The Future of Cryptocurrency

What is cryptocurrency? I imaging for most of us the answer to that question is fuzzy at best. We could go read the whitepapers on Bitcoin and blockchain, but it won’t take long for our eyes to glaze over with terms like cryptographic hashing algorithms, Byzantine fault tolerance, and distributed ledgers. I imagine some of you are going that route already. So let’s start with a different question…

What is Money?

This is a deceptively simple question. What would chunks of metal, green pieces of paper, and shells all have in common? What are the underlying principles that allow us to see these things as equivalent?

Yuval Noah Harari in his book Sapiens describes the essence of money. Here is what he has to say about money based on two universal principles. First is quote, “Universal convertibility: with money as an alchemist, you can turn land into loyalty, justice into health, and violence into knowledge.” For example, oil is extracted from the Earth; the oil is sold and the company buys more land; the landowner from which that land is purchased invests in his daughter’s college fund; his daughter uses her law degree to prosecute environmental violations of oil companies. The oil is converted into land, which is converted into investment into someone’s future, which is converted into knowledge, which is ultimately converted into justice. This is part of why money plays such a central role in our lives, it is the means by which we can facilitate so much of what we want out of life in a free flowing, dynamic way.

The second underlying principle is quote, “Universal trust: with money as a go-between, any two people can cooperate on any project." Trust…this is an essential aspect of our human experience and something worth exploring in depth. Trust is ultimately what I'm here to talk about.

The US dollar has value because the world has a measure of Trust in the US government; Trust in the stability of our society, Trust in our ability to pay our debts, Trust that the world of the future will include the United States who will still be able to make good on the "value" of the dollar. The dollar is, after all, just a green piece of paper. More specifically a piece of paper with the signature of the US Treasury Secretary on it. And therein lies the Trust that we put into the dollar. The dollar, as with all currencies, deal in the same intrinsic value….Trust.

So how does cryptocurrency and blockchain fit into this picture? Quite simply actually, once we have shed light on these two principles. The cryptocurrencies and tokens that we have heard so much about – bitcoin, ether, litecoin, etc. – provide the mechanism for Universal Convertibility. And the blockchain — the technology on which these cryptocurrencies are built — is the mechanism of Universal Trust.

There is an idea floating around that cryptocurrency is bound to fail because it lacks an intrinsic value. Alan Greenspan (former chairman of the Fed) said this, “You have to really stretch your imagination to infer what the intrinsic value of bitcoin is. I haven’t been able to do it.” The underlying assumption -- of course -- is that the US dollar, gold, and other currencies contain some measure of intrinsic value that cryptocurrencies lack. What seems to be missed in those arguments is the fact that Trust is the underlying intrinsic value of any of these systems.

This reminds me of a parable I heard awhile back…in ancient times there was a group of very wealthy kings. The world was relatively peaceful and trade and economic activity were booming. Gold was the currency of the day but being a very heavy material, these kings got tired of the time and expense it took to ship gold from city to city. They all collaborated and decided to build a centralized system of vaults and ledgers on an undisclosed island, hidden from their enemies. All the kings sent their gold stores to the island. The ideas was that whenever loans were issued, payments were made, or any transaction processed between their kingdoms, a set of Trusted Accountants would maintain an independent Ledger and transfer the gold from vault to vault to process the transactions. The system was put into place and for many years everything operated as expected. Transactions were efficient, the kingdoms collaborated and traded, and peace was maintained.

After ten years all the kings decided to celebrate their ingenious idea and travelled to the island to check in on the system they put in place. Upon their visit, they found all the books to be in perfect order. They had their own accountants pour through all the ledgers. Every account was exactly as expected, every ounce of gold accounted for. The kings were very pleased. As the last part of their visit, the kings all wanted to tour the vault system to bask in their stashes of gold. The ledger keepers hemmed and hawed, encouraging their visitors to drink more wine and take in the local culture. This worked for a time but the kings eventually became impatient and unsettled.

Finally, after much pressure the ledger keepers brought all their visitors together. The lead accountant stood up in front of all the most powerful men at the time and informed them that five years ago a massive earthquake hit the island. The entry shaft into the vaults had collapsed. All the gold was completely inaccessible under the mountain. The gold was lost to history, never recovered, and passed into legend.

I think there is a key lesson to take from this parable. That lesson is this…the value of the system always resided in the Trust in the accountants and the reliability of the ledger. The material value of the gold was always a mirage. Even when all the material value of the ledger system was lost beneath the mountain, it still operated because the accounts were in proper order. The ledger was still maintained.

It is in this way, blockchain and cryptocurrencies are quite analogous. If the blockchain ledger can be Trusted, there is no need for a material transaction. In fact, this is not so different than our current financial systems. When I send you money via Venmo or PayPal, there’s no Goblin at Gringotts that moves the dollar bills from my vault to yours. There is merely a change made to the ledger. And if you didn’t Trust PayPal to maintain that ledger, you wouldn’t use it.

It’s Trust all the way down, it always has been.

Let’s shift gears a bit here. Some of you may be thinking, “why should we be caring about Trust in the first place?” Why? Because the world is in desperate need of Trust. There seems to be a sort of background radiation of distrust. Consider for a moment the state of our voting systems, our news media, our political climate, big tech firms, Wallstreet…does Trustworthiness even remotely describe what comes to mind in these contexts? It doesn't for me.

Don't Trust me? (you probably shouldn't) For an objective view, we can look at the Edelman Trust Barometer which has been monitoring global trust for almost 20 years. They find that Globally we stand at a "distruster" level. In 2017, the US feel to the bottom of the heap among the informed public in terms of Trustworthiness. Of 28 countries surveyed, the US was 28th. Dead last. And in terms of global industries, Financial Services has been the least Trusted sector for 5 years running. If this isn't a crisis of Trust, I don't know what is. I’m sure we all know people who don’t vote in elections, refuse to invest in the stock market, don’t let their children go outside unattended, or refuse to see a doctor. I think a lack of Trust is a large (if not primary) factor in these sorts of positions. I am not saying they are necessarily wrong. As a skeptical person myself, I can see many reasons not to Trust institutions, authorities, and strangers. But the fact remains, Trust seems to be in short supply.

Now back to cryptocurrency. Cryptocurrency offers a unique approach to establishing Trust. Bitcoin (the prototypical cryptocurrency) was born out of the 2008 financial crisis. A time when Trust in financial systems was at an all time low. Bitcoin sought to implement a solution that could prevent such breaches in Trust from re-occurring. These technologies seek to instantiate Trust via computer code and protocol design rather than Trust based on a legal frameworks, Wallstreet executives, or geopolitical organizations. The idea was to remove human error and human manipulation from the system. This is the next step in shifting our Trust more completely to algorithms and computer systems – a process which has been underway since the emergence of credit cards, digital payments, and bots in the stock market.

So rather than try to describe the technical details of how these cryptocurrency systems are designed (much of which even I don’t understand), let’s focus on some of the conceptual components of Trust that blockchain seeks to implement. Namely…

  • Resiliency. The lack of central authority can result in a more resilient network and no need to Trust any individual actor. Single points of failure are a common cause for economic and political turmoil. Nations that over-emphasize the importance of a single leader are often destabilized with a transfer of power and anyone familiar with supply chain management knows how over-reliance on a single supplier can bring an entire business to its knees.

  • Transparency. Every transaction is visible in a public ledger. Transactions cannot be hidden or deleted if they are processed through the blockchain. While the fact that the transaction occurred is fully transparent, the details of such transactions are not. Which brings us to the our next point…

  • Security. Transactions are encrypted and once completed, are robustly resistant to tampering. Blockchain differs from many other financial technologies due to the fact that it is “secure by design.” In other words, security was considered as a core component of the protocol rather than afterthought as is often the case with our computer systems.

Resiliency, Transparency, and Security…now that all sounds peachy but clearly cryptocurrency systems have not earned our Trust, and for good reason. Every day there is news of hacks, scams, and speculation undercutting our Trust at every turn. It’s worth noting that these issues are often not related to the blockchain itself but rather the social context in which it resides.

At the end of the day, I think there are social aspects of Trust that cannot be defined programmatically within the blockchain. In my opinion, there are two essential components that fall into this category:

First, we need a Bridge. We need a transition of Trust. A bridge of Trust. I’m talking about a strong position staked out by a Trusted entity. This could come in many forms. Maybe that’s explicit government backing. Maybe that’s Amazon support. Or maybe it’s the blessing of Warren Buffet. Whatever it is, it will be someone or something that the world can rally around and support. Think about the difference of interacting with a stranger on the street vs. being introduced to someone by a close friend. If your close friend holds that person in high regard, that person will probably jump a couple levels of Trust in your eyes almost automatically.

Second is Time. These technologies are so new and so foreign that it is natural for us to be suspicious. No matter how secure or transparent a system is, Trust needs to be built incrementally, over time, as understanding and usability progresses. We Trust our partners and our friends because we have known them through many phases in our lives. We have come to rely on them based on the way they conduct themselves at many points in time. So it also goes with all new technologies, including cryptocurrency. Do you think you will Trust autonomous vehicles the first time you ride in one? I doubt it. You’ll probably be on edge – watching the street carefully – but by the time you have taken one to work every day for a month or a year, you will begin to seamlessly Trust it.

I’d argue that cryptocurrency is not going away. Largely because the world is in desperate need of new mechanisms of Trust and our financial systems are the low hanging fruit. It may very well change shape, change hands, or re-brand itself in some way but it will persist. The fate of cryptocurrency is inextricably linked to the Trust in cryptocurrency. The question only becomes…

How long will it take to earn that Trust?

The Science of Buddhism

It seems clear to me that there is an alignment between many Buddhist teachings and the discoveries of modern science. Buddhism and modern science take different approaches to analyzing the world but seem to draw similar conclusions as to how it functions. Modern science is focused on building an accurate picture of the world through objective measures and observations. This is a sort of "top down" approach where fundamental forces such as gravity, electricity, evolutionary mechanisms, and mathematics are used to better understand how humans fit into the broader context of the world. By contrast, Buddhism focuses on subjective experiences to develop a picture of the world. This approach operates "bottom up" in the sense that those on the Buddhist path first seek to understand their own experience and mind which in turn enables them to view the world more clearly. I believe that the alignment we are seeing between Buddhism and modern science is a product of these top down and bottom up approaches beginning to overlap. This alignment plays out particularly in the description of the human predicament and the practice of meditation itself.

First, in regards to the human predicament, Buddhism emphasizes the Truth of Dukkha (suffering) which aligns with modern scientific understanding of how humans seem to interact with the world. The definition of Dukkha that translates to “unsatisfactoriness” helps to illustrate this connection more clearly. From a scientific perspective, it seems that humans (and all biological creatures for that matter) are never satisfied with their place in the world. All creatures seek more safety, status, food, sex, and gratification more generally as long as it promotes the propagation of their genes.

A tree in the middle of an empty field (with no competition for light or nutrients) will nonetheless continue to strive to grow taller and dig its roots more deeply -- never satisfied with where it is in the moment. Humans are rewarded (via dopamine) more for the anticipation of achieving gratification, than for the gratifying act itself. Some of the most exhilarating experiences for humans (sex, eating good food, and winning in competition) all have clear evolutionary ties to mate selection and gene propagation. This seems to be a well-understood byproduct of natural selection, which only really "cares" about the genes passing to the next generation. It does not consider the satisfaction of the host organism that carries those genes. In short, the very mechanism that brought us into being (i.e. natural selection) is predicated on the process of unsatisfactoriness as a driving force.

Another way in which Buddhism and modern science converge is in the practice of meditation. I think meditation can be conceptualized a sort of scientific exploration of subjective experience. It shares many key concepts with the scientific method including observation, hypothesis, and experimentation. Meditation (as well as science) begins with close and careful observation. This is where one tries to sit back and view the world objectively. In mediation (as in science), these observations will likely yield questions such as: What caused X to happen? Is there a connection between X and Y? If I introduce Z, what effect does that have on X and Y? It is with questions like these that we are able to formulate hypotheses about the world. In meditation these hypotheses are often described as "insights" -- both words indicate an understanding or explanation of a given phenomenon.

Once this hypothesis (or insight) is formed, it must be tested. In meditation, this is where the insights on the pillow come into contact with the harsh realities of the world around us. Proponents of mediation rightly emphasis this embodiment of the practice in our daily lives. This is a sort of data gathering phase in meditation practice. If this process is done right, the meditator will begin to integrate the experience of meditation with actions in the world. In much the same way, scientists test their hypotheses in a series of experiments that begin in abstract, controlled environments (think mouse studies) and gradually move towards real world implementation (think randomized control trials on humans). The ultimate goal of both science and mediation is to have a theory of the world converge with the reality of the world.

Though it may seems surprising, the teachings of Buddhism (minus the metaphysical claims) seem to align with our modern scientific understanding of the human condition and human mind. Even more strangely, it seems to me that Buddhism was able to capture some components of the scientific method long before the concept of science had even been instantiated. Hopefully further analysis (both objective and subjective) will bring us ever closer to the Truth of our place in the world.

Analysis of the Self: Borderless But Not Boundless

[CONTEXT: This is a prompt from a course I am taking called Buddhism and Modern Psychology…The Buddha makes the claim, which may draw some support from modern psychology, that the self does not exist. Describe the self that the Buddha says does not exist and explain the Buddha's principal argument against it. Do you agree or disagree with the Buddha’s argument that this kind of self doesn’t exist? Or are you unable to take a position? Give two specific reasons for your view, and explain why your reasons support either the existence of the self or the non-existence of the self, or why they explain why you are unable to take a position on the question.]

As I understand it, the Buddha makes a claim regarding the concept of "not self" as distinct from the idea of "no self" which I will discuss later. The "not self" claim emphasizes that the analysis of the five skandhas (or five aggregates) reveals that the self does not appear to be present within them. For instance, from a subjective (or objective) perspective, one is unable to point to a place in the body that contains the self. The self may feel like it exists in the head but where in the head is it? What is the specific point behind your eyes associated with the self, with the essence of you? This question seems to be difficult to answer for our bodies as well as for the other four aggregates: consciousness, feelings, mental formations, and perceptions. The Buddha's claim rests upon the two essential properties that are attributed to the common conception of the self: 1) permanence and 2) control. By contrast, from the Buddha's perspective, the world around us (and within us) is fundamentally characterized by impermanence and lack of control. I tend to agree with this claim and by way of illustration; I will outline both an objective and subjective viewpoint.

Let us first start from an objective claim, once again in the context of the body aggregate. To the point of impermanence…our bodies are not remotely in a state of permanence. Our cells, for instance, die and renew constantly. Some of which only last hours. Some last days, months, or years. After a decade, we replace many (if not most) of the cells in our body. Some cells, of course, do last our entire lifespan such as our neurons but these are the exception, not the rule. I do not imagine many people would claim that their "self" is only comprised of their neurons and nothing else. Even if they did, the neural network is far from unchanging. The neural pathways we engage and the connections between areas of the brain are in a constant state of flux. At all levels, our body is in a state of change: metabolically, physiologically, hormonally, chemically, and so on. Now for the question of control. While many of us feel that we have control of our body much of the time, there are irrefutable examples of a lack of bodily control. Sneezing, yawning, crying, and stomach churning to name a few. When we sleep, we relinquish all conscious control yet our body continues to function autonomously. In addition, none of us truly controls how our body breaks, degrades, and ultimately fails even the healthiest among us. From the objective perspective of the body, there seems to be no space for either permanence or control in any ultimate sense.

From a subjective standpoint, I have explored this claim through my meditation practice. While I have not necessarily had a profound selflessness experience; nonetheless, I have been unable to identify anything I can claim to be the self. For me, the absence of the self is the absence of a center. There is no middle. There is no central point. There is no "there" there. I have looked for the self and found nothing, though I have not necessarily found nothing to be the only thing there.  Here we run into the distinction between "not self" and "no self." I will not go so far as to claim that there is in fact no self but I see the merit in the Buddha's claim of not self. If the self is defined as the totality of experience, of all five aggregates, fair enough. However, if it is in any one of the five aggregates, I have not seen it for myself.

Finally, I would go beyond saying that there is no center and add an additional claim. A claim that there are no borders as it relates to the self. I see no clear distinction between what we identify as our "selves" and the world around us. The objects and people we interact with influence all of our thoughts, feelings, and actions. We are unable to take a step unless there is ground for us to step upon. We cannot survive five minutes without the air around us to breath. We hold no political viewpoints unless there is first a political system to view. At every turn the ever-changing world around us both constructs and constrains us in ways in which we have little to no control.

For me, the self is a sort of quality of being. A quality without a center and borderless without being boundless.