Catallax and Enabling Peaceful Financial Violence Against the State

The events of the last couple have been fascinating to watch. I spend a lot of time thinking about how a Catallax based society would approach some of these same issues.  Specifically #DefundThePolice is fundamentally built into the underlying Catallax System. 

Catallax isolates State Accounts in the system in a way that financial violence can be used against the state by the people in a couple of ways.  First of all, State Accounts cannot have any kind of privacy in how funds are used.  The inflows and outflows are public record by default.

In a Catallax based system each government domain has a State Account. They collect taxes via the systematic decay of currency in accounts that elect that domain.  These Domain Accounts can create Agency Accounts for the various agency accounts that their collected taxes fund. The police department would be one of these agency accounts.  Citizens that pay taxes into the Domain Level account get a Democratic Veto right to all agency accounts.  The democratic veto is described as follows in my book Immortality:

VTO. Democratic Veto

... How can the (CTZ), using selective citizenship (SCZ) and the public ledger (PLG) keep the state's power in check?

Power corrupts and the citizen must have tools to regulate out of control power without the use of force.

When a citizen pays taxes they should get a vote in that 'state'. We will do this via the democratic veto.

This veto is a 3 phase vote. Citizens can vote 'abstain', 'deny', 'override' on a state account.

This gives power to small minorities to stop the payment from state accounts until their concerns are addressed or their negative vote is overridden by other citizens.

We also don't want small issues gumming up the general working of the state. As a result we should provide for agency accounts that can be selectively vetoed when particular issues arise in the running of those agencies.

Therefore:

Establish the democratic veto for state accounts and selective veto for agency accounts.

This system allows small groups to have their voice heard and amplified.  Larger groups must be proactive in overriding the veto and while this proactivity certainly hasn’t kept people from being oppressed in the past, it at least puts the burden of action on those that would seek to not meet the needs of the minority.

In a practical application, communities across the US could use the Democratic Veto to freeze the accounts of police departments across the nation and keep those accounts frozen until the departments make the demanded changes.

Catallax could soften the economic impact of pandemic

The Catallax project has been on ice for a while as we wait for the technology to catch up to the vision.  ETH 2.0 and DFINITY currently are pushing forward with scalability advancements and ZK tech will have some interesting things to say about how to deal with the ‘privacy problem.’  As frustrating as it is to wait on these technologies to mature, it is even harder watching the current spread of Covid-19 and the associated recession knowing that a world with Catallax would have significantly more economic tools to help weather the storm.  I’ll rip through a few of them, but if you want to know more you can check out http://catallax.info or read my book on the subject here https://amzn.to/39894up.

Cash Decays

In a Catallax based economy cash decays overtime backward through the blockchain.  This means that if you hold cash, it eventually is returned to the people that paid it to you.  Now this happens slowly and it is very likely that you will have spent the cash before that happens.  In scenarios like this economic trumpdown the governing system can print a lot of cash and ramp up the decay rate so that it is available to get the economy ginning again, but also decays back out of the economy quickly so that inflation is avoided.

Cash Decays to you

The backflow of cash in a Catallax economy flows to the people who have spent money in proportion to how that money is used to build more value in the economy. As you spend more money over time you build up an earned basic income.  The amount of your basic income payment depends on how you’ve spent your money. If you’ve spent it with sustainable and profitable businesses your income will be higher than if you spend it with companies that fail to build sustainability.  Math dictates that this basic income will likely not come close to compensating for your entire income, but it is enough to help people make it through times like these with reduced employment.

Grassroots agencies

A portion of decay goes to support government agencies that are selected by the participants in a Catallax economy.  In times like this groups can coordinate to fund new agencies with their tax dollars and cash starts flowing to those agences immediately.

Holding Government Accountable

In a Catallax economy, the people have the ability to shut off the account access of government agencies in order to pressure those agencies to act.  Government inaction can lead to swift organization by those that participate in the system and pay taxes to those government agencies.

Conclusion

It is never fun to have to think about how to react to these things while in the midst of the emergency.  Previously I dreamed up Harveycoin (http://catallax.info/news/2017/9/8/devlog-10-harveycoin-decentralized-disaster-relief) when it was the only thing I could do when I was evacuated from my home after the hurricane that hit Houston.  Hopefully these ideas will inspire others that are currently social distancing and who have the time and ability to code these things in the new and scalable tech that is emerging.  Please reach out if you’d like to talk more about these things or if you’d like to try to come up with some solutions.

Privacy, Accounts, and Transparency

This is the third part in a five part series of posts that lay out the basics of what we are trying to build with Catallax.  The series will follow the following schedule and I’ll update the list with links as the articles go live:

1. Demurrage, Catch Up, and Pref Dividends
2. Passthroughs, Legacy, and Folding the Blockchain
3. Privacy, Accounts, and Transparency  (today)
4. Selective Citizenship and Citizen Override
5. Loans and a new kind of Capitalist

 Privacy is a very important issue.  It is also an issue that is very hard to predict.  It is possible that in the future we will have a very hard time maintaining privacy for anyone when computers and data are involved.  This has caused me to think about a few questions in regards to Catallax and how to move forward with privacy in mind.

 
How can we be long privacy in the places we want it?
How can we be short privacy in the places we don’t want it?
How can we reduce the need for privacy by increasing the value of transparency?
 
Let’s first talk about the elephant in the room.  Catallax in its rawest form lacks any kind of privacy.  It tracks who you spend money with, who spends money with you, and publishes that info on a public blockchain. Yikes.  This is a privacy nightmare.
 
So let’s unpack this and see how it isn’t that bad.
 
The first step we take is by making transparency really valuable.  The scenarios given in part 1 show how by making your transactions open you can reap varying levels of financial reward for the sacrifice in privacy.
 
A scenario that I regularly compare this to is the ownership of stock.  Chances are that if you own stocks you don’t own them anonymously. You want your name(or at least your account number) next to those certificates so that they well send you dividends when they pay out.
 
Catallax’s first step in addressing these issues is by making it more valuable give up some privacy than to keep it.
 
With that in mind, there are still situations where you do NOT want to forfeit your privacy.  For example, there may be a medicine you need for an undisclosed medical condition and you don’t want the public to know you are buying it.  For those situations, we propose a system of privacy pools.  The privacy pools will allow you to send cash into a vague account and have it anonymously end up in the account you want it to go to.  This is a technical challenge but I think is achievable by using zkSnarks. This is a core feature coming to a future version of ethereum.  These pools will still operate in a catallaxy way where cash will flow from receivers into the pools and out to payers via a pass through, but the payments will be less associated with the payer’s ability to spend money wisely.
 
We further address privacy by splitting accounts into contexts, each of which has a specific privacy profile:
 
Citizen Accounts:  real people can send and receive private payment
 
Legal Entity Accounts: businesses with limited liability must sacrifice some privacy for the right to limited liability.  They can receive private payments, but cannot send them.
 
Government and Institutional Accounts:  These accounts can collect taxation from the system and as a consequence must be completely transparent.  They cannot make or receive private payments.
 
These accounts and their subtypes are discussed more in the Form Language section of my book Immortality (buying a physical or kindle copy helps support this project).
 
This privacy signature is currently a proposal and I’m very interested in speaking with experts on the gaps I’ve left.  I think that the current proposal address privacy where it is important and adds significant anti-corruption infrastructure where it is needed for a free and open society to develop.

If this is interesting to you and you'd like to see where we are going with Catallax, please pick up my book Immortality (Purchase of a physical or kindle copy helps support this project).

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Next: Selective Citizenship and Citizen Override
 

A week with Ethereum

The past week has been a fun one as I’ve started trying to actually write some ethereum code and figure out if the eco-system is ready for me to try to build on top of yet.  My very high-level priorities are currently:

1. Figure out if I can build a decaying currency as prescribed by hypercatallaxy on ethereum.

2. Figure out how to integrate this system with existing payment networks in a way that gives the Catallax card an unfair advantage over other kinds of payment networks.

3. Figure out how to build the governance model as described in my book “Immortality” on the ethereum blockchain.

4. Figure out how to transition from a “benevolent dictator” model to the created governance model in a trustless way that makes sense for system stability.

This week was all about #1.  I don’t have any code to post yet, but I did make some significant discoveries that I think will be productive:

Ethereum transactions are expensive.  

They are not as expensive as bitcoin transactions, but still expensive enough that building out all the infrastructure in blockchain storage is just not really an option at this point.  Writing a piece of data (address-> unit) looks like it can cost about $0.008. This is not that bad unless you are catching up and trying to send a couple dollars of demurrage to the 10,000 accounts that in your pref table.  Then all of a sudden you are updating 10,000 address -> uint pairs and this is going to cost you $80 to distribute $2 in decay.  This obviously won’t work right now.  Moore’s law says this probably won’t work for 12 years if gas costs track computing power.

Storing Data Off Chain

The solution looks like it may be storing data off chain.  Your pref map and even your balance may end up needing to be off chain in some trustless data structure.  TrueBit looks like the leader in the clubhouse here.  Because of the way hypercatallaxy works we should be able to structure code in such a way that current balances are deterministic given a set of transaction operators.  TrueBit lets any number of solvers run our code for us and update the blockchain.  If they try to lie, verifiers can force them to prove their calculations and take a large reward if they catch a cheater.  There are a bunch of things to work through here, but my current thoughts are that the Ethereum based part of the problem may end up just being a linked list of structs that track:

transactionType: uint (these will be coded in solidity based code so EVMs can run the transactions)

transactionHash: byte32 (this is a signature proving that the msg.sender created the transaction)

transactionLocation: byte32 (this is an ipfs hash pointing to a location where the json of the transaction detail can be publicly retrieved and verified with the has

I’ve just started thinking through this so there may be some more variable needed, but this kind of structure should get recording transaction down to a few cents and that is way more manageable.

If you have any insight or sample projects that have done this kind of structure where most of the data is kept off chain, let me know where to look.  Source code is a super bonus.

Next Steps:

I think I’m going to be learning a lot about Merkle Trees and roots and how those can be recorded once and then used as verification.

I’m also meeting with a card processing company that may have some insight on how I can set up goal #2. If nothing else I’ll have some expectation of the costs involved and be able to do some of the math necessary to figure out if the 0 transaction fee is going to be feasible or not.

Donations always accepted at:

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