about blockchains and regulatory regimes have clear parallels to the ways I might go about thinking about systems design at a smaller scale when working as a product manager and UX designer focusing on a software ecosystem. 

However the topic that I’ve found most thought-provoking, related to both regulation and systems design but distinctly in its own category, is the role of trust in networks. Given that the Bitcoin architecture’s semantics are relatively new to me, I’ll spend the majority of this paper summarizing and illustrating my understanding of trust and Bitcoin’s approach to trustless design, and finish with some thoughts about the implications of this design. I will elaborate on the implications down the line, as I develop a more sophisticated understanding about how the technical architecture could lead to unsuspected behaviors.

A simple exploration of trust

I’ll start by trying to define trust. Trust, I think, requires one actor to become dependent on the actions of another actor, without certainty about whether that 2nd actor’s actions will be consistent with promises or expectations of the nature of their actions. For example, if I pay my apartment’s rent on September 30th in full before charging my roommate for his half, I trust that he will pay me back in a timely manner. Why might I trust him?

Perhaps it’s because he has a track record of paying debts in a timely manner. It could be that his failure to pay back would cause him sufficient tension and risk of harm -- we live in the same space -- that I assume he would not act against his interest. Perhaps he will give me collateral to insure against his non-payment. In all of these cases, I would need to compute the risk of failure to pay and decide whether it was sufficiently small for me to pay the rent in-full. 

In this setup, I know my roommate quite well, and the transaction is just between our 2 parties. If he defaults, the trust between us will be broken, and I’ll assume the costs associated with that. What if, instead, I am looking to sublet my apartment to a stranger. How could I ensure that this stranger was able to pay? In order to build trust, perhaps that stranger would be willing to pre-pay the rent. But why would they trust that I wouldn’t run off with the money? Instead we might seek a trusted third party to accept the stranger’s rent payment and pay me upon successful delivery of the apartment. 

Why would we trust this third party? Likely for the same reasons that I might trust my roommate -- history of trustworthiness, sufficient risk of harm to themselves upon failure, insurance. A motivated bad actor could exploit any of these; this is at the heart of Satoshi’s whitepaper.

Bitcoin’s approach to trustless network design

The Bitcoin whitepaper clearly identified trusted third parties in financial transactions as an unacceptable risk that could be removed by a system of trustless verification of transactions. Satoshi’s proposal has three key features:

• A distributed ledger of timestamped transaction blocks, viewable to anyone

• Cryptographic design that links all previous transactions with most recent transactions, leading to an effectively immutable ledger

• A system of self-adjusting competitive incentives for verifying transactions that make coordination of false verifications extremely unlikely

Taken together, this system is designed to shift the responsibility of verifying transactions from a trusted third party to the crowd. Its assumption is that the incentives laid out in the system will attract a sufficient number of nodes to do the work of mining coins and verifying transactions to have the scale needed to mitigate the risks of manipulation.

Implications of trustless design

The first question to examine is whether this system is truly “trustless.” It is true that this design no longer requires a single trusted third party. Now, instead, trust is placed in the design itself; that there are sufficient checks to any attempts at sabotage. What are those different types of “attack” that the system designs against?

Satoshi notes in his introduction that “The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.” If attacker nodes controlled more CPU power than honest nodes, they would be able to coordinate a falsified transaction log of recent transactions, with exponential difficulty in replacing older transactions due to the Merkle Tree hashing structure. The potential for bad actors to accrue this level of power is probably empirically model-able, but in the absence of having done this exercise or researching existing work on the viability of this sort of attack, suffice to say that it would require huge levels of resources and coordination at this point in time to pull this off, and would probably only be able to be done by a “superpower” sovereign nation-state. 

With this power, Satoshi argues that “If a greedy attacker is able to assemble more CPU  power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.”

Satoshi’s reasoning makes sense in the case of an infinite game -- that the interest is in continuing to accrue coins indefinitely.

If the game is deterministic -- that the entity with the most coins at a particular moment in time “wins” -- I believe the incentive to pull off a coordinated attack gets much higher. Using BTC’s blockchain mechanism for voting seems like a case where this type of deterministic system might manifest itself. 

During our last class, I asked Scott Stornetta about blockchain voting schemes, and he mentioned that there are a number of compelling use cases already in-flight. I will be researching the existing work done on blockchain voting design to see how folks work around incentives to manipulate the blockchain under deterministic circumstances.

Thesis Musings

I’m at the beginning of my dive into thesis research. We officially began our thesis class at ITP 2 weeks ago, and were asked to write a little bit about what was on our mind.

Prompt: Write a short blog post on the big concept or passion or interest or questions you want to tackle (not the technology).

Yogurt is a food. Yogurt is alive. Yogurt was an accident. Yogurt is intentional. Yogurt is recursive. Yogurt is an archive.  

A spoonful of yogurt might sound like nothing more than an occasional breakfast snack; but what if I told you that within that yogurt, we can find questions and answers touching on everything from experience design to metaphysics; systems architecture to the future of computing?

Yogurt has been in the human diet in various parts of the world for thousands of years. We know it as a tangy, smooth-textured dairy product that is in a distinct class from cheese, milk, kefir, butter, and the rest. We know how it’s made now, too — heat milk, let it cool, add a bit of previous yogurt, give it time, and voila– you’ve got yogurt. But it wasn’t always this simple. 

Yogurt likely began as an accident. It probably went something like this: milk was left outdoors in a hot environment near some plants, where lactobacillus — a lactic acid producing bacteria — was crawling around. That bacteria found its way into the milk and metabolized the lactose in the milk to produce lactic acid. That lactic acid lowered the pH of the milk. The hot environment “cooked” the milk, changing the shape (denaturing) many of the proteins in the milk. The more acidic environment and the denatured proteins encouraged a re-formation of protein networks in the milk. Those new networks of proteins created a firmer texture, and the lower pH gave the milk its tangy taste. Some brave soul took a bite of that substance, liked it, maybe even felt good rather than sick, and perhaps tried to recreate it. Over many centuries and experiments, we now have a relatively reliable way of making yogurt. 

The mechanics of the inner workings of yogurt, which I can go to in much more detail, are ripe for analogy to the ways that human systems form, de-form, transform, and re-form. Bookmark “resilience in networks,” and “transformation” as topics of interest, and yogurt as a lens through which to look at these topics. 

Also bookmark “experience design” as a practice of interest, and the cultivation of spoiled milk into a repeatably delicious product as something that we can analyze as an act of intentional design, and extend into other food and non-food design processes.

As I mentioned above, yogurts are created from previous yogurts. They don’t have to be done this way, but in common practice, they are. In that sense, yogurts are recursive. A piece of the whole begets the next whole; the “next” is dependent on the “previous.” In Indian households it is very common to make yogurt at home, and yogurt starters are often an important item to bring along when moving from one place to another, or to share with family and friends when they come to a new place. We can trace lineage through yogurt — where did it come from, where did it branch, how did it transform? We can tell stories of migration, of immigration, through yogurt; both through people and through bacteria. 

There are a few ways we could go about tracing the lineage of yogurt. One of those ways would take advantage of recent dramatic improvements in our collective ability to understand the biological makeup of the world around us. Genome sequencing has become orders of magnitude cheaper, with handheld DNA sequencing tools now available to hobbyists, with room for further improvements in hardware and cost well within reach. The study of genomics coupled with the techniques of bioinformatics, among other related fields, are giving us new information about both the “hardware” and “software” of life, and allowing us to identify specific species of invisible microorganisms in our environment. We even have the ability to “program” some genes. We’ve figured out ways to store information in DNA, and we’re beginning to understand the possibilities of using DNA instead of bits as the basis for computing. Taken together, we are starting to learn techniques that may give us new infrastructure-level tools to reimagine the ways in which we build the materials around us — both physical and digital. The uses of these technologies will not be neutral; we have to imagine and execute the uses of the technologies that we want to see exist. 

It’s possible that yogurt already is a kind of archive in itself; I would like to explore whether we can use the bacterial makeup of yogurt as a way of identifying its ancestors in ways that are roughly similar to how we are able to identify our relatives using DNA. I’d also like to explore using DNA storage to embed oral histories of the Indian community in New York — my mom’s family was part of the early batch of Indian immigrants to arrive in Queens in the 70s — in the DNA of lactobacillus, and use that lactobacillus to make yogurt. I’d then want to demonstrate the ability to read out those files from the yogurt DNA.

Zooming out — I am trying to weave together a variety of interests and questions through an exploration of yogurt. It is possible that I’ll narrow in on one specific area: resilience in networks, transformation, lineage, stories of the Indian-American community’s roots, the future of biology and computing, infrastructure technology versus end uses, Vedic philosophy. It’s also possible that all of these can be refracted through one prism. Let the journey begin…

(Im)permanence and Fabrication

Assignment: For this final fabrication assignment, we were asked to build something with a motor. The main fabrication skill to focus on was mounting the motor. Any of the conceptual or interactive work was secondary to motor-mounting, but given that we were all going to have time to present to the class, it was important to me to think about the audience experience.

Stories and Inspiration:

Two anecdotes. First:

Back in 2013 I spent a month in Ladakh, a town in the Indian Himalayas. While there, I visited a number of monasteries. On of of those visits, I spoke with a monk who had just finished raking stones into a pattern. The courtyard we were standing in was windy and rocks were already shuffling out of place. I asked the monk about this practice of raking the rocks; if the rocks were going to be out of order within moments, why do it each morning?

The monk replied by calling my attention to the window out of the courtyard. The monastery stood upon a cliff, high up on a mountain jutting out into a valley. It was exposed to all of nature’s elements, including the wind that we were now feeling. “This mountain will be destroyed,” he said matter-of-factly, “and that is why it was built here. It serves as a daily reminder that even that which we hold most sacred will not last.”

Second:

I’ve been fermenting a lot of food and trying to learn about food cultures around the world. Although the specific pickling and preserving techniques vary wildly not only across countries but within them, the biological principles we use to ferment are similar. At its philosophical core, too, we’re doing something similar: we’re harnessing decay. We’re recognizing the impermanence of our food materials and seeing an opportunity to embrace change— to make something new of the old.

I wanted to reflect on these two anecdotes through this project and bring my classmates into this reflection with me.

Idea:

I told my classmates the story from the monastery and asked them to reflect on three questions:

1) What is something that feels permanent in your life

2) What is something that feels important now but you know will not be later

3) Make a prediction for 30 years into the future

I then passed out pieces of orange peel and markers to my classmates and asked them to write at least one of their answers on those pieces. Then, they placed these pieces on a conveyor belt— the fabrication project— which dropped into a container. I poured layers of cement over the pieces of organic matter (I added some pieces of cheese and also passed out paper to write answers upon in addition to the orange peel.)

Some photos from the demo, then fabrication notes and reflections after the jump.

Fabrication: I cobbled together pieces from Brunos, Home Depot and (mostly) Jake and Noah — a million thanks to them! The conveyor belt used a motor with a 100 rpm gearbox, but 2000+ rpm motor — there was a lot of torque at the slow speed, which is useful for a conveyor belt. I built the frame and motor mount with scrap wood from the shop and wood screws to keep things in place. The belt itself was held together with some zinc-plated pipes and shaft couplers-like pieces to secure the pipes in place (this isn’t the right term; I’ll edit when I find the right one.) After testing with tape (taped to itself) and cardboard to no avail, I finally made the belt from a bunch of rubber bands. It actually proved to be quite effectively and looked nice to boot.

Improvements: I began this project the day before it was due, which was a nightmare. I knew what I wanted to build, but was waiting on parts for most of the week, and also just made the calculation that I needed to get other assignments done first and could get this one together in time for class. It led to a lot of running to the hardware store, a lot of shoddy craftsmanship, but ultimately a demo that I was happy with. I’d like to do this over again with better materials and more attention to the quality of fabrication; all of the screws should be flush, all of the holes for the zinc pipes big enough for good belt rotation, I should get the right sized pieces of wood (or something else the next time around) to make the whole setup more efficient.

For the demo, I’d like to experiment with different organic materials and different concrete molds. I may tweak the questions as well. Overall, I liked that my classmates seemed engaged and appreciated the opportunity for reflection; I think there’s a path to making this engaging for another audience.

Make 5 and Philosophy

First, the assignment, and then, the weirdness.

This week in Intro to Fab, we were asked to make 5 of something using more than 1 technique for the repeated item. The goal was to think about repeatable processes— things like clamp setups and jigs, among others.

I made 5 rings for a “Tower of Hanoi” game.

They’re different sizes, but all used the hole saw attachment on the drill press. I mistakenly did not attach the center hole drill bit, so I also had to set up a system for drilling holes in the center of each ring. Afterwards, I sanded each of the pieces, first a bit on the belt sander, then manually. Finally, I coated each of the rings in black paint then drew a character across them (pictured later.)

I didn’t quite succeed in the core purpose of this assignment. I don’t think the processes I used were as thoughtful and repeatable as they could have been. In the crush of the week, I think I ended up locking in to a concept rather than really focusing on the intent of the assignment. I could have more thoughtfully rigged up a system for precisely sanding the rings, drilling holes and even cutting/sanding the corners on the game board.

With that said, I did end up using all of the equipment in the shop and even made it out to Reuse to pick up wood. And in the process of making my assignment, I rediscovered a line of philosophy that I really enjoyed way back in the day in undergrad, a good 12-13 years ago!

The Game

As a little kid, we had a couple of wooden tabletop games that I vividly remember. One of them was a game that I now know is modeled after the Tower of Hanoi mathematical puzzle. The goal is to move all of the rings in the tower from their starting dowel to another one, one ring at a time, with the bigger rings never on top of smaller ones.

The goal is to do it in as few moves as possible— which, spoiler alert, winds up being 2^n -1 where n is the number of rings on the board.

I added an additional component — reconstruct the character on the rings as well.

The inspiration

What’s the deal with the character and board decorations?

It starts with a line of philosophy focused around the “continuity of consciousness” — in other words, how do we define what a mind and/or a body is *over time.* I remember discussing this during Philosophy 101 back in undergrad as part of a broader unit on the theory of mind, free will and simulations.

First, a couple of thought experiments (for a more expansive set of thought experiments, this blog post is solid.) For each of these, think: in which case is your mind and/or body continuous throughout the whole scenario:

1) You enter a teleportation device and immediately are sent to another location

2) You enter a teleportation device, then a month later, you appear in another location.

3) You enter enter a teleportation device which sends you to another location one atom at a time.

I’ll let you ruminate on the answers. Maybe I’ll share some thoughts on my answers in a later post or addition to this one. But for now, let’s just leave it as a thought experiment that inspired the drawings on the game. The character in the game is in scenario 3, being sent one piece at a time to another part of the board — the past, present or future.