Spirit of Protocol

The Ruled Power

by Charon Charpentier

In this book

48 principles develop the big picture of economic protocols:

a strategic vision for systems of liberating and adaptable rules;
a mental model to architect decentralized ecosystems;
a practical takeaway, how to rule power over a utility.

Foreword

I care not for the wealth of golden Gyges, nor ever have envied him;

I am not jealous of the works of Gods, and I have no desire for lofty despotism;

for such things are far beyond my ken.

Archilocus

Warning

This manifesto can be said naive because of its optimism.

Expect the unexpected, which can go awfully wrong.
New paradigms tend to replicate past patterns.
This text has chosen to ignore them.

Underlying principles of a wishful future keep us on track.

Impetus

When the world is getting lost in details;
focus on what matters within those details.

Principles give a strategy;
patterns are tactical.
Derive technology;
build it,
for action.
Debug and analyze.
Repeat.

Contribution

Corrections for poor command of English are welcome.

Preface

A Problem | Envisioned Solution | A Eureka

Last days of Spring 2018.
Blockchains look both very promising and arbitrary.
I am a complete outsider in Toledo, south of Madrid.
Pretty place.
Scientists have taste.
No one is talking about blockchains.
They are busy upvoting each other's papers with like-minded scientists.
Special speakers didn't play this game.
And I didn't have the cards to take part.
I could only hope to connect with the best.

One of the invited guests was professor Petr Skobelev.
He is a pioneer in a type of applied Artificial Intelligence:
adaptive resource management.
He's coming from an engineering background, that is, he makes things work.
He had just developed a virtual market in space.
It solved conflicts through consensus in a fleet of autonomous satellites.
They were running his peer-to-peer algorithm to coordinate independently.
Impressive that the protocol operated under stringent cosmic conditions.
Cooperation on earth was not diplomatic enough.
Petr studied at Samara State Aerospace University during the Cold War.
Earlier, but after the Cold War, at the lunch buffet, he had been kind.
He had given me the reference of an important book for him.
It contained a mathematical proof for markets driven by protocols.
When I passed by him again, outside, by chance, I could not resist.
I stopped him, even though he was on his way to a conference room.

I quickly inquired in a weird way to say hello:

How could I build an adaptable protocol?

Skobelev first reaction was:

You'd need a system to manage the protocol itself.

I wasn't very happy with what the answer was giving me:
the idea of a transcendental system next to the unaware protocol.
When Petr and his followers promptly left, I noticed a side patio.
I went there to think under the sun.
I was hopeful for the intricacies of vegetation around the deadpan stone.
Leafy benches and columns reminded me gardens and statues of Sanssouci:
the down-to-earth stronghold of the Enlightenment in Europe.
But I got stuck.

My conclusion was that adaptability wouldn't be an inherent property.
You'd need a system to manage the manager and the manager of the manager…
getting further away from change signals.
Miners are validating Bitcoin transactions.
There was then a need to manage miners and mining pools appeared.
There was then a need to manage mining pools and control appeared.
The protocol lost some intrinsic value for the sake of management.
The outside cause of an action for change felt wrong.
Externalities are not understood from the inside.
Organisms autoregulate to get rid of managerial systems sucking resources.

The regulation mechanism must be internal.
Be it in minds or protocols, a supernatural motive creates a disconnect:
a greater friction than that of a need for change.
Ethereal injunctions stiffen systems to save the beauty of idealized laws.
Bounded rationality assures a greater complexity than what we can think.
As a result, we endure great pains misaligned with a simplistic Almighty.
Yet, it makes us rigid to resist mostly small temptations.
They only break rules when growing in times of crisis or revolution.
I wanted to align frictions with a simple Almighty.
They could shape adaptability within a protocol's world order.

Envisioned Solution

Organic shift alleviates pain caused by immobile institutions.
Microscopic discord could feed a cost function to adapt protocols.
We want the decisive agility of a supervisor in a single chain of command;
but also the regulation of complementary functions in an organism.
Let the supervisor be a function rather than a separate system.

In traditional software development:

Input + Rules = Output

But in supervised machine learning:

Input + Output = Rules

Likewise, a DLT is learning consensus on the fly from past transactions:

Transaction + Validity = Consensus

Consensus is then applied to new transactions to determine validity:

Transaction + Consensus = Validity

Likewise, in the judiciary:

Case + Laws = Judgment

The question is, how do we learn:

Case + Judgment = Laws ?

Newly formed laws would integrate back the protocol like the consensus.
An input and a protocol for a desired outcome compose usage functions.
The system does not learn in this setting.
The agent triggering a process learns but has no control over the system.
Agents will look to gain control over the system, or switch to another.
They could become supervisors, who need controllers in a vicious circle.
This control paradigm is a directed acyclic graph lacking backpropagation.
The controlling agent is not part of the system for a reason.
We want to avoid situations where the controller designs a biased system;
which could lean towards personal ownership rather than usage.
We want a systemic judgment but keep it in check with usage.
Let the agent be a feedback function of system usage.

In the learning mechanism:

Transaction + Validity = Consensus

Validity is the sum of feedback functions from agents:

Transaction + Feedback * Agents = Consensus

And usage remains:

Transaction + Consensus = Validity

As a result, learning dynamics of THE answer for an adaptable protocol are:

Case + Feedback * Agents = Laws

A supervisory authority is not required to evolve protocols.
Commands are a poor substitute for broken cycles of self-regulation.
Regulated usage and learned adaptability can be made complementary.
The two system functions keep each other in check.
Compliant usage capitalizes on learnings from free usage in a closed loop.
A belief system governed by such feedback, maximizes users' utility.
In a belief system of rules, laws keep evolving like a consensus.
A fluctuating level of disagreements drives change.

Note that a reliable rule must simplify circumstantial experiences.
Out of diversity, simplicity isn't simplistic.
Feedback must be far greater than complexity to synthesize it.
Only then statistical order emerges from chaos in a comprehending rule.
That is why ordinary rules are believed to apply when not dictated.
In a pure social setting, people behave according to learned habits.
Internalized laws either avoid conflict or maximize life chances.
Thus, verified rules guide behaviors for growth and survival.
Interactive rules are shared because one life learns only a tiny amount.
Legislative cooperation is a lifesaver.

From a tribal perspective, we were often on the very verge of extinction.
Up till 10000 BCE, the world population was often well under one million.
The earliest known testimony of written laws dates from 2100–2050 BCE.
Murder, robbery, and rape were capital offenses in the Code of Ur-Nammu.
Later, the Ten Commandments still appeared in a self-preservation context.
But a single set of ten rules for inner peace cannot cope with us anymore.
Between divides of an overpopulated world, it is now often believed that:
the middle finger of God inscribed commandments on two tablets of stone.
We reached another extreme where vital coordination challenges hard rules.

In Ani's Papyrus, 42 sins ensured cohesion to 42 administrative regions.
Everyday laws unified society and the kingdom of ancient Egypt together.
The deceased confessed cooperation in the Book of the Dead's judgment.
Division was the ultimate death sentence for the kingdom.
Accordingly, the Devourer of the Dead, Ammit, punished divisive behavior.
The chimeric creature was made of the three largest human-eating beasts.
But life regulation across different beliefs cannot rely on common laws.
Means of relative regulations have yet to be devised to face diversity.
Presidential whims do not have grounding in democratic foreign policies.

Many hope to avoid the deadly struggles leading to a global empire.
The end state of centralization is even more to be feared.
No empire could last for very long.
The homogenization of the rule of law is the end of resilience.
Monotheism forced by heretic pharaoh Akhenaten had been hastily canceled.
A kingdom's fate is to be diverse or to be divided.
The disparition of leveled powers introduces a single systemic risk.
History taught that internal checks and balances do not resist authority.
A global civil war could implode humanity.
Hopefully, governance does not have to be designed around a single will.

A Eureka

Fast forward in Summer 2021.
I heard about Hayek's book "Denationalization of Money".
I had it in mind when I read "The Use of Knowledge in Society".
It is a paper from the same author.
The book was not as easy to download.
I was almost tipsy, very late on a Friday night.
I had gone home because Covid restrictions were closing places early.
I could not share my good mood outside like usual.
I finished the night listening to Fauré's Requiem while reading Hayek:
skipping paragraphs talking about methodology because I couldn't follow.
And eating almond paste cookies because I had nothing better to do.
Why I was listening to a requiem was not obvious to me on that night.
Friends opined that nocturnes for piano would have been more appropriate.
Nietzsche's spirit was singing the death of God.

Two weeks before Easter 2022, I woke up from the disillusioned.
I recalled what Skobelev told me four years earlier in Toledo.

His last remark was encouraging, he said:

You're looking in the right direction.

I had been looking bottom-up.
I went down the rabbit hole again and found something above me.
The system to manage the protocol was not transcendental.
It is the immanent price system of Friedrich August von Hayek.

02-04-2022

Charon Charpentier

The Economy

Introduction

Knowledge in Action | Scale is the Limit | Discontent | Vested Interest in Status Quo

Knowledge in Action

a. the right focus

Nothing new under the sun.
In 1945, Friedrich Hayek was already a famous economist.
At this point in History, he was in the midst of particular circumstances.
They made him see the nefarious effects of overwhelming governance powers.
Vision influenced his landmark paper: "The Use of Knowledge in Society".
In an interpreted nutshell, when price is a synthesis of what is at stake:
the sovereign conduct of omniscient goodwill benefits those concerned.
Decentralized monopolies emerge from this definition of an ideal economy.
"What is centralized is not part of the monopoly" implies no oxymoron.
What a monopoly should manage and its scale, we will see.
Ubiquitous economic arguments digress from our initial statement.
Supply versus demand overlooks the greater price dependency on allocation.
Liquidity, exceptional interventions and black swans are more influential.
Discrete steps in the unfolding of events resemble a pragmatic procedure.
A system of operating rules is hard coded in institutional charters.
The laws of economics can explain but they do not take action.
A protocol with stated objectives is actually driving the economy.
On the one hand, we spent too little time optimizing the modus operandi.
On the other hand, actionable formulas lack in continuous randomness.
Financial reserves override dynamic fluctuations at will.

Scale is the Limit

b. micro & macro

Institutions are sacred.
They have stood the test of time.
Businesses have not.
The administration is wishful for growth.
Supervised entities are dying for it.
Businesses stand or fall because they cannot walk.
They are constrained like a tree in a forest reaching higher for the sun.
They grow not to stay in the shadow, until resources are exhausted.
They might not reach high enough, though.
Not everyone was born on a rich soil.
Some have spent everything they had for nothing; they were not big enough.
Some others don't even try.
Too much weight.
Too much leverage to reach a safe zone.
Too hard to move.
Too costly to make a mistake.

I just happened to witness a manifestation of the issue:

A lady entered the hearty restaurant where I'm sitting.
She explained that she would only have lunch if they served salad.
I know they do but that's not what they do best.
She eventually ordered a sandwich, almost complained about its size…
ate it and finally complimented the chef.

This is our economy, when you can afford eating out at a restaurant:
do not stick with your lean plans to have a nice meal.

Discontent

c. muted feedback

We have grown intolerant.
Contemporary populism has been fed up with the elephant in the room.
Despite rising sea levels, the ocean is not vast and rich enough.
Small fishes do not stand or support the existence of enormous whales.
Fatphobia has spread because growth is a ceremonial sumo fight.
Happy chubby koalas on the branch of a tree would gather more likes.
We do not make money from what we like.
We are not ready to remember the curves of Renaissance paintings.
But a serious dietitian would not recommend frugality.
We want more.
We want more of something different.
We want more proportionate harmony.
Pump and dump is a disgrace to fine finance.
We proclaim too big to fail a good investment.
Who is failing, then?
A safe stock.
Who is insecure, then?
This product is a killer.
Who is being killed, then?
Do you hear this rhetoric?
This is all too suspicious.
Are we blind, then?

Vested Interest in Status Quo

d. one size anomaly

VIP status above laws of common people discredits legitimate failure.
In their eyes, liability should scale with size.
Tax collectors are not the only ones struggling with unscalable imbalance.
Change is pushed one-way top-down.
Unadjusted levels of sophistication apply.
Every regulation flagged by a majority of affected parties argues:
central planning manages a theoretical body made of headless chickens.
They are missing corrective action when it is not reviewed or revised.
No economic actor is average.
Each of them will either lose or profit on each side of the aggregate.
Their deviation extends from a weighted average drawn to riches.
They're barriers of entry on one side and economies of scale on the other.
As Elinor Ostrom demonstrated in her studies of common pool resources:
rules derived from the status quo are the least productive.
An unconscious stream of calibrated thinking is turning down potential.

The Economy

Knowledge Horizon

Flat Growth | Idiosyncratic Business Models | Freeing Up Intelligence | Freeing Up Regulation

Flat Growth

a. sum of particular circumstances

A distribution tails add up until infinity.
We can achieve greater growth sideways.
We can allocate opportunities rather than inflate and burst businesses.
Less in front of us is more on the horizon.

Global Competitiveness reports of the World Economic Forum showed:

Economies with high social mobility are also more competitive.

Social mobility is measured in a number of generations by the OECD.
It takes decades for low-income families to reach average income levels.
There is large room for improvement and the reward is compelling.
Economic success of a country is tied to the ease of redistribution.
How could it possibly work?
Borderline welfare between aid and dependency is another dilemma.
What is needed is structural empowerment instead of submission.
Their own success preoccupies empowered and knowledgeable individuals.
They work out the details of solutions for dispersed impediments.
The potency to facilitate could be given to atomic economic agents.
We maintain a type of superior knowledge to the institution governing us.
Hayek points out the underlying principle;

in the third part of the already mentioned publication:

practically every individual has some advantage over all others in that he possesses unique information

The individual possesses:

the knowledge of the particular circumstances of time and place

Mail used to be too slow to pool this knowledge together:

the method by which such knowledge can be made as widely available as possible is precisely the problem to which we have to find an answer

War had just been resolved when the paper was published.
Last World War II surrender occurred on 2 September.
The IT problem declared above has arguably been solved.
But the global war-ming comeback did not alleviate problems since 1945.
It remains the process to enable the informed mental work of individuals;

stated as, while talking about a random man and with added highlights:

he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation

Idiosyncratic Business Models

b. "fit for purpose" value chain

The argument proposes that added value could be conditionally released.
The delegation of decisions relevant to the individual unlocks growth.
However, the decision scope of delegation is highly debatable.
It can be derived from the analysis of obstacles.
We noted earlier the rigidity of public services.
They are constrained by the mandate to administer one system for all.
A value chain designed for a company idiosyncrasies gains efficiency.
Both the administrator and the operator should benefit.
It is conceivable that bespoke administration could yield greater returns.
Business rules themselves have to be delegated.
Digital nomads are revitalizing the knowledge economy desert in a sandbox.
Mental work misses composable business processes to thrive anywhere.

Freeing Up Intelligence

c. constrained mind

Research has successfully measured the invisible untapped value.
It confirmed that we do not make the most out of everyday knowledge.
Sendhil Mullainathan and Eldar Shafir showed in "Freeing Up Intelligence":
effects of cognitive taxes on the quality of decisions and mind bandwidth.
Mental capacity is badly impacted by preoccupation, in any scarcity form.
It corroborates the potential to create thriving environmental conditions.
Lateral interventions are designed to disperse stress at friction level.
They substitute needs with local resources, flexibility and expertise.
Actors become aware and handle issues in a specialized intermediation.
Such systemic agility is only a theoretical model because of overheads.
Rigid regulations externalize processes of the assembly line and protocol.
Bureaucracy disintegrates local value and creates scarcity with red tape.
Sad truth is that an anxiety-inducing world brings about mass control.
Minds occupied by destitution are helpless.

Freeing Up Regulation

d. liberating structures

Lean and special-purpose interfaces handle impotent micro-contributions.
They cannot, free and for free, legislate or finance narrow services.
There is a lot to win in the establishment of a free regulatory zone.
It can reliably respond to administrative demands with a public ledger.
Risk is minimal.
Narrow services do not leave much room for abuse.
Every transaction is tiny and traceable to a micro-contribution.
Value is generated, and not channeled, in an IT system.
It is not going to finance terrorism unless misappropriated later.
A tractable fear should not override making money from original purposes.
A currency amount can be tied to a public utility represented by tokens.
More effective regulations would articulate utility rather than identity:
the what, the use and abuse; rather than the who, the poor and the rich.
"Know Your Client" is only necessary for progressive tax liabilities.
There is no need for it in an open and fair system taxed at the source.
Mass surveillance should not burden people looking to make a living.
The regulatory weight is only sustainable to corporations.
Freelance programs have eased but there is no middle ground to grow.

A bit of data is a drop in the economy.
An administration made of fiber optic cables charges a gigabyte per bit.
It creates scarcity where others create value.

The Economy

Communication Structures

Governing Funnel | Hopeless Architecture | Organization Shape | Purposeful Architecture

Governing Funnel

a. two-way bottleneck

Powerful actors can come with good intentions, but do not have to.
Most predictably, at least one shortcoming is inevitable.
Power contradicts with the very nature of information: its distribution.
Archilocus recognized the poor enlightenment of despotism in the foreword.
Such things are far beyond anyone's ken.
No matter the technocratic ability of central bankers, they hit ken limit.
They cannot contribute to financial stability as much as:
the structurally superior adaptability of horizontal liquidity.
The deep pocket skew imposes diffusion bottlenecks to monetary policy.
One-size-fits-all rates cannot embrace the complexity of people realities.
Microeconomic ups and downs ask for personalized measures.
They aim to revive joy in the amusement park but they stop in the queue.
Right when we want it most, direct access is only given with a paid pass.
Financial relief blockages reflect the inversion of centralized knowledge.
Accumulated information given to large institutions drops many details.
It does not take into account localized concerns until they become big.
It is too late to avoid congestion when they cut through numbers.
Information reach is covering the globe.
But financial spread is stuck in the corners.

Hopeless Architecture

b. communication spell

We need to understand how financial markets came to be.
Their shape, epitomized by skyscrapers, might not have been intentional.
They have grown during the radio and TV era of unfettered broadcasting.
Mass communication was the norm in the exercise of a given power.
Peer telecommunication did not exist.
Bond and stock markets channeled investments to make the future possible.
But the woman and the man in the street remained out of touch.
The people in their home remained outsiders.

Conway's law broadcasted centralizing financial systems over society:
systems are copies of communication structures from design organizations.
It is not too far-fetched, messages market and channel economic exchanges.
A minority of integrated and capitalized social circles spread like media.
The best of smart, courageous and lucky entrepreneurs built behemoths.
Let alone the rich who ticked all boxes and could afford prime time on TV.
Consequential firms dealing with financials became a backbone of society.
We shake when they shiver.
The news of a bank run is the trembling voice of a dictator on the radio.

In the meantime, the digital economy has grown and developed.
Offshoots branched out into networks to conquer neglected prospects.
Centralized structures cannot price everything we value as a society.
Alternative schemes could buy out a war with a population's peace shares.
Priceless things and ideas are not worthless.
They can be so unique or precious that they’re not fungible;
there is no market, and there shouldn't always be.
They are cases where a shared desire to acquire a dream deserves a market.
Networks unite across previous disparities and under a common purpose.

Organization Shape

c. communication frame

In 1968, civil protests were decrying governmental systems;
which did not work for all.
Conway popularized a timely integration in April of that year.
He formalized communication paths against segregation in system design.

His demonstration in "How do committees invent?" leads to this conclusion:

organizations which design systems are constrained to produce designs which are copies of communication structures

Imbalanced communication produces unstable systems.
Unfairness could stem from such systems in a social setting.
The conclusion now known as Conway's law was not mere coincidence.
Four years earlier, a book by Marshall McLuhan had coined a principle.
The 1964 "Understanding Media: The Extensions of Man" was riding a wave.

Its tagline was explaining what was about to happen:

the medium is the message

Baby boomers took over the streets.
They united for the cause of a world seen on TV.

McLuhan states in the first chapter:

it is the medium that shapes and controls the scale and form of human association and action

Scale and form echo the height and shape of a distribution;
which allocates knowledge, then wealth and subsequently power.
Human association and action echo an organization and its protocol.
They snowball in the quote order from a controlling communication medium.
Polarization between control and actions caused uprisings.
Social movements could be reduced to a scary and mechanical adjustment.
Mass communication drives mass dissent and consent.

The following corollary expressed by McLuhan:

The content or uses of such media are as diverse as they are ineffectual in shaping the form of human association.

stresses that people agglutinate whatever TV is saying.
Profits agglutinated, too.
The message was always designed to be broadcasted.
The rich and the poor have been segregated by communication structures.

The medium is the message is Conway's law in computer science.
Both theorists were observing the same phenomenon:
outward in McLuhan case with the medium as an extension of ourselves;
inward, as a communication constraint, in Conway case.
They both reckon the structured message and its structuring causality.
Dynamics seem to diverge from the same impulse and eventually agree.
McLuhan is observing the conquering effect of mass media.
Conway sees the forces of communication at play in delimited committees.
They are protected from overwhelming influence contrary to an audience.
McLuhan sees communication's effect on organization, Conway on systems.
Organizations and systems are not different from rules defining them.
Communication determines an influential protocol's shape in any context.
Messages carry power, payloads and resources scaled by the medium.
Distribution channels depend on communication design.

Purposeful Architecture

d. power of a medium

McLuhan attributes a power to the medium throughout History:

Print created individualism and nationalism in the sixteenth century.

He is implicitly referencing a breakthrough invention a century earlier.
The democratization of the printing press is indeed an inflection point.
People could start to pick books and think for themselves.
The diffusion of print within a language borders homogenized thinking.
Shared mentalities created a national unity felt deep within individuals.
It was the beginning of the end for split provinces of the feudal system.
The concept of a nation was born within a language; borders came second.
Latin kept the Roman Empire together.
The medium is the message; content does not matter to social patterns.
Society is framed as an organization by communication structures.
Design teams had been tasked to architect the formal financial system.

Let us apply to this task the practical stance of Conway in the same paper:

Given any design team organization, there is a class of design alternatives which cannot be effectively pursued by such an organization because the necessary communication paths do not exist.

Votes are framed for consent rather than input.
A society's calls for change do not drive organizational evolution.
Typically, feedback emerges in an independent medium.
It is structurally opposed to the communication direction of management.
Constructive public opinions are even counterproductive.
The formal decision making process opposes interference.
Leaders tend to turn a deaf ear by design.
Consultations can be initiated.
But the need for that consultation occurs elsewhere.
Protocols do not integrate outsiders.
A central governance acting in good faith;
a wise business run by strong people;
a teal organization without servant leaders;
or a foundation delegating decisions in a hierarchy:
rule over the same type of inefficiency.
They reproduce biased patterns in a vision impacting choiceless subjects.

Decentralization left outside management is a carnival parade:
like democracy in an authoritarian regime.
Abominable or inactive voting alternatives impose the instigator's choice.
Exclusive power forges consent in impotence.
You cannot offer your own power unless you cut heads and pooled profits.
Needless to say that this is not going to happen.
Power structures get both the first and the last word.
We find greater abundance where power would be distributed by design.
Adaptive resource management cultivates sources of wealth.
Decentralized ledgers are a good example.
A blockchain is a common pool resource of computing power.
Anyone can own a part, and so, increase its power and improve management.
We can achieve more, together.
To this end, the peer-to-peer network appears as a liberating structure.
Distributed information shapes a new form of power and human association.

We will dig deeper after we review internal change in the next chapter.
We will see how power separation can achieve decentralized management.

The Economy

Change System

Live Change | Process Integration | Price Omniscience | Inner Loop

Live Change

a. flow of news

Part VI of Hayek's essay starts with a parallel:

We must look at the price system as such a mechanism for communicating information if we want to understand its real function — a function which, of course, it fulfills less perfectly as prices grow more rigid.

According to the author, the price system is an information mechanism.
We may extrapolate and even confuse the IT system with the price system.

A few lines later, Hayek adds:

It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications

He insists on the tangible representation of a price system.
It combines change and telecommunication in an associative purpose.
The very function of the news affecting a price is the news itself.
It is a differential, rather than a fact.
Facts are very convenient mental snapshots over the flow of news.
But time doesn't stop to think over continuous differentials.
A fact stays further away from the truth as information keeps flowing.
Dams installed after sources can give the illusion that nothing changed.
Schedules are such dams.
They look like a misunderstanding of the price mechanism.
Economic actors could ponder this when they drop news on the market.
Scheduled economic announcements are drawn from public and updated facts.
Prices are not adjusted yearly, monthly or every quarter.
They are continuously adjusted as information flows.
Information retention creates a large resulting differential.
And it must be digested by the market at once.
Information retention is a threat to financial stability.
It could be avoided if crucial indicators were continuously calculated.
Markets could sync news in live streams for smooth propagation.
Accounting, data collection and economic indicators are still batched.
Worries of a global market volatility dwarf automation of data streams.
Live data is not a nice-to-have but a prerequisite to robust markets.
Immediate feedback enables a far better enforcement of regulations.

Process Integration

b. priced news

The value extracting function of the IT system communicates information.
IT must be able to charge and pay for data to perform its purpose.
That is, it must interface with a price system or a market.
Receiving and paying accounts are tied to the instruction.
It carries information from A to B.

Where data is free, value is exploited;
where data is paid, value is created in the knowledge economy.

People tolerate clunky redirections to online payment gateways.
They would understandably better keep funds in a bank than at a retailer.
The underlying issue is a lack of direct access to the banking system.
Transacting code of an application cannot afford external banking.
Overheads cost seconds of manual work to a localized millisecond process.
They break the value chain.
Bits of data carrying unique information are simply wasted at the source.
They do not propagate unless exploited at scale by a third-party bank.
Such agreements are secured by offline contracts out of a developer reach.
Change data lacks an open microfinancial infrastructure for tiny news.
Transactions must be integrated within IT to reap its full benefits.
The knowledge of particular circumstances is clearly missing.
Funds scrape social networks to pick some of it with advanced techniques.
A remunerating interface would incentivize higher quality data for less.
Decentralized knowledge is lost.

Price Omniscience

c. all-encompassing past

Knowledge transmission is a socially beneficial purpose of price systems.
Live prices prioritize market exposure efficiently to reallocate funding.
Think of the amount of news changing prices create every day.
The questions they raise are very significant.
Some read the stars, some review fundamentals.
We all plan, together, as a society, through prices.
They make or break businesses.
Investing is the art of simultaneously guessing:
what is in the price;
what is not in the price;
and what will be in the price.
In other words, investing is anticipating data sources.
That's why insider trading is tagged as unfair.
Interests on information retention or conflicting data loss cannot cover.
More money is lost every day by not knowing:
what the price should have known, which insiders knew.
Delayed information aggregates rob prices.
We cannot imagine how much more beneficial omniscient markets would be.
Almost no crash.
Almost no bubble.
Almost no panic.
Omniscient markets progress slowly, bit by bit, one at a time.
AI bots trading financial markets partly attempt to predict the past.
At least, the day we will realize omniscience, we will know the past.
We will not know the future, but we will be pretty close.

Inner Loop

d. from data to actions

IT systems execute instructions in a process of information arbitrage.
Data carries a knowledge gap to be interpreted by instructions.
Instructions modify the state of knowledge creating a differential.
It departs from the numerical synthesis of previous knowledge.

Pseudocode illustrating continuous knowledge updates performed by IT:

while information in $data; do
    new knowledge = instruction($knowledge, $information)
done

The knowledge process creates or burns money when applied to the economy.

Pseudocode for time series of pricing differentials:

while transaction in $data; do
    new price = instruction($price, $transaction)
done

On this assembly line, knowledge and information are specific.
Price is the product and transactional data the commodity.
Instructions are dependent on the price system.
Each transaction expresses an agreement on a change moving a price.
Buyers and sellers agree to disagree on diametrically opposed actions.
Their exchange forms a consensus integrating a wider price consensus.
Trading systems cultivate powerful and wide multipartite agreements.
Goods and services carry with them a greater complexity of opinions.
What is actually exchanged can be seen as a token of beliefs.
The economy is an overlap of individual intents.
Resources with more subjective overlaps become more valuable.
Resources with less subjective overlaps become less valuable.
The economy is debating and adapting the right position for society.
Constant action of prices communicates up-to-date consensual knowledge.

The symbiosis of transaction and information is ignored by law and design.
The crossing between underlying systems is highly regulated.
It is partly responsible for scarcity in the knowledge economy desert.
Value creation faces a fortress around the oasis of currency.
Scarcity paralyzes the most vulnerable fringes of society.
They cannot afford to act on the unique knowledge available to them.
And most affluent fringes cannot buy it.
We are all losing.
Manipulations are exceptions to the rule.
The integration of IT and price systems synergizes any endeavor.
Control is one of them when the merge isn't distributed.
Knowledge is managed by information systems; to own them is to hold power.
Misinformation originates in a system that the people truth can't afford.
Hayek evokes malfunctioning rigidity in a fixed price.
It isn't fulfilling its primary balancing purpose against decision bias.
In turn, knowledge of synthesized information embeds a potency to act.
The right action to take is derived from dispersed insights:
as representative as they might be, as influential as they are.

The Evolution

Power Separation

Outer Loop | Three Pillars | Functional Powers | Engaging Institutions

Outer Loop

a. change boundaries

Hayek conceptualized the link between price and communication.
It has been closed into a tripartite loop by Conway's law:
linking communication to (price) systems (of economic rules).
- Our specific application of the law has been parenthesized. -
A system of rules is a protocol and the economy is an ecosystem.
It is made of communication, price and rule subsystems.
As examples of looped and intertwined dependencies across the paradigm:
prices communicate changes driven by protocols, influenced by prices;
communication structures protocols and value their token prices;
IT, market or company regulation cascades through the other two;
idem for innovation, for they're all linked in an encompassing protocol.
The market, often a main locus of debates, is a subproblem of the economy.
We have long been suboptimizing the bigger whole.
The entire frame allocates subsystemic resources.
Fitting a subsystem oblivious of bigger changes makes the whole fragile.
Suboptimization introduces particular system conditions in core processes.

Controlled but unoptimized variability of subsystems builds up resilience.
- We will see how to manage it at the end of the upcoming chapter. -
In the last principle [1], a system designer must leave room for change.
The inner loop regulates unexpected and new knowledge within structures.
Laws are centralized on the outer but inner rules must be decentralized.
Opportunity costs of suboptimization are even bigger than temporary gains.
The bulk of wasted value occurs in the interfaces of economic subsystems.
Outside systems, the value chain loses most in blind spots.
The integration of a harmonious ecosystem should be the utmost priority.
Harmony is created in well delimited and connected functions.
They spare us forceful ideologies and sovereignty debates.
No need to posit that markets should rule over the state and vice versa.
Clear limits and borders is the first management principle of commons.
It was prominently highlighted by Ostrom among eight other principles.
They promote self-governed institutions with ample evidence.

Let us also recall a piece of Edwards Deming wisdom;
on the first page of "The New Economics":

Knowledge necessary for improvement comes from outside.

That is how subsystemic collaboration is maintained within a bigger whole.
The exercise of a well delimited function optimizes its public utility;
rather than its internals, which are merely extraneous artifacts.

[1] 4. Change System: Inner Loop, d. from data to actions

Three Pillars

b. split prerogatives

The public utility of subsystems should be the primordial system's focus.
Technical optimization of a function does not improve the system.
The definition or redefinition of a functional utility does.
Only then, inner subsystems can be derived.
Suboptimization is a symptom of decentralization at the top of a system.
Decentralization must be organized at the bottom to synthesize at the top.
Confused governance originates in a failed oligarchy of subsystems.
Besides its definition, a utility or purpose should not be decentralized.
A system of equal objectives makes conflicting subsystems.
One system equals one utility; one sub-system equals one sub-utility.
No system should be built before an overarching agreement on public value.
Look no further to understand why political polarization does not help.
Partisans project different visions of the State.
They fight unless they agree on a function with clear boundaries.
Let's do it before we do it.
We often waste debates because we engage before "it" has been agreed.
A single motive makes a multi-objective system of subsystems possible.
Those can be decentralized because one utility centralizes contributions.
In turn, utilities of subsystems harmonize an almighty system of rules.

A blockchain purpose is to decentralize; it seeks to distribute.
But a Dapp attempts to centralize the decentralization of a given matter.
Fearing forks, it aims to grow as close as possible to a single consensus.

The three independent pillars of a republic respect power separation.
Their reason to exist, uniting purpose and common utility is the Law.
It is an intrigue for a mind aware of the three economic subsystems:
the legislative is devising protocol rules;
the executive is taking actions according to the protocol;
and the judiciary is resolving compliance.
What if we'd turn the legislative into an autonomous organization;
the judiciary into a market;
and put the executive into an automated and incorruptible software?
What would we get?
Bye bye presidents, senators, judges and ministers…
We'd get a tripartite economy optimized as one;
a promising ecosystem;
a decentralized application;
an autonomous organization running on a blockchain.
The vision of a limited toolset in the Ethereum blockchain is spot-on.
Vitalik has been championing the executive purpose of the blockchain.
Pre-packaging decentralized finance would be restricting the legislative.
And the usability of price systems would decrease, harming the ecosystem.

The executive decentralizes the legislative.
The legislative centralizes the executive.
The judiciary aligns the legislative and the executive.

Functional Powers

c. two third legacy

From an economy to a tokenomy, puzzling mismatches occur.
An executive of competing organizations has been replaced by softwares.
And in the early-day tokenomy, autonomous organizations legislate.
But they better be knowledge systems to leverage communication.
Thereby, each power maps to a functional and economic component.
Communication, price and rule subsystems roughly map to:
the legislative, the judiciary and the executive.
Conway's law explicitly relates an informed DAO to a utilitarian Dapp:
undirected communication graphs devise fair systems of bilateral rules.
Representative knowledge of affected parties makes popular protocols.
The legislative is the executive, underpins the medium is the message.
McLuhan did not face such an exact causality in his society, however.
Structures could shape but they did not detail enforcement.
For better or for worse, the Tokenomy is the end of social unrest.
Technology could have shrunk room for civil disobedience and plurality.
Smart contracts are the children of a lawmaker and a police officer.
Strict parents have been wise enough not to micromanage their kids.

Judgment's decentralization democratized the perfection of Conway's law.
Without a built-in consensus mechanism, digital laws topple republics.
On the blockchain, a distributed executive became a legislative order.
It contrasts with presidential and executive orders bypassing a congress.
A programmable DLT aligns management powers in a new State of the art.
Organizations are their own master and legislate a cooperative executive.
Original functions of the two management powers remained.
They only changed mechanics when turned into DAOs and smart contracts.
The judiciary, however, has been fully replaced to deter despotism.
The judiciary did not reward active participation;
which is crucial to remove hierarchical control.
Obedience to law disappears with authority.
A system of prices replaces the need for a dominant order.
It can be arranged to reward or penalize any kind of activity.
The protocol optionality facilitates the removal of imperatives.
It is easy enough to opt out and sell tokens on a conclusive disagreement.

Even so, protocols create welcoming environments in their own interest.
The token is a protocol share and its price an expression of a consensus:
the value of such a share, determined by visible features.
Internals do not matter without a purpose.
Thereby, we find a single meaningful drift in the institutional evolution.
Pillars of states and tokenized protocols differ by the rule of law.
Trade is the business of peers and obedience that of subjects.
The Tokenomy legalized corruption in a market of regulations.
Perfectionist enforcement is also putting an end to small-scale extortion.
We went from small hacks and big taxes to big hacks and small taxes.
The new scales of authority and creativity inverted redistribution norms.
The Economy and the Tokenomy balance out taxing hacks and hacking taxes.
A technocratic and capitalized industry would better stick to an Economy.
Bigger taxes insure a company's treasury.
Open source and decentralized apps represent the tokenomic archetype.
Low taxes make up for the loss of intellectual property on a bigger base.

A stronger and strict legislative micromanages an Economy;
while a stronger and free executive macromanages a Tokenomy.
Thereby, the judiciary shifted from the authoritative to the consensual.

Engaging Institutions

d. gamified society

On DLT, the use of institutions has been turned into a business game.
The tradition of power separation could make it a remarkably fair game.
The legislative, the executive and the rule of law have been preserved.
Participants don't game the ecosystem but subsystems where they're active;
what is expected in a fair environment.
While the judiciary urges citizens to obey;
the price system encourages the exploitation of a win-win design.
The blockchain evolution of institutions gives a lesson to politics:
engaging with a protocol is a precondition to engage with its governance.
It's been achieved thanks to a democratic version of power separation;
which is the organizational pattern of self-regulation.

Only power can stop power.
Hence, self-regulation requires a multipartite power.
Peer regulation is in the nature of controlled power.
(Authority regulation is in the nature of controlling power.)
Checks and balances thrive in network communication structures.
Trustless consensus resides at the level of countless agent interactions.
The 1748 political triad spreads exponentially beyond the third dimension.
"The Spirit of Laws" described power patterns to unite freely.
Montesquieu's book was the second most quoted by US Founders.
It would be the first by now because biblical stories have lost steam.
Already a few years after the US Constitution, Louis XVI lost his head.

In an interconnected world, the advocated principle is stronger than ever:

Power ought to serve as a check to power.

The Evolution

Tripartite Ecosystems

Means of Power | Ecosystem Promises | Territorial Overlap | Macromanagement

Means of Power

a. governance determination

In the paradigm expressed so far, an economy is a form of government;
where the rule of law is ensured by price systems manifesting a consensus.
The parallel is clearer within a decentralized application.
It isolates simplified functions.
In the mainstream Economy, a legislative power defines business rules.
Companies are entrusted to take actions like a distributed executive.
They apply legislation on their own;
but also in the interests of workers, investors and the state.
Likewise, a government is a form of economy;
where the rule of law is ensured by a judiciary manifesting an authority.
Hence, consensus represented in the price characterizes economic activity.
Which tripartite ecosystem could resolve a given societal problem?
Should it be resolved by a government, an economy, or a mix of them?
It boils down to the distinction.
Should subdivided problems be solved by authority or consensus?

Ecosystem Promises

b. primary problem of economics

Rule of law acceptance posits a beneficial posture.
The value proposition of a promise legitimates the ecosystem oversight.
According to social contract theory, individuals consent to accept it.
The promise made by a modern government states that everyone is equal.
Under the Law, it opposes the promise of markets:
everyone is different in the economy.
Authoritative or economic oversight determines the relation to power.
Ruling systems make equally subordinate subjects or unequally free peers.
Society is relieved from harsh inequality in total freedom by the State;
and from harsh equality in complete subordination by the economy.
The State guarantees rights and the economy personal will.
The consent of oversight for these two deals is generally accepted.

The problem is where to draw the line between each ecosystem.
Equal standing is a precondition to trade as opposed to appropriation.
The State promise reduces inequality variance where it is fulfilled.
Equal rights provide a greater spread of resources than privileges.
Distributed opportunities rely on fair legislation away from despotism.
Each side of an impartial deal must be balanced but offsets contradict.
A decrease of variance for the sake of spread is also a loss of freedom.
The legislative space excessively restricts a safe scope paring change.
It requires expert knowledge to navigate.
Poor Alice and rich Bob must both revise restricted endeavors.
Out of place, laws impede resource repartition as much as wild prices.

There is no such thing as an objective appreciation of changing wealth.
Both ecosystems must coexist for the future to be equally promising.
Environmental inequality arises from two unique sets of circumstances.
Essential inequality cannot not exist between two unique individuals.
The tradable adjustment of inequalities is more bearable outside the law.
Social disparity exchanges relative preferences to a certain extent.
Outside constraints, chosen inequality is a freedom of concerns.
Such a concern could be philosophy.
If you'd like to sleep in a jar on the market like Diogenes, you could.
Another concern could also be gold in other places.

In Switzerland, I was once told by a Californian girl:

Money can't buy happiness, except in California.

She knew sign language despite her high monetary expectations.
Social occupations are not known for lofty remuneration.
She had a complementing collection of concerns.
She was ready to work harder or smarter for extra bucks.
A government would dictate how much good she would do with them.
It is only her to judge, as guaranteed by the economy.
Like anyone else, she was able to recognize a need which is not addressed.
Where to draw the line between governments and economies is subjective.
Let us ask how, instead.

The issue is how to trade out of undesired and unique situations.
We derive the right tools:
exchange protocols offer various paths towards different aspirations.
Governments cannot decide for us but guarantee that we have a choice.
Should you trade your time for a degree or your body for a pittance?
Upper and lower limits of tradable conditions frame accessibility.
The State breaks its promise out of economic bounds:
below affordability and above sophistication.
Exclusive rights are responsible for the skewed allocation of resources.
But the wealth gap is not of a government resort within tradable bounds;
where it is precisely the consequence of a free economic promise.
Inequality ambivalence infers a generic trend between ecosystem remits.
A fulfilled state promise widens economies in scope and participation.
The perfect State does not exist.
Yet, we need it until is has accomplished its purpose:
the liberation of opportunities.

The inference smells very much like the dictatorship of the proletariat.
Bad odor perforates the border between opposite promises.
It repels the destruction of freedom by political radicalism.
Hayek published "The Road to Serfdom" the year before his 1945 paper.
A Wikipedia contributor extracted the essence of this influential book.

Referencing the Austrian author:

He argued that fascism, Nazism and socialism had common roots in central economic planning and empowering the state over the individual.

Authority permeates through the fine line of freedom.
However, empowering the individual over the state moves away from it.

The overlap of ecosystem legislatives coincides with economic immaturity.
Constitutions attempt first to underpin both governments and economies.
Scaffolds amalgamate with buildings.
Economic legislatives could very well be separate from governments.
Let us not confuse limitless governments with their restricted ability.
Caricatures of governments exercise undue and overwhelming influence.
The twentieth century has witnessed a number of harmful exaggerations.
Communism exhorted that everyone should be equal within a price system.
State managed equality was contradictorily applied to the economy.
Our expansionist institutions still carry a part of responsibility.
The State is meant to relinquish control when it is safe to do so.
Disinterested authority leads society the furthest away from martial law.

Government solutions to wealth distribution cannot address the root issue.
Nor can they sustain lasting change.
They must empower.
They operate in a different ecosystem cycle with opposite assumptions.
The governmental problem is the allocation of equal rights.
States entrust inclusive rights so more resources flow between peers.
How they flow, however, is a very different matter.
Interference impedes direct exchanges.
Third-parties, including institutions, endanger social cohesion.
They corrode or prevent reciprocal social bonds established by trade.
Shared wealth arises from the exchange of relative differences.
Free exchange distributes inequalities devoid of power asymmetries.
The economic problem is the allocation of varied resources.
It is only solved satisfactorily by flat consensus outside governments.

Territorial Overlap

c. confused institutions

The high-level distinction of institutional issues is straightforward.
The state prerogative is to provide the baseline of human condition.
States guarantee the observance of unalterable and fundamental rights.
On paper, a state is a protecting authority.
All which is not absolute, but relative, is of the realm of the economy:
from share rights to conditional commitments, contracts.
In this context, self-determined contracts do not challenge governments.
Nor do they challenge the judiciary rule of law.
Smart contracts experiment to compose the next generation of protocols.
They fulfill their own legitimate purpose.
They are already recognized by a social process of self-regulation.
Yet, the state legislature is not going to relinquish its business scope.
We would rather see it take a consensual stance to resolve trade issues.

Free token rights will be officially recognized when they are understood.
The value created on DLT reached a new level of trade transparency.
No company makes transactional data auditable publicly in real time.
But the mainstream focus is on speculation rather than business utility.
Until this changes, the authority will be uncomfortable.
The lack of absolute guarantees is understood as a risk or an escapism.
Price action is the very mechanism of regulation which states are seeking.
Token bubbles hide underlying price systems making up protocols.
External price trends don't look like controlled solutions.
The slow evolution of institutions will lead to turning points.
In a faraway future, states will buy governance shares in free protocols;
these protocols will turn into governments under international law;
people will eventually claim their right of self-determination;
and will finally establish a country on the blockchain.

Macromanagement

d. economical State

We have elaborated on demarcating features of governments and economies.
They determine the use cases of both ruling ecosystems.
It could now be helpful to generalize in a greater abstraction.
We could comprehend what power organizations have in common.
The next chapter will resolve conceptual conflicts.
They arise when different powers mingle.
Guided by functional utility, we will reconcile confusion.
This will allow us to consider substitutes maintaining a given purpose.
They can only be articulated within a generic ecosystem.
We are already hinting that institutions are not set in stone.
Before we reorganize power, prudence asks first how entities could evolve.
The economy is a governance problem relying on institutional protocols.
As an echo of the first introduction paragraph:
assumptions in laws of economics are only valid within a given paradigm.
Indeed, we propose to optimize the protocol rather than the assumptions.
They can become obsolete with significant changes of resource allocation.

The economy is constantly rebalancing knowledge.
We try too hard to conform fluctuations with our current understanding.
We are unwillingly triggering large adjustments;
which we have previously contained.
Anomalies signal that assumptions should be modified.
If only we knew how to distinguish fluctuations;
rather than modeling them on other past fluctuations;
we would learn something new.
We could proactively enhance within a process rather than intervene late.
Firefighters extinguish remote fires when smoke shows up on the horizon.
A central bank is akin to a single fire station in a sprawling city.
Monetary policy must provide political safety.
Social stress has to be relieved to avoid dividing extremes of politics.
They increase conflicts further away from consensus.
A government contains an internal economic problem.
In "controlled variability" invoked earlier to fend off suboptimization:
control is governmental and variability economic.

Business rules should not be part of a different ecosystem than business.
The legislative and the executive should depend on the same rule of law.
The inconsistency between subsystems breaches compliance by design.
The executive is obliged to reconcile two different rules of law.
The administrative cost is a symptom of poor ecosystem design.
Businesses must continuously weight opportunities against the law.
The grey zone is a gold mine.
Regulators scale up surveillance while increasing the compliance burden.
The economic rule of law is strikingly more efficient to regulate trade.
Price systems price out the unacceptable without delay and monitoring.
Transgression is always an option at a high cost, like in a judiciary.
The crucial trade benefit of price systems is a wiser plural assessment.
There are as many judges as market participants in the economic mind.
States are prone to micromanage markets because laws govern specifics.
Micromanagement suits the oversight of rights in any circumstance.
However, this predisposition effectively suboptimizes economic activity.
Price systems are better designed to regulate unique circumstances.
The economy could only become an official ruling power;
if it does not remain a conflicting partner of governments.

Edwards Deming consistently advocated for the appreciation of a system.
He would decry the tension between businesses and regulators.
The statistician's teachings are pointing towards a sensible future.
He is credited for the tremendous post-war rise of the Japanese economy.
He remained faithful to his theory throughout his consulting life.
He saw it work too well, beyond his own wishes.
A patriotic American was unwillingly challenging America's economy abroad.
He was embarrassed, as his grandson tells in "The New Economics" foreword.
Deming generously shared a secret with manufacturers: a methodology.
It taught them how to learn from samples out of statistical control.
Abnormal deviation was used to inform changes to the process.
Efficiency gains within a macromanaged system go through the roof.
Outliers are bursts of dynamics continuously at play within a process.
The isolation of outliers in extreme conditions turned blue collars white.
It allowed the identification of main drivers behind unrestricted results.
Workers were then able to pull the right strings to enhance the output.

The prestigious Deming Prize is a testimony of precious knowledge.
The award for quality management recognizes continuous improvement.
The exact opposite habit inhibits change in the economy's management.
Long-standing processes go unchallenged as historicals accumulate.
Conflicting anomalies do not change procedures.
Crises are fixed by tougher regulations to shift responsibility.
Lawmakers are more worried about sustainability in politics than business.
Rules are decided by outsiders pointing fingers in a different ecosystem.
The cost of capital is free from a central manufacturer standpoint.
Inflation and interests are paid by individuals and businesses.
Theoretical likelihood prevails over valuable methodology.
Governing institutions do not have skin in the game.
They should be regulated.

A decision scientist addressed a crowd of PhDs in Toledo:

If you have done something smart, this is stupid. You cannot reproduce.

Indeed, we would rather govern with intelligent protocols.
Most of the time, we cannot rely on stupidity.

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.

The Evolution

Authority Twilight

Anonymity Crime | Poster Extinction | Cognition over Ideology | Neanderthal Diplomacy

Anonymity Crime

a. zealous enforcement

Curious.

Presumption of innocence does not apply to cash flows.
Dirty money already exists when the only known crime is the unknown.
Privacy hides only details below the protection bestowed on us.
There is little we could not be hiding when we do not walk naked outside.
People see us walk like any dressed criminal.
Only crime can tell the difference.
That is not even enough but personal details do not help.
A misbehavior can be justified upon inspection of anonymous circumstances.
Enforcement gaps could be caught in intransigence or outdated laws.
Systemic interactions are more informative than fluid personas.
Financially, oppression translates into the presumption of dirty money.
It undermines the promise of fungibility;
endangers a currency credibility;
and costs legit holders a decrease in purchasing power.
Transactions are denied over risk rather than verified claims.
Innocent people pay for crimes surrounding them, without the proceeds.
FATF lists punish people for their state governance;
albeit they are not responsible for a single incriminating deficiency.

We could at least aim for relevance in the inclusion of sanctions.
Cases of escapism could be as many survival strategies as dirty moves.
Shift from legal identity to conduct spares the former, catches the other.
Excessive regulations incentivize crimes.
State of the art predictive analytics is adamant:
behavior alone gives the most insightful clues.
Identity is only a source of bias.
It is high time we updated our criminality models.
It is not worth running after all too often late and hypothetical intents.
The assumptions of AML and KYC look disproportionate.
They create fraudsters in unticked boxes of statistical prejudice.
We convict innocence in a self-fulfilling prophecy.
Let us save a few bits of privacy.
Do we want to live in a world with more false than true criminals?
This question alone should decide on the policy.
Justice is overwhelmed by zealous enforcement.
Regulators should be regulated.

Poster Extinction

b. superorganic policies

The hero of today is the villain of tomorrow.
The hero of tomorrow transpires more humility.
Popular personalities can step away from power.
Their advice will be heard.
Anonymity shields from biased control.
It should perhaps govern for responsibility to fall back on the protocol.
No one trusts the unnamed to take a decision alone.
The superorganism spirit goes as far as optimistic protocols.
They manage millions publicly on the very premise of honesty.
They assume successfully that anonymous users can be trusted, together.
A price system isn't inherently good or evil.
A compass can give directions but it doesn't decide on the destination.
The hive mind should govern for good use.
Price is the ultimate known form of consensual value.
When not oversimplified in votes, policy markets create public utility.
The more this value is distributed, the better the governance.

If there is any principle standing out from opinions in Ruled Power:
it would arise from a consensual epistemology.
Sides of a problem resolve in the same token because knowledge is a coin.
People like both privacy and transparency.
How could we have both?
If the two must be separate, privacy is personal and transparency public.
It does not resolve the issue of what must be personal and public.
In fact, the answer is the question.
If private transparency must be a consensus; the answer is pseudonymity.
We must free identity.
When the sun goes down, look at the ambivalence.
What you see above the skyline, is the liberation from authority.
Decomposed sunrays do not cancel each other in a single aggregate.
Each color has a name different than light.

Good evening, my name is purple.
On the other side.
Good morning, my name is orange.
Here comes the rain.
There comes the rainbow.
Stay a bit more.
Look at the horizon again.
Colors have changed.
Identity has not.
You could still call sunset what you could see.
Pseudonymity, that is.
How could day agree with night without twilight?
There is no privacy when there is nothing to hide.
Pseudonymous protocols reconcile transparency with anonymity.
Public action is the regulated identity.
A private name is only required to hand out fines.
They are patches made for dysfunctional protocols.
Let's first make sure that we do not design systems to incentivize abuse.

Cognition over Ideology

c. thoughtful choices

In 1968, there were insurgent answers but a single authoritative solution.

Conway explains:

It is an article of faith among experienced system designers that given any system design, someone someday will find a better one to do the same job. In other words, it is misleading and incorrect to speak of the design for a specific job, unless this is understood in the context of space, time, knowledge, and technology.

Space, time could integrate their resulting knowledge within institutions.
That would make them flexible enough to be characterized as adaptive.
Adaptive protocols put an end to uncompromising forms of dictatorship.
There would only remain innovation to overthrow institutions;
or deprecate a system of rules.
No reason to justify radical actions with variable arrangements.
They remain consensus solid despite diversity.
Of course, such complexity cannot be managed by a single actor.
This burden is actually a weight keeping us safe.
Consensus mitigates destructive reforms and unstable institutions.
Soft and proven methods crystallize learnings in slow moving protocols.

Neanderthal Diplomacy

d. asking for revolution?

Accountability is shifting from leadership and subjects to ruling systems.
Decentralizing trends reduce the confusion of power with representation.
Actions have consequences, identity should not.
The former matters, the latter does not.
That is one of the reasons why anonymity can actually benefit governance.
Consequences would be center stage before political divide.
The aristocracy legacy is more precious in its appearance:
agreeable manners and patronage.
Style contributes to semantics.
Much can be embellished or revealed from a poetic escape.
Allegories evade strict grammar and rational guards of a causal prison.
The practice of a refined life veils barbarian politics.
In ceremonials, monarchs hide a savage rule of law quelling dissent.
Actual debates look ugly because confrontation is apparent.
At least, they spare more than a few collateral damages.

Elite protocols decorate and distract the media with cordial images.
On the contrary, decentralized protocols encourage disagreements.
Authority is the most primitive form of justice.
The muscle was never made to decide alone.
That is why we grew a brain;
then a culture to soften muscles with the brain;
and finally a civilization to work out in a gym.
The tokenomy preserves an authoritative baseline in a consensual twilight.
Expertise sets the lower bound of democratization.
Below the competency line, distribution debases services in abundance.
Scarce supply remunerates added value, incentivizing diversification.
Open knowledge is the greatest strength and weakness of a dapp ecosystem.
When copycats grow more than the market, original dapps lose shares.
Yet, adversarial and free scrutiny of smart contracts nurtures excellence.
A second opinion is a low acceptance standard among elite decision-makers.
The bet is that the many know better than a few, no matter how qualified.

Web3 systems still face the expertise dilemma.
How much decentralization is too much?
Where the learning curve gets steep, most switch to a pricing curve.
Intermediaries grow where operation costs dissuade active participation.
Centralization feeds from busy ignorance delegating decision-making.
Markets sell a subscribed capacity to create goods and services.
Sustainability of mercantile relationships relies on long-standing needs.
Solving expensive knowledge in mediation locks a control over dependence.
The economy of knowledge acquisition allocates governance powers.
Pre-merge Ethereum showed accessibility is no less centralized than not.
A staking platform lowered barriers of entry for passive income.
The heavily marketable service turned a gateway into a perceived backdoor.
It only became a concern when capital concentration grew a bias.
As always, the last regulation mechanism left was social backlash;
until creators went on to decentralize control.

Too much decentralization occurs when the job is well done, but half done.
Accessibility reinforces centralizing managers before they realize it.
Governance tokens should perhaps not be separate from committed stakes.
Thereby, they would represent the already distributed user base.
It's a starting point; total value staked by provider is split by staker.
A service opened up opportunities in a provision of new rights.
But a passive income skew incentivizes more extraction than contribution.
Yield farmers do not cultivate the field of their harvest.
The danger is mostly misaligned interest in governance.
A stake turned into a liquidity pool creates a partial free-rider problem.
At least, active investing deserves credit for engaging mutual interests.
A prover market would solve the centralizing issue of passive income.
PoS farmers could directly invest into shares of validators able to stake.
Not sure if they should, though; token holders will figure it out.
We merely debated how to manage the manager.

Knowledge graphs design utilitarian systems without an architect.
Guidance stems from affected individuals.
A decentralized vision is a construction rather than a construct.
The leading process determines a posteriori results.
Utility is defined a priori to converge despite the lack of a master plan.
Centralization and decentralization meet in the middle.
By definition, in a pyramidal construct:
decentralization starts from a utilitarian epicenter at the top;
touches the bottom, and regulates centralization back to the top.
Architects build temples filled with believers working on protocols.
The doer power architects generic utility, framing laws in an executive.
The maker power designs protocols running on the executive.
And the user power regulates them all.
DLT markets value platform tokens of the executive.
Policy markets value protocol tokens of the legislative.
Ruled Powers do, make and use the trinity of democratic sovereignty.

The twilight of authority broke apart the national monopoly of regulation.

The Tokenomy

Tokenomic Fungibility

Fungible Tokens | Ownership Myth | Liquid Identity | Tokenized Jurisdictions

Fungible Tokens

a. power dimensions

A currency value is derived from exchanges.
Therefore, the most valuable currency is permissionless by design.
Thereby, it offers the most potential for exchange.
The designer of a currency gains control over underlying price systems.
They include issuance, internal exchanges and regulations.
They form together a protocol backed by a currency.
The currency is subdivided in fungible tokens.
The protocol cannot legislate freely without its own currency.
On the one hand, system independence determines a new currency creation.
On the other hand, system integration does not require a new currency.
It is counterproductive to create a currency when it is not required.
A currency creates many pitfalls to avoid.
Without the guidance of a necessity, pitfalls are embraced.
As a result, wealth is extracted rather than cultivated.
For greed is always second-best, a lack of prospect sells sustainability.
The token issued within a protocol is a protectionist border.
It encircles a self-contained and autonomous ecosystem.
In its ecosystem, a native currency manages resources freely.

Ecosystems can compose other ecosystems.
A federation of currencies forms another dimensional ecosystem.
The forex is an ecosystem made of fiat tokens valued through price rates.
The value of fiat amounts is constant across any two exchanged currencies.
The forex fungible token is this value denominated in any currency.
In this sense, different currencies are fungible.
Fungible tokenomics bestow undifferentiated value on protocols.
Conversely, non-fungible tokenomics bestow unique value.
Tokens carry exchanged value to diffuse it throughout parallel ecosystems.
Fungibility carries undifferentiated value regardless of denomination.
A token acquired for fiat or another can also transact in its own system.
Currencies carry out exchanges in multiple dimensions.
Hops of value between dimensions achieve horizontal distribution.
The initial value storage of an exchange isn't integrated at destination.
This enables parallel innovation in fully-controlled systems.
The one-size-fits-all issue of a single economy is resolved.
Micro and macro limits of economics disappear in parallel dimensions.
Markets are gates to different price systems.
Tokens are tickets to new dimensions.

A national currency attempts to guard markets within borders.
Currencies englobe ecosystems to preserve the valuation of resources.
Token protectionism embeds the value threatened by foreign exchange.
It facilitates all peer exchanges determined by internal price systems.
They govern a resource within ecosystemic borders.
The token is effectively a versatile form of share in an ecosystem.
The market price of a token measures its ecosystem utility.
The token protects the ecosystem too well.
State regulators can only regulate exchanges on external interfaces.
Aggressive regulation of interfaces incentivizes token holders to hodl.
They develop native alternatives to decrease external reliance.
Non-tokenized services rely on skin-above-the-game regulations.
They are less aligned with distributed user interests.
Internal change systems incorporate future-proof adaptation.
A metaverse escape is very tangible for most stringent governments.
Autonomous citizens cohabit with lean states.
Tokens liberated the future of regulation.
Speculation aside, every lasting token drains resources with it.
Value migrates from the least to the most promising tokenized future.
Growing resources magnify power scope.
The token is the protecting and ruling power of a protocol.

Ownership Myth

b. connected personality

In a parallel economy, experiments have been blazing a new trail.
It leads towards a reconciliation of governance with participation.
More recently, a wild ramification, a NFT craze, has left many wondering.
Is it temporary or an integral part of the initial crypto agenda?
Two intertwined traits stand out to agree that fundamentals are ripe.
There is more to develop than what we believe.
At first, a collection endows a unique artifact with significance.
Unicity finds value in plurality.
In our current understanding, a NFT on its own isn't worth much.
Outside a bigger whole, it cannot convey a relatable myth to its buyer.
Yet, the owner of a NFT can still project personal aspirations.
They're mirrored by unique features of a common design denominator.
The interplay of shared beliefs creates a ground for mutual consideration.
Added subjectivity gives rise to a value differential.
Buyers and sellers are willing to discuss through a predefined protocol.
Various opinions interact within a negotiation process.
They seek to reach a quantified and mutual understanding.
Even if markets could have been tricked within a priced exchange;
they do not make the predisposition to engage with a NFT less relevant.

Liquid Identity

c. precious mechanics

A mechanism assuming the provision of liquidity creates staking growth.
The Tokenomy expansion is all driven by Collateralized Liquidity.
This dimension measures DeFi growth better than Total Value Locked,
which attracts CeFi funds with trends of vanity metrics.
At the end of the day, a tokenomic success won't be measured in fiat.
It won't be made out of thin air but will be backed by liquid collaterals.
Aave and Uniswap address both illiquidity in different price systems.
Tokenized protocols free value trapped in missing or controlled systems.
We'd all be much richer if we did not own more value but unlocked it.
Saving gluts give the scale of the loss in working capital.
Cash-trapped value is begging to be tokenized.
Fungible means of exchange can only represent normalized commodities.
This goes against the very nature of what makes something unique valuable.
Tokens are the future of currencies and the end of conformity.
Non-fungible wealth, identity and regulation have yet to become liquid.
Policy swaps will deprecate banks and passports.
The magic of NFT is in the last letter because it exchanges the first two.

The NFT magic happens when non-fungibility becomes liquid.
Social validation of singularity synergizes prices upwards in a community.
It confers to the NFT a soft power superior to self-expression.
Recognition of a difference personalizes shared opportunities.
The NFT protocol opens up a single prospect into limitless variants.
The alliance between identity and belonging can be leveraged further.
Meaningful domains face the pattern of the particular in the disjointed.
NFTs unite ensembles without overarching authority.
They could become a tool to alleviate confrontations.
Social contracts guaranteed by general will have now been engineered.
They were unconventional in 1762, when Rousseau first brought them up.
Hobbes Leviathan isn't a fate anymore but a collective choice.
The network aristocracy, also known as the Netocrats, might disagree.
They will change their mind because they cannot rule a global empire.
Technological advantage lost the exclusivity.
Non-fungible tokens added human recognition to mechanical lines of code.
Smart contracts are now more palatable to variety in a wider audience.

Tokenized Jurisdictions

d. NFT intermediation

A system of partial, liquid and tokenized jurisdictions seems promising.
Policy markets offer live and multiple-winner votes on legislation.
Relative governance solves acute political issues rooted in absolutism.

Absolute differences and relative equalities define NFTs and FTs.
Denominations are not interchangeable but currencies are exchangeable.
Scale matters to examine what a token represents: a share or an identity.
Currency is a NFT among commodities; a distinction in a homogeneous group.
Denomination is the NFT of currencies; an identity of exchangeable tokens.
Amount is the NFT of a denomination; the unique value in a set of coins.
The singular is a NFT among the up and down plural.
A NFT is a NFT within a collection but also among its own fungible shares.
A NFT is the representative of a lower distribution in a higher assembly.
This intermediation joins parts and keeps them together in an ensemble.
Fungibility lowers the scale of distribution; the opposite is also true.
Decentralization deconstructs non-fungibility into fungible bits.
Centralization constructs a non-fungible ensemble from fungible bits.
Macroscopic governance scales down to microscopic and equal agents.
The atom is the bottom of decentralization but also the body of another.
The body is the top of centralization but also the atom of another.
The design of a token fungibility is always a change of scale.
The direction of the intended change determines the fungible quality.
Scaled intermediation oscillates between fungibility transitions.
Decentralization without recentralization does not improve governance.
A conflict resolution is a NFT deconstruction and reconstruction.
The final arrangement is as unique as the allocation of fungible tokens.

Territorial jurisdictions are mutually exclusive.
On the contrary, tokenized jurisdictions share territories.
Decoupled from the land where people live, jurisdictions are traded.
They cannot be imposed.
Like borders, tokens delimit jurisdictions;
and unlike empires, they market regulations.
In the land-based world order, governance tokens apply to border zones.
At least two jurisdictions must rule for policy shares to have any use.
When sided foreign policies fail to agree, borders turn confrontational.
They lack a justice mechanism to diffuse tension.
Policy markets succeed between peers where dominant institutions fail.
Two free-thinking populations sharing a border is worth considering.
This naive view illustrates the resolution of polarization within borders.
Each individual can only be governed by a single policy in every matter.
Free choice is mostly determined by an individual's residency.
Countries offer pre-packaged policies.
Free individuals move their affairs where they see fit.
Countries regulate and individuals migrate.
Policies' markets have already been in place for as long as globalization.
The Estonian e-residency program is experimenting with a different scheme.
What if countries export their regulations, instead?
When they have a choice, individuals stay where they feel they belong.

One of the Estonian value propositions is cash accounting administration.
It is quite an innovation within the prevalent accrual basis worldwide.
Profits are not taxed when realized but when distributed.
- A sexy feature for companies working on several year research cycles. -
The Tokenomy goes further than innovative regulations.
It is also liberating policy markets from national administration.
Tokens replace citizenship and residency to allocate shares of regulation.
Individuals govern each of their matters in any jurisdiction they like.
If this was not enough, individuals can also program public laws.
Tokenized jurisdictions provide Law Programming Interfaces (LPI):
specialized Application Programming Interfaces of self-executing laws.
They offer on-demand smart contracts and bespoke public regulations.
LPIs can be more or less restrictive:
from ready-made policies offering varying degrees of responsibility;
to minimalist checks and balances, which integrate with free protocols.
The integration makes free protocols compliant with the LPI authority.
Governing authorities decentralize legislation in tokenized LPI rights.
After a vote, populations lose control of elected representatives.
Democratic representation rules only the accession to power;
which is then unleashed until the next election.
Tokenized policies couple representation with legislation, instead.
Unlike political governance, utility tokens govern the protocol.

A popular split is for utility tokens to govern the actual protocol;
and governance tokens, its future ramifications and instantiations.
At first glance, protocols finance their own fork, called a new version.
Governance tokens capture the brand value of a protocol for shareholders.
Buying votes has long been called a fraud when public utility comes first.
Governance tokens are just big business.
Regular users vote when they swap protocols, instead.
They drive the price of utility tokens and the policies they represent.

just imagine

A border is tokenized in a NFT collection.
The collection is composed of two flags owned by respective populations.
Residents own fungible tokens of the flag where they live.
Non-fungible flags intermediate between a border and two populations.
Both sides are inclined to talk to recentralize a consensus…

One side:

We have a line in common but we see it differently.

The other:

Better we do not write down how we want to manage this line together.
Let us multiply arrangements so shareholders can freely renegotiate.

The answer acknowledged, a market of agreements seemed promising:

Yes!
Bad times disregard what has been written in good times.
We would rather govern at all times.

Each flag exposes a foreign LPI to other nations.
Individuals or states are free to interact and enter political agreements.
A transaction with a foreign LPI requires foreign fungible tokens.
Resident tokens must be exchanged for foreign tokens beforehand.
And a stake must be deposited to guarantee enforcement.
The foreign stake is usually deposited by a government for its citizens.
Live enforcement of policies removes the need for identity verification.
Dissident foreign policies are legally possible without repression.
LPIs provide apolitical cross-border services.
They also remove the need for national identity in foreign policy-making.
Individuals do not have to follow their own state directives.
The foreign jurisdiction is then no different than free protocols.
It could run as well, if not better, on a programmable blockchain.
A market and a token exchange give access to a different jurisdiction.
A sold citizenship token acquires the right of a foreign power regulation.
Tokenized jurisdictions rule for the people of the world.

Markets of foreign policies do not succumb to the tyranny of the majority.
When a nation does not back a foreign policy, individuals are still free.
They can stake their own responsibility to choose an unendorsed policy.
The foreign LPI is always ready to accept deals with willing individuals.
The home state does not facilitate all conducts to preserve the consensus.
Digital transactions enforce appropriate contracts.
Personal token allocation is tied to a system of rules.
Foreign policies bypassing sanctioned LPIs are also allowed.
But residents of each side must then first enter a bilateral agreement.
This creates a market of alternative policies.
They are regarded as private bilateral contracts by the authority.
Private entities are allowed to override the public agreement.
Should they agree to do so across a border, domestic laws still prevail.
Bilateral contracts can be promoted to endorsed policies.
National LPIs reward the design of innovative foreign policies.
Or alternative jurisdictions can grow peacefully within a state.

time to stop dreaming

That is how economic and tokenized jurisdictions already work today.
But only a central authority can face or resist another.
Decentralization must recentralize administration to safeguard liberties.
The top and the bottom of governance aligns and stabilizes each other.
The price system of a policy market controls otherwise free upper hands.
Nevertheless, we have enough material to be skeptical of such schemes.
Speculative tales and negative connotations of markets abound.
At odds with sensationalism, let us recontextualize drama in statistics.
Disturbing trades stand out of the most encountered distribution.
Outliers and Heads of state make good stories.
We want to see heroes to incarnate our inspirations;
and villains to find a culprit for our misfortunes.
On the contrary, deals should work for ordinary people.

The Heads of each side of the line introduced foreign LPIs as such:

Would you rather be governed by policies or politicians?
The government won't give up on its supranational responsibility.
Yet, you will be free to disagree and act accordingly.
Authority will be granted by tokens for the provision of desired policies.
Tokenized jurisdictions outprice lobbying in markets of free contracts.
We will generally agree to disagree on the specifics to govern together.

Markets, contracts, or even more markets of contracts enable exchanges:
the contribution of one another towards each other, fairly and safely.
Horizontal liquidity mitigates bias in crowdsourced influence.
In the stock market, retail investors have a greater say than CEOs.
Influencers or politicians seek to skew wealth for cases bigger than them.
Financial imbalance is partly tied to a Pareto distribution.
It provides vertical liquidity in a centralized world order when required.
But peace needs no expert knowledge and conflict even less followers.
We all deeply understand the consequences of weaponized battles.
When war is portrayed as a governing whim, stakeholders are good or evil.
In "War or Peace", war excludes peace and vice versa; there is no trade.
The success of "War and Peace" was made by an inclusive conjunction.
Surrounded by a collection of intents, borders get stuck in consensus.

The Tokenomy

Permissionless Commons

Open Contribution | Collective Action | Permissionless Feature | Cohabitation of Institutions

Open Contribution

a. trustless loyalty

The growing Economy widened wealth gaps while scaling.
Decentralized networks display an interesting countertrend.
They show the potential to redefine wealth and power dynamics.
More distribution revolves around contribution rather than privilege.
Tokens give rights, not the other way around.
Earned authority grow from disinterested and active commitment.
Peer-to-peer organizations prosper thanks to independent contributors.
They are free to collaborate on unmet and random needs where they see fit.
They are the active citizens working on public utility for their own good.
The merit granted for shared value ensures a consensual prioritization.
Synergies govern the decentralized management of price systems.
Petty busywork preserving central administration can't compete or sustain.
Developers' permissionless impact ripples throughout global markets.
Token exchanges are not only the key to open participation and demand.
The pricing mechanism creates trust into a collaborative capacity.
All protocol participants have skin in the game.
Trustless features are quite emphatic in the blockchain space.
Advocates cannot see trust when it is diluted in millions of promises.
They are unlikely to be broken altogether.
One cannot see trust when it is everywhere in the air.
Trustless is not unreliable.
Trustless is the idea that we are one, together.
NFTs are an expression of that idea.

Collective Action

b. technological transition

Nobel Prize recipient Ostrom dedicated a life to a neglected prospect.
She studied a viable alternative to nationalization and privatization.
She envisaged a mode of governance for particular use cases: the commons.
They suit the needs of an ecosystem better than public or private admins.
Commons accommodate numerous economic strategies.
They are allowed to capitalize on sustainable and varied objectives.
Controlled freedom diversifies needs, less likely to exhaust resources.
Agents benefit from supporting structures in a shared environment.
In commons, users exercise management powers collectively.
They are incentivized to work together.
The tragedy of resource depletion without coordinated action is avoided.
For they benefit from something they share, they find common grounds.
They manage to rule together over their own institutions.
On records, some agricultural commons have existed since the Middle Ages.
Even though the most famous commons have not been around for that long;
their financial scale is unprecedented.
They have taken the form of computing blockchains.

Permissionless Feature

c. original right

Commons tend to form as a spontaneous administrative solution.
They emerge in pastoral lands, irrigation systems, groundwater basins.
That is, commons emerge in the management of open environments.
They suit resources where it is difficult to exclude users.
Inclusive resource rights are granted when weighted against alternatives:
a one-off privatization discounts sustainable resources over time;
independent federations or local knowledge discredits nationalization.

Commons legislate the exclusive or inclusive inclusion of users.
Exclusive inclusion applies typically to natural resources within borders.
Commons where inclusive inclusion is allowed are said permissionless:
anyone within reach of a resource or service can interact with it.
Borderless rules are considered comprehensive and flexible enough.
At odds with common practice, trust does not grant or revoke access.
Indeed, mainstream businesses frequently identify physical persons.
Thus, operators can discharge themselves from active duties of compliance.
They are detached from the protocol to fall back on the individual.
From login, gatekeepers conduct only passive monitoring of the delegation.
Identity check is the notice of a statement valid within crossed borders.
It says that the system of rules or enforcement is incomplete.
Unenforced system compliance relies on other laws or civil responsibility.

In a holistic protocol, anonymous users enjoy outright rights.
All possible actions are granted thanks to live enforcement.
They are regulated satisfactorily in immediate costs and rewards.
Innovation is unrestricted by outdated laws in other systems.
That is how flash loans were made possible.
Quality loans are offered to anonymous borrowers without collateral.
The feat is not even thinkable in legacy law.
Amazingly, permissionless commons offer a double edge:
they create versatility and robustness, more opportunities for less fraud.
Even so, they look largely unregulated from the outside.
Outlaw impressions stem from the dissimilarity of markets to judiciaries.
One does not find loopholes in a price curve.
That is the sense of exact justice highlighted by Montesquieu.
Price systems apply succinctly a large range of regulations at once.
They make up adaptable protocols, which leave actions open with a P&L.
Replacing parameters and fixed rules by a price curve removes loopholes.
Trade refines reciprocal interests with greater protocol adaptability.

Magistrates could read "The Spirit of Laws" again for trade's justice.
Surely, they are more comfortable with private property:
a protecting substitute where commons do not exist.
Within private boundaries, permissionlessness is guaranteed.
Opening the door to guests gives them free access to the house.
Swaths of land have also been appropriated under private property law.
They can constitute havens for wild animals.
They couldn't negotiate commons with lawmakers.
A dumbfounded rhino enjoys permissionlessness within a Namibian ranch.
That rhino's land happened to be authoritatively delimited.
Similarly, digital gates enclose web users in safe but restricted spaces.
Public barriers are substitutes for better managed alternatives.
The lawful jungle is not very welcoming for the lay public.
Live prices strike far more deals than lawyers.

One can read a sign above Etosha reserve from space. It says:

Welcome to Permissionless Commons. The Trustless Land.

Cohabitation of Institutions

d. right to exist

Outright rules do not help.
Outlaws do.
Change must be progressive to sustain.
Remember the teachings in the legend of the bad hacker:
corrective action is distributed.
Lone hackers can't be evil.
They target grouped netocrats looking for control;
and perform a healthy function of regulation.
Permissionless hackers discover what should not be part of the protocol.
Lawmakers' loopholes, exploitable and unwritten rules, did not disappear.
Hackers are thorough auditors, who do not work for a fixed price.
They do not leave a stamp of approval but a lesson making History.
Permissionlessness reinforces wild systems.
Hackers are engineers of chaos, experimenting in prod to build confidence.
They determine the system's capability to withstand before broad adoption.
Hackers are selfish Robin Hoods.
They transparently disappropriate honeypots, which do not feed the hive.
Hackers help to make clear what does not help the network:
collecting decentralized wealth to leave it in a single booty.

In Hayek's own words, part VI:

The problem is precisely how to extend the span of our utilization of resources beyond the span of the control of any one mind;

A permission, a single rule like a single mind, have something in common.
They restrict utilization of all others.
If we are to build a better world but do not safeguard diverging views:
we will be back to square one at the start of the next iteration.
We must respect maximum viable rights, past and future.
That is why smart contracts are immutable.
Progress is building up in parallel.
Coders support outdated and light versions of software.
They understand that every user environment defines a different harmony.
Elaborations of Marx and Schumpeter relied on a belligerent world vision.
Disagreeing with the premise of creative destruction refutes the argument.
Knowledge is at the tip of ignorance.
To keep something behind is to evolve.
The mirror of the past inverts our vision for the future.
Breaking it causes bad luck.
Traces of conservative thinking backs up critical thinking.
The arbitrary maximalist mentality takes away our choices.
We are here to stay and enjoy the landscape.
Hold on for dear life and consensus.
We need both ends of the spectrum and every color of the rainbow.

The Tokenomy

Collective Strength | Varied Ecosystem | Open Knowledge | To the Moon

Collective Strength

a. the one

The role of social inclusion is described by Hayek in his last argument:

an essential part of the phenomena with which we have to deal: the unavoidable imperfection of man's knowledge and the consequent need for a process by which knowledge is constantly communicated and acquired.

A single change of mind taking action, moves prices.
Knowledge imperfections adjust automatically without inefficiency:
deliberation, compromise or groupthink.
The particular time and place where I am freely contradict yours.
Our knowledge and preferences differ openly in the economy.
We disagree on today's circumstances to contribute to each other later.
When we recognize what we need and don't have, one of us can be wrong.
While I'm busy with my own affairs, you're involved with other resources.
I will need them once my context of tomorrow resembles yours of today.
Wealth distribution finances a society's disagreements.
At any point in time, in any area, there will be someone who is right;
when all others are wrong.
Thus, advances are made in front of constant change.
We could be threatened by conformity.
The seeding venture capitalist understands it very well.
We simply don't know what is going to work.
The central economic problem of resource allocation is distributed.
It is solved by people's differences and their independent actions.
The consensus synthesis combines subjective views in multiple prices.
Be they goods, instruments or services.
No trade-off is made to safeguard the individual with the right knowledge.
Immersed in particular circumstances, this individual should not sell.
Society needs to afford to express preferences for its own sake.

Varied Ecosystem

b. robust production

The social process of consensual knowledge forms prices.
We derive the quality of the most productive ecosystem in the long run.
It is an environment where actors do not fight for resources.
Sustainability ensures that they can freely afford to disagree.
That is how society can maximize the number of seeds for the future.
It is the spread and variety of production that matters for resilience.
A single absolute number completely misses out the wealth of diversity.
The productive quality of an ecosystem differs from that of a subsystem.
An objective measure would hinder the pursuit of several concurrent goals.
All activities must be maintained when they profit a desired market.
An economic actor facing a dire uncertainty might choose to prioritize it.
A chosen contingency over a return would be reflected in the price.
The goal does not need to be stated among independent actors.

Trade is over-optimized for growth at the expense of everything else.
We do not treat the economy as an ecosystem.
Similarly, a Formula One car is too optimized for speed.
A single bump on the road can break it apart.
In a 4x4, however, the driver can go anywhere.
It is the road rather than the race that must be overcome.
The economy is not a sport.
It is first a livelihood.
For anyone to reach any objective, an economic ecosystem is the approach.
When growth is going up, something which isn't measured is going down.
We will focus on growth the day when everything we care about is included.
Global growth is needed to absorb the inflation's cost of central money.
Decentralized currencies can be deflationary by design.
If no one stands above issuance, holders do not have to get poorer.

Open Knowledge

c. collaboration limits

Even if the economy was a sports arena, the Olympics have taught us.
Fair play is breaking world records.

As Deming puts it:

Who would wish to do business with a loser?

We do not need to treat the economy like a competitive battlefield;
and expect chances to lose before the finish line.
Two similar competitors spend efforts to catch up with each other.
They sometimes only spend their last 10% of capital to differentiate.
From the viewpoint of a knowledge economy, that is 45% waste.
Competitors could have pooled their common offering for half the cost;
get to the same results;
and invest 4 times more into what makes them better.
Free knowledge would lead companies relying on IP to bankruptcy, though.
It would hold if all had started on a level playing field of open IP.
It is not only about the global efficiency of resource utilization.
Confrontational environments orient participants towards short-term moves.
Under survival stress, they put their own company at unsustainable risk.
Increased regulatory scrutiny must kick in to prevent escalation.

The core issue is private intellectual property.
In theory, its abolition would publicly enable without required scrutiny.
Anyone could make a difference in an efficient environment;
again, getting more for less as a whole.
In practice, no reason could legitimize a rule over private information.
Privacy is the safe zone which we don't share with the untrustable public.
Outside state-managed fundamental rights:
collective rules should not apply to private individuals and entities.
We are still responsible for the consequences of our private thinking.
Liability should not be forcefully engaged to safeguard creativity.
The right to know cannot be observed; we have more to lose.
We'd lose safety, freedom and innovative mistakes in the loss of privacy.
But knowledge still always grows in the nature of public domain:
watered collaboratively and sunned with critical feedback.
Private knowledge dies as dinosaurs and only leaves curious fossils.

To the Moon

d. imagination fuels rockets

A society bigotry fails to take different perspectives into account.
It is reflected in the Lorenz curve, representing wealth distribution.
It has the shape of an inverted slide.
The steeper it is, the harder it is to climb up.
One can be stuck at the bottom of indifference.
A liberating framework would make gravity work for everyone.
Contextual preferences of a group add up to a different curve of riches.
Luna Park does not always boast the same attractions on Coney Island.
Diverse marginal rates of substitution play in exchanges.
The horizon shapes other things than rollercoasters.
Political focus on economic factors may be a lack of alternatives.
How to assess and monitor a population's well-being, otherwise?
One may then ask how to provide means of measurable variety.
Financial equality does not capture a coherent and self-directed society.
A policy impact quantifies its results to hold enactors responsible.
Measures are all the more powerful to inform contingency plans.
Yet, a small proportion of what actually matters has been quantified.
Financial markets do not reflect people's aspirations.
In fact, cats and dogs, pet figures, made cryptocurrency breakthroughs.
Expensive cartoon animals testify to the progress of monetization.
Imagination, not marketing; innovation or prospects, reached new heights.
Between corners of a metaverse and the real world, one finds a new galaxy.
There, projects shine to discover their own rules for prosperity.

The Tokenomy

Consensus Explosion

Systemic Resilience | Self-directed Inclusion | Cultural Breakout | The End

Systemic Resilience

a. breaking the business mold

Tokenomics gives a new chance to ostracized business models;
which didn't fit well within a corporate or individual framework.
We will all benefit.
Business standardization of national administrations templatized success.
It also made failure a generic feature with no addressable cause.
Lost entrepreneurship has made us more prone to systemic crises.
The breakdown of conformity produces seismic ripple effects.
This awareness makes lawmakers highly conservative.
Compliance imposes a narrow scope.
It is so tight that innovation bubbles skyrocket whenever an escape looms.
The derived effectiveness of strict laws comes at a high opportunity cost.
Co-creation, ecosystem services, micro-contributions, local economies;
and countless worthwhile activities in the public domain lack facilities.
They'd be criminals, should they tokenize lightweight currencies to exist.
They have not yet found the marketplace to become sustainable;
or weight against an arbitrary financial scale.

A single rule is a single best.
Central regulation excludes economic minorities.
Power concentration is also a concentration of hard opinions.
Parallel jurisdictions depolarize society; no winner takes it all.
Conflicting issues arise from the monopoly of the Law;
which is financed by another monopoly: the issuance of currency.
Horizontal accessibility is a process of decentralization.
This process will bring a diversity of rules and opinions.
For a more resilient future, they will be eager to invest in alternatives.
A myriad of arrangements widens financial commitment to public utility.
Exclusive utility will remain in the private domain.
Privileges have no price unless given up; we will buy them out.
Eventually, central governance will recognize the need for specialization.
Governments will offer institutional composability to attract businesses.
Law Programming Interfaces (LPI) will provide a lean frame of free rules.
Open public contracts backed by the judiciary will rule inadequacy out.

Self-directed Inclusion

b. consensual will

Hayek poses that self-interested agents manage priced resources:

prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan

Empathy is a nice-to-have but it's not part of the equation.
Unilateral altruism can ease but cannot sustain.
Ethics is a matter of aesthetics.
It offers no guarantee.
Fashion changes with seasons and forced change offers resistance.
Should we hammer harder on a tough nail?
We might break something.
Elasticity is not built-in;
but built-out through an extension of opportunities.
Redistribution cannot scale to a billion people with incompatible beliefs.
They are increasingly aware that decisions have far-reaching consequences.
No one will agree.
We need multilateral rather than authoritative solutions.
Subjectivity accumulates in tokenized public utility.
We need inclusive markets of what matters.

Cultural Breakout

c. heads or tails

Culture precedes change.
Society is on the verge of becoming more inclusive.
Cyberspace has propelled new ideas beyond confined territories;
freed collectives from physical and knowledge barriers;
exposed and debated toxic disrespect;
took self-expression and creativity to new levels;
celebrated subcultures;
created unknown celebrities;
and regrouped myriads of communities.
Social accounts have all the same rights;
and intellectual property has become counterproductive in Web3.
We're now knowledge and remote workers, open source contributors;
or simply digital friends.
On the flip side of the coin, means of biased control have grown.
Like means of freedom, they have propagated exponentially.
Usable users eat cookies in innocent web parties.
Fear not, for servers without a master are with you.
Soon enough, peer nodes will outnumber database slaves.

The End

d. fanciful sunrise

One-to-one architecture will pave the way for Pareto efficiency.
Every deal will make two winners and zero loser.
Flat organizations will free the sky from high-rises.
Previously short-sighted, bums will see the horizon from the sidewalk.
Information will crystallize from Hayek's foresight:
the particular circumstances of time and place.
Knowledge already self-executes from the source of truth:
an online and collaborative base.
Artificial intelligence will be vetted by countless human beings.
With barely any computing power, they compose greater singularities:
than that of science because they are engineered to deliver;
than that of machine learning because they are democratic;
than that of sci-fi because they are real.
Anyone;
everyone;
will discern their own fantasy in connected valleys and mountain ranges.
The incredible price consensus is reached across continents.
Billions of people who don't know each other take part and negotiate.
Price forms in unpredictable interactions, regulations and manipulations.
We rarely contest a price on the condition to take it or leave it.
But we do know it's largely been manufactured by a random agency.
We deeply understand that subsystems can be improved.
Even so-called free markets have been marketed and designed.
Emergence of self-enforcing protocols will take us to the 22nd century.
We will assist throughout the 21st to a tokenization wave;
which we never dared to think of.
Microscopic price systems will flood the ocean.
Whales will go on a healthy diet.
Decentralized markets will distribute value for values.
Most burning desires and greatest hopes will unite to buy out our fears.

It is high time we took Tokenomics seriously.

Protocol Architecture

Laws | Ecosystem | Instantiations

One does not design a protocol but the system designing it.

Laws

Let

in a unique tripartite ecosystem, a protocol regulate a public utility;
among affected parties, agents be groups of actors.

The Ruled Power has shown.

The inner protocol copies communication structures between agents.¹
The outer protocol bounds the inner protocol in an ecosystem.²
Tokenomic Doer macromanages with Law Programming Interfaces (LPI).
3'. Economic Maker micromanages with legislation.²
In the Tokenomy, Doer manages the protocol; Maker legislates utility.
4'. In the Economy, Maker legislates the protocol; Doer manages utility.²
A paradigmatic justice mechanism balances doer and maker powers.³
Undirected communication edges transpose into price systems.⁴
Directed communication edges transpose into data feeds.⁵

Notes

¹ By virtue of Conway's law;
communication graphs of Maker knowledge organize inner systems of rules.

² By virtue of Tripartite Ecosystems, centralized and decentralized.

³ By virtue of Montesquieu's political triad;
the user power is preserved in a judiciary as well as in a trading system.

⁴ By virtue of Hayek's 1945 paper;
price systems synthesize communication to coordinate independent actors.

⁵ By virtue of IT systems.

Ecosystem

+-----------+--------------------------------------+----------------------+
| Knowledge |              Governance              |       Regulation     |
+-----------+--------------------------------------+----------------------+
                     
                                _________________       _________________
                  ___          |                 |     |       ___       |
    O           /     \        |                 |     |     /  O  \     |
  /   \       /         \      |                 |     |   /  /   \  \   |
 O<-|->O  +  |           |  +  |                 |  =  |->|<-O<-$->O->|<-|
              \         /      |                 |     |   \         /   |
                \ ___ /        |                 |     |     \ ___ /     |
                               |_________________|     |_________________|

Communication    Public             Management               Protocol
Graph            Utility         (outer protocol)
                   |                    |              
O: subgroup        |                   / \            O: subsystem
                   |              micro ----------|  
                   |              /      macro    |   ->|<-: Rule of Law
                Economic <-- Economic      |      |                |
                  Doer         Maker   Tokenomic  |-------->  Judiciary   
                   |                     Doer                      |
                   |                       |                       |
               Tokenomic ---------------> LPI -------------> User markets
                 Maker                                             |
                                                                tokens
                                                                 /   \
                                                              Dapp   DLT

<-|->: undirected edge                                <-$->: exchange
 -|- : common interface                                -$- : price system

<-, ->, / or \: directed edges                        idem: data feeds
                                                                |
   O    : broadcasting agent                          id.: central s.s  
 /   \                                                          |    
O     O : listeners or emitters                       id.: decentral s.ss

⁶ s.s or s.ss: subsystem or subsystems

Instantiations

communication graph	public utility	manager	protocol
Tokenomy	currency	DLT	crypto
Economy	currency	central bank	fiat
Tokenomy	market	EVM	AMM
Economy	market	tax office	fiscality
...	...	...	...

A protocol inherits the features of management.

Glossary

Definitions are not totalistic and solely express the Ruled Power's view.
It simplifies economics by targeting a singular issue underpinning others.

Allocation: valued prioritization by price systems among agents.
Consensus is an active aggregation of one-to-one agreements.
They commit bilateral changes departing from the majority opinion.
A consensus disagrees on the current state but agrees on the direction.
Doer is the executive governance of the Ruled Power.
DLT: Decentralized Ledger Technology, most often a blockchain.
economy: generic definition, with lowercase initial;
ruled power concerned with the allocation of resources.
Economy: with uppercase initial;
economies where the rules of trade are centralized.
Ecosystem is a superset of systems which can sway a common utility.
A system of subsystems is an ecosystem.
Institution is a product engineered to govern with protocols.
Law Programming Interface: see LPI acronym below.
LPI: Application Programming Interface (API) for smart contracts.
It is a specialized API provided by Doer where Maker rules governance.
Maker is the legislative governance of the Ruled Power.
Organization is an agency of actors.
Power is the ability to act on an intent via rights or resources.
Price System is an exchange protocol.
Protocol is a system of rules.
Resources are means of a utility.
Rule of Law is the User power in a judiciary or trading system.
Ruled Power is a ruling and regulated power;
a tripartite ecosystem of checks and balances between Doer, Maker & User.
Rules regulate a utility.
Smart contract is a self-executing rule integrating governance.
It is defined by Maker through Doer's Law Programming Interface.
Token is the protocol share of a jurisdiction.
Tokenomy: economies where the rules of trade are decentralized.
tokenomy: same as Tokenomy.
Tripartite: ensemble of knowledge, governance & regulation systems.
Trust is an implicit peer-to-peer contract.
It asks for undetermined and deferred exchange against a resource grant;
which gives rise to a shared and synergized power.
User power is the regulated power of the Ruled Power.
Utility is the value of a resource designed for use.

Evolutive concepts are explored throughout this manifesto on Tokenomics.
They are best understood with different perspectives, including your own.