The Evolution

Composable Institutions

Basic Powers | Multifaceted Justice | Checked Rules | Omniscient Governance

Basic Powers

a. Occam's razor

In book XX of his masterpiece, Montesquieu points out (added highlight):

The spirit of trade produces in the mind of man a certain sense of exact justice, opposite on the one hand to robbery, and on the other to those moral virtues which forbid our always adhering rigidly to the rules of private interest, and suffer us to neglect this for the advantage of others.

On this consideration alone, the rule of law distinction could dissolve.
It abstracts price system and judiciary within a single justice mechanism.
Tripartite ecosystems, government and economy, are undifferentiated.
They share not only trias politica, but also the function of each power.
They are both a generic protocol, a system of rules.
This leads us to the notion of composable institutions.
Which kind of each primary power would do a better job in a given context?
Should we govern justice in a market or judiciary?
Should it be a combination of both?
Or another form which we haven't devised yet?
The answer should be given in the light of other interacting powers.
Justice guarantees user's will in fair, not necessarily equal, rights.
It promises everyone the same treatment under one set of public rules.
Let us then call justice, previously the rule of law, the user power.
Similarly, legislative and executive become the maker and the doer powers.
For instance, in our simplified denomination:
the doer power of a platform executing a smart contract;
which was devised by the rule maker power;
creates user power in a decentralized market.
That is the ecosystem spirit.
Management powers create user power.

Multifaceted Justice

b. many jobs, one function

Hayek articulated a system of imperfect and individual knowledge.
It implies differences of opinion, or disputes.
The price system of a protocol qualifies as a judiciary.

"The Spirit of Laws" describes it in a prince or magistrate as such:

he punishes criminals, or determines the disputes that arise between individuals

Justice resolves conflicts, either against the law or between individuals.
Let us examine how it applies to the popular proof of stake.
In the blockchain consensus, stake loss punishes the unreliable validator.
And a randomized block reward resolves a hypothetical dispute.
Agents would compete for transaction fees without random allocations.
It all happens in a single price system.
By extension, the judiciary power could be deemed to apply market logic.
It offers scaled penalties exchanged for damage estimations.
Indeed, justice can take any form, from authority to randomness.
It is only required to resolve conflicts efficiently within an ecosystem.
The obligation of a power dictates that public utility must be fulfilled.
Beyond purpose, the domain of satisfying arrangements is nearly infinite.

Checked Rules

c. power game

It is now easy to derive how conflicts of interest arise.
They grow from simultaneous exercises of user with maker or doer powers.
The developer of a contract implements the doer power.
As an abuse, user power could then exploit a premeditated vulnerability.
A maker rule created to benefit a combined user power is also an abuse.
The Doer can block the latter.
Likewise, Maker orders the removal of vulnerabilities introduced by Doer.
These observations direct the first rule of power separation.
The exercise of management powers must be segregated from the user power.
We are also aware of the necessity to keep power in check with power.
Hence, a system safe from abuse is obliged to a second rule.
It cannot boast less than two management powers.
In total, a legitimate system cannot segregate less than three powers.
They are three mutually exclusive functions, including usage.
This bare minimum preserves a consequential concentration of powers.
On the other extreme of power separation, we find no upper limit.
Peer-to-peer networks grow power distribution with each new client.
Maker, doer and user powers exercise a singular power each.
With regard to rules, they form together a balanced protocol.
In the simplest terms and at the highest level:
separated powers to make, do and use rules guarantee ecosystem integrity.

MEV¹ is a violation of power separation between Doer and User powers.

¹ Maximal Extractable Value stolen from users by manipulating blocks.

The three powers arise from an agency of interdependent subsystems.
Therefore, no single institution governs a power alone.
Each power is bounded by subsystems in one-to-two relationships.
Among bilateral management powers, Doer manages what Maker legislates.
When not intermediated, User oversees as a third-party judge.
Of course, usage itself is regulated by management powers.
As such, all three powers are governed by two others.
However, the exercise of a power maps to a single economic subsystem.
Communication, price and rule subsystems map to Maker, User and Doer.
All three must be tightly integrated in their power exercise only.
The confusion of a power exercise with its governance brings dysfunctions.
Governance power mapping to a subsystem isolates oligarchic institutions.
Subsystems fail to serve public utility when they rule their own purpose.
The exercise of power separation is nowhere as clear as its organization.
A power exercises through itself and rules through others without overlap.
Thereby, power separation is maintained in its exercise.
Ruling limits rather than permissions is the secret of management.
Ruling permissions is the most telling symptom of micromanagement.
Reciprocally, ruling limits macromanages checks and balances.
Powers enter vicious circles of overregulation when ruling themselves!
Within macromanaged boundaries, the exercise of a power is simply free.

A power governs others when restricted in its own right:

• User sells Maker or Doer for a loss of utility.
• Maker launches on a Doer maximizing reach and penalizes irregular User.
• Doer prioritizes Maker's Dapps to the extent that User bids on them.

Macro constraints expand liberating structures to grow a shared utility.
The token is key to synthesize the value of powered contributions.
The capitalization of a DLT grows mechanically with adoption.
Usage increases the native token demand of a Doer platform.
The user power buys or sells shares out of grown or declined expectations.
Maker is incentivized or penalized to analyze and regulate.
In turn, new smart contracts enrich the ecosystem.
But a decrease in their usage lowers the capitalization of a DLT.
Tokenized economic cycles coordinate actors with a single objective:
the token appreciation.
Where this token does not exist, contribution relies on duties.
Without a North Star, people must be told and put into job boxes.
Non-tokenized businesses of contributors run but they do not innovate.
Startups do not create because they're agile but because they have shares.
In fact, they tend to be quite wasteful because they can afford it.
The importance of skin in the game is found in the governance by utility.
The What is not stated, only the Why, and it is digitized in a token.
What else could matter above demand to build a public service?
Investments speculate when free-riding an exit regardless of utility.
So, we should keep trading to let makers and doers know what we want.
Sell the Economy to buy the Tokenomy.

Omniscient Governance

d. decentralized monopoly

Individuals can and should cumulate powers, if and only if distributed.
Distributed management is a desired property of enlightened governance;
which capitalizes on the user's circumstantial knowledge in rule design.
Peer-to-peer distribution of powers activates lateral checks and balances.
They safeguard protocol integrity from conflicts of interest;
while leaving enough influence to bring personal interests forward.
Separated powers deprived from distribution must resort to authority.
In the exercise of their function, they do not leave room for consensus.
When distributing particles of maker and doer privileges to users;
management powers disintegrate in the interest of superior governance.
In an airdrop of tokens, the tripartite ecosystem becomes a common:
a decentralized monopoly of collective powers and personal rights.
Infinite configurations and unique arrangements are made possible.
The general will of commons is unrestricted.
Interests are preserved and aligned.
The governed contribute to the challenge of innovation in institutions.