Kernel Learn Track - Module 2

Last updated Aug 15, 2023

See Atlas/Maps/Kernel MOC

We hope that you can already appreciate a little bit more deeply how to make meaning from the raw material of your life; not necessarily through grandiose action, but rather as the result of joyful little subversions along the way of real awareness and humility. ==A life lived wide awake naturally leads to various explorations of trust and value; the kinds of shared truth we preserve in narrative and pass between generations.== Now that we have ownerless, borderless protocols for recording such history, we can potentially multiply the effects of thousands of little individual subversions into a more stable, global joy.

We’ll begin with a short introduction to ==asking better questions==, because it really is worth asking about why systems are the way they currently are before moving straight into a disruptive mindset. From there, we’ll take an extended journey - through the links between money and speech - into the very belly of the beast.

Firesides:

• https://www.youtube.com/watch?v=1tHQ9K5Oj9s
• https://www.youtube.com/watch?v=pCHVmUz8maQ

1. The most simple, seemingly silly questions are almost always the most profound.
2. Good questions must come from a sincere desire to learn, rather than as a veiled means of stating your own opinion.
3. Experts rarely ask good questions. Be a beginner, always.
4. Questions are an opportunity to be humbled. Asking good questions is indistinguishable from practicing humility.
5. Own up to what you don’t know. It will set others free and you may end up coming closer to the shared truths which are a hallmark of honest conversation between peers.
6. Close listening and clear attention are preconditions for good questions.
7. A real master is the pupil in the eye of the world. Don’t be afraid of letting others teach you; it does not degrade you, it uplifts you. The ego doesn’t always acknowledge this simple truth.

• Asking better questions is about process and practice
  • Skill, not innate trait
• Applies to KERNEL’s thinking methodology
  • being able to identify patterns of meaning through complementary opposites -> being able to ask better, simpler, and more direct questions
• Honest conversations contain shared truths that create value
• Starting point to ask yourself: “What goes this really mean?”
  • About whether you can understand basic principles
    • If you can’t, it’s either because:
      • it’s not a well-formed idea (then move on)
      • or you need to learn a new skill in order to understand its implications
• How do you develop a willingness to learn? It begins with clarity and honesty about what you don’t know.
  • This makes you more incentivized to improve yourself, because no one likes feeling inelt (even though we all are)
• Experience the benefits of beginner’s mind, not conceptually, but in the actual course of your life
  • About starting now, trying for yourself, being frustrated by your lack of expertise, and letting your heart show your mind how to celebrate this fecund state of not-knowing - for therein lies ==both truth and liberation.==

68 Bits of Unsolicited Advice from Kevin Kelly

Corey Petty and Justin B question the claim made in point 3 above. The debate boils down to whether asking good questions in general is an ability best developed through disciplined exercise of rational skill, or the cultivation of “beginner’s mind”. In particular, techniques like the Socratic Method develop rational inquiry in order to fuel deeper, more intuitive understanding of a given topic. Corey writes:

==Experience and reflection, learning from our mistakes, and developing understanding all provide nuance.== A mechanic doesn’t develop his ability to diagnose a problem solely from introspection. It is through the combination of knowledge and understanding that intuition arises. I’ve spent most of my life honing skills that give me broad and deep understanding for the specific purpose of being able to ask good questions in any context.

Or Justin B:

I feel that ==knowledge of the specific==, e.g. computer science, translates directly into ==intuition around the general.==

The mechanic or scientist’s skill does grow more nuanced through acquisition of knowledge and skill by the exercise of discipline, and this does lead to ==more specific questions about utility.== In this way, honing a skill leads to asking questions about that particular discipline, which is a good thing. So, let us add an 8th point:

8. Asking good questions requires a deep appreciation of context.

However, “beginner’s mind” is not opposed to rational inquiry and the honing of skill: it is, in fact, the pinnacle of such discipline. Consider the Socratic method more closely:

Socratic Circles are based upon the interaction of peers. The focus is to explore multiple perspectives on a given issue or topic. Socratic questions are open-ended, focusing on broad, general ideas rather than specific, factual information. ==The technique emphasizes a level of questioning and thinking where there is no single right answer.==

• Rational inquiry demands a diagnosis; a solution; an end to a process which had its beginning in the mind.
  • What can such a mind do in the face of “no single right answer”? It can develop negative capability, but even this is insufficient, because ==we’re not after skillful intellectual understanding: we seek harmonious and clear ways of living.== And life is not only rational.
• Accepting honestly your own limitations and inability to understand everything that happens around you creates the space within for curiosity.
  • You can genuinely enjoy never knowing what’s going to happen next, which leads to asking questions which come from the heart and go to the heart of the subject being questioned.
  • It is, as Paul Myburgh says, ==perceptual rather than conceptual: simple knowledge of things-as-they-are.==

“Put your money where your mouth is!”

A tamperproof, borderless, ownerless, global record is a new way of simultaneously ordering both which ==makes possible valuable==, ==meaningful communication== with anyone, anywhere in any way we care to program it. TL;DR: a new kind of money and language.

• Our narratives and financial records were clearly distinct before 2009
  • But share common language from twin practices of faith and finance
• Money as a programmable protocol that relies on a shared record no-one owns is a development of the order of language
  • Collapses distinction between ==narratives around which we organize== and ==our record of societal debt==
• Meaningful communication is a balance between the ==fact that your ability to speak ought to be free==, with the ==fact that you don’t get to say whatever you please.==
  • Freedom of speech enshrined as a constitutional good
  • Implement error-handling for exceptions like hate speech and defamation
• Your ability to access the network (like TCP/IP) is free in all senses, ==requiring only a connection that can support you speaking in the same language as your peers. ==
  • Protocols capable of processing valuable narratives (e.g. Bitcoin and Ehereum) render interperive balancing acts (negotiation, communication) unnecessary
  • Saying anything meaningful (i.e. state-changing) has a specific, well-defined economic cost, captured in transaction fees which accrue to the benefit of those who “listen” to what you have to say.
• The primary benefit of this new order of econo-linguistic network we now communicate with:
  • everyone is simultaneously free to speak
  • the cost of any kind of meaningful speech is well-defined everywhere.
• We are also provided with a clear definition of meaning: ==any speech act which changes the state of our shared record.==

• In blockchains, speech and execution are one and the same thing and interpretation is deterministic.
• Protocol has bare minimum of rules required for consensus
  • You cannot double spend a token
  • Every peer processes every transaction which passes these rules without fear or favor
• The context is determined not by legal interpretation, but by economics.
  • Enshrining an ideal like “free speech” which we agree is good -> certain behaviours we agree to be malicious are made prohibitively expensive
  • They are not disallowed, just economically unsustainable, in much the same way that ==prevention is better than any cure.==
  • Related: Vitalik’s Devcon 1 talk
• Programming penalties rather than rewards ensures that the only state transitions worth validating are those that maintain a meaningful consensus.
  • It is a profound change in ==how we regulate expression.==
• Complementary opposites: See Sources/Kernel/Kernel Learn Track - Module 0

The most effective way to free meaning is to price it correctly.

• Pricing different kinds of speech appropriately, rather than trying to “protect” a culturally-conditioned ideal, has the ==second-order cybernetic effect of better securing public goods. ==
  • Cybernetics is a transdisciplinary and “antidisciplinary” approach concerned with regulatory and purposive systems—their structures, constraints, and possibilities. The core concept of the discipline is ==circular causality or feedback—that is, where the outcomes of actions are taken as inputs for further action.==
  • E.G. SSTOREs are a relatively expensive operation/expression because storing data on public networks is costly, and it is a cost borne by all of us.
    • Thus, we agree upon a gas price that incentivizes developers to write contracts which store the minimum possible information required for state-changing, meaningful transactions.
• It could even be said that there is no such thing as free speech on freely accessible public blockchains
• Increasingly costly expression <- increasingly complex kinds of meaning
  • Incentives are programmed in such a way that the costs borne by the speaker are always provably more than those imposed on the community of listeners.

• The space of meaningful communications is greatly expanded when we stop “protecting” free speech
  • price any speech act according to a ==set of explicit consensus rules== we all agree to follow
• We can program our shared ledger in any way we care to
  • Favoring those in power = lack of creativity
  • E.G. Gitcoin Grants and Quadratic Funding: a speech act which donates $1 to a cause can have nearly as great an effect as a donation two orders of magnitude larger, because we’ve modelled clearly the most optimal way to fund public goods.

When there is nothing to protect, we no longer need guards. Without guards, the digital world is not about captive audiences, but ==creative participation.==

Despite the descriptive limitations of natural language faced with such a construction, we can still be precise about the exceptions to free speech

1. Hate speech (analogous to malicious behaviour or outright attacks on the network) can be more elegantly handled when you are required to have value-at-a-loss to speak meaningfully.
   1. If you then violate rules which are not just social norms, but executable software, ==that value is slashed simultaneously with your speech== and you suffer provably more damage.
2. Defamation comes in two flavours: per se (a statement that is obviously defamatory) and per quod (the defamatory implication must be proven).
   1. Per se defamation can be more elegantly handled by mechanisms like that which runs dap.ps. Anyone can vote in a way which “defames” a product or service, but that vote is also an economic signal denoted in tokens, which are sent straight back to the product or service. So, your downvote causes reputational damage while simultaneously repaying the people you’re damaging (programmed according to a curve which makes votes cheaper the richer/higher the rank of whomever you’re voting on is).
   2. Per quod defamation can be more elegantly handled either by some version of negative votes Gitcoin Grants is currently iterating over, or by reputational systems - hopefully using profiles and actions - yet to launch.
3. The (in)famous EIP-1559 is a great example of how we price transactional expression at the protocol level, which is where the most contentious debates occur. Note, however, how such debate centres not on opinion, but engineering trade-offs and technical proof.

This new order of communication, akin to the appearance of language itself, is best demonstrated by:

• you need only memorize 12 magical words, incant them into an internet-connected machine and you gain immediate access to monetary value, anywhere in the world.
• One can even encode a reference to a newspaper headline in the genesis block of a network of timestamp servers (Satoshi’s wording) which run money-as-a-protocol to make a permanent political statement.

Shelling Out

1. Reciprocal altruism and the problem of cooperation.
2. The deep evolutionary links between money, mnemonics and genetic, generational memory.
3. The importance of incentive structures to greater cooperation throughout human history.

“The precursors of money, along with language, enabled early modern humans to solve problems of cooperation that other animals cannot – including ==problems of reciprocal altruism, kin altruism, and the mitigation of aggression.== These precursors shared with non-fiat currencies very specific characteristics – they were not merely symbolic or decorative objects.”

Szabo begins with a story about the problems faced by the early colonists of America, who had limited access to the “coin of the realm”, which was used to ensure they remained loyal subjects of the crown. They solved this by adopting the form of money used by the majority of Native Americans: wampum (or clam) shells. This strategy was so successful, and trade in wampum so widely accepted, that wampum became legal tender in New England from 1637 to 1661. Eventually the British shipped more coins to America and this practice ceased.

The language of money takes us back to well before recorded history, right to the very roots of homo sapiens sapiens, the wise ape capable of complex communication and its concomitant: ==the calculation of value.==

The precursors to money as we know it were used by people across the world to solve problems of cooperation in situations of low trust.

These strings of regular shells and other items may also have been used to satisfy our aesthetic tastes - made for sheer enjoyment. Far from an explanation, this raises a problem for evolutionary psychologists: why do people find the collection and wearing of jewelry enjoyable? What caused this pleasure to evolve? The critical question in all the theory is: how did cooperative strategies evolve?

“We will see that some humans, too, chose highly risky and discontinuous prey items, and shared the resulting surpluses with non-kin. Indeed, they accomplished this to a far greater extent than the vampire bat […] Dawkins suggests, “money is a formal token of ==delayed reciprocal altruism==”, but then pursues this fascinating idea no further. We will.”

We’ve established through Antonopoulos that money is a language for communicating value, and that it was used long before writing was developed. This is now pushing to the heart of why language itself is useful at the biological, genetic level of our evolution: it fosters cooperation. In more technical terms, it allows us to overcome the value measurement problem - i.e. if you scratch my back in return for a piece of fruit, how long must you scratch for; how many ticks should you find; how big must the piece of fruit be; how do we remember who owes what in the case of delayed reciprocity? The cognitive overhead implied by this problem has never been overcome, except by homo sapiens.

“If clams can be money, furs can be money, gold can be money, and so on – if money is not just coins or notes issued by a government under legal tender laws, but rather can be a wide variety of objects – then just what is money anyway?”

Money as a formal token of delayed reciprocal altruism, as an abstraction, and as a language has allowed human beings to overcome ==the value measurement problem.==

“With money, there are only n prices – 500 products, 500 prices. Money for this purpose can work either as a medium of exchange or simply as a standard of value – as long as the number of money prices themselves do not grow too large to memorize or change too often.”

Szabo goes on to define early forms of money like wampum shells as “collectibles” and uses this to illustrate why “people, clans or tribes trade voluntarily: because ==both sides believe they gain something.==” Trade benefits from ==lowered transaction costs==, which are exactly where collectibles serve usefully, apart from their aesthetic or sentimental value. He describes:

“==how collectibles lowered transaction costs in each kind of wealth transfer== – in the voluntary free gift of inheritance, in voluntary mutual trade or marriage, and in the involuntary transfers of legal judgments and tribute […] Durable collectibles, what today we would call heirlooms, could persist for many generations and added substantial value at each transfer – often making the transfer even possible at all.”

“The Kula valuables doubled as “high power” money and mnemonic for stories and gossip. Many of the goods traded, mostly agricultural products, were available in different seasons, and so could not be traded in kind. Kula collectibles solved this ==double-coincidence problem== as an unforgeabaly costly, wearable (for security), and circulated (literally!) money. Necklaces circulated clockwise, and armshells counter-clockwise, in a very regular pattern.”

💡 ==Communicating value and transferring it are one and the same thing==; it’s just that media which are not perfect abstractions - which have their own, intrinsic value - obfuscate this essential fact.

The primary benefit of using collectibles, with embedded narratives, as money is lowered transaction costs.

In analyzing such wealth transfers, we need to keep two things in mind: ==context== (the time it occurs at and the supply/demand at that moment) as well as what Szabo calls the ==“flow graph of monetary circulation”== which allows collectibles to accrue value over time. E.G. Food is worth much more to starving people than to well-fed ones.

However, the trust required to make the requisite trades was often lacking between tribes, and so ==collectibles substituted for otherwise necessary but non-existent long-term trust relationships. ==

In tandem with this kind of “starvation insurance”, Szabo advances a ==theory of trade-based predation== - pointing out that many paleolithic tribes specialized in hunting only one kind of species, which often migrated seasonally, i.e. reindeer or bison. Importantly:

“It is not enough, for the theory of collectibles put forth in this paper to be correct, that single beneficial trades were possible. We must identify ==closed loops of mutually beneficial trades.== With closed loops the collectibles continue to circulate, amortizing their costs.”

Collectibles are not only useful for starvation insurance: they can be used to ==trade abstract foraging rights==, as is still the case with !Kung in Southern Africa today. 

Nevertheless the major point remains that underneath our great economic institutions are far more ancient institutions that also involved wealth transfer. Most importantly, this kind of transfer can be passed between generations: i.e. kin altruism beyond the grave.

“The ==demand for a durable and general store of wealth== for use in marriage, inheritance, dispute resolution, and tribute was thus even more urgent than for trade itself. Furthermore, these institutions may predate inter-tribal trade, and involved for most tribes a greater transfer of wealth than trade. ==These institutions, more than trade, served as the motivator and incubator of the earliest primitive money."==

This is a contentious argument, but the point remains that collectibles act as a ==container for memory== across generations, and our memories of who we are and what we owe extend far beyond mere trade relationships.

In order to achieve the lower transaction costs Szabo claims are a feature of money-as-collectibles, the collectibles must move in closed loops of mutually beneficial trade?

“Often collectibles not only embodied wealth, but also served as a mnemonic, representing the title to a clan position of responsibility and privilege.”

This has always been true, and in an even deeper sense that Szabo is getting at here. ==Wealth is itself a mnemonic==, perfectly illustrated by the fact that you now need only remember a 12 word mnemonic, which you can carry in your mind across any border in the world, in order to have immediate access to wealth. Szabo then discusses gifts and other forms of wealth transfer like family trade and marriage, putting particular emphasis on this notion of the closed loop of circulating collectibles, as well as tribute and the spoils of war. Again, when paying tribute:

“Collectibles doubled as a primitive mnemonic device that, while not verbatim, could be used as an aid to recall the terms of the treaty.”

Circulating collectibles highlight the link between money, language, mnemonics, and memory (both individual and collective). ==Money contains the memories of our indebtedness to each other; narrative contains the memories of our indebtedness to life, the universe and everything.== What happens now that the two are merging?

Another critical point that comes up in the section on Spoils of War is that ==tribes would often hide wealth in order to reduce the tribute they were forced to pay.== This remains true today, albeit it in a more complex way. There is a very good reason we use the words “shell corporation”. The innovation of a public, auditable, verifiable ledger changes this fundamentally, with hard-to-predict effects.

Szabo uses these sneaky tribal tactics as a segue into the work of Arthur Laffer, who proved that ==as the tax rate increases, the amount of revenue increases, but at an increasingly slower rate than the tax rate,== due to increased avoidance, evasion, and - most of all - disincentive to engage in the taxed activity. This has become known as the ==Laffer Curve==:

“On a larger scale, the Laffer curve may be the most important economic law of political history. Charles Adams uses it to explain the rise and fall of empires. The most successful governments have been implicitly guided by their own incentives – both their short-term desire for revenue and their long-term success against other governments – to optimize their revenues according to the Laffer Curve. Governments that overburdened their taxpayers, such as the Soviet Union and later Roman Empire, ended up on the dust-heap of history, while governments that collected below the optimum were often conquered by their better-funded neighbors.”

The main question about coins is why minting was dominated by governments as opposed to private interests - and the answer is not just the government’s ability to enforce anti-counterfeit measures more effectively. It has to do with the fact that ==coins are high velocity money, facilitating a large number of low value trades.==

“The king, deriving his revenue from tax collection, had a strong incentive to measure the value of wealth held and exchanged by his subjects more accurately. That the exchange also benefited from cheaper measurement by traders of the medium of exchange, creating something closer to efficient markets, and allowing individuals to enter into the marketplace on a larger scale for the first time, was for the king a fortuitous side effect.”

Being from the internet, we reject kings, presidents and voting; opting rather for rough consensus and running code. The question is ==whether we can have efficient marketplaces without central authorities such that the fortuitous side effects of global trade can accrue to the people actually trading, rather than the authorities “allowing” that trade to occur.==

Money helps humans solve the value measurement problem. Coins, as high velocity money, enable us to do this more efficiently. Traders in coins benefit, because measurement is cheaper. Take a moment to reflect on the cybernetic fact that ==money is about value measurement, and that measurement itself has a cost.==

Human relationships of any kind generally require some kind of ==dispute resolution mechanisms== in order to be sustainable in the long term. Szabo tackles this thorny issue next:

“Most pre-modern cultures, ranging from the Iriquois in America to the pre-Christian Germanic peoples, decided that payment was better than punishment.”

There is a lot more to be said about dispute resolution, but we selected this particular quote because it highlights a fundamentally important idea for Web 3: can we advance the aims of rehabilitative justice using a shared and common historical record? Because it’s the perfect tool to do so. We can use economics to combat economic evils like the privatization of prisons. These are the kind of society-level changes we want you to think about, because they are, in principle, possible.

This takes us back to the primary importance of understanding this notion of collectibles:

“Indeed, collectibles provided a fundamental improvement to the workings of reciprocal altruism, allowing humans to cooperate in ways unavailable to other species. For them, ==reciprocal altruism is severely limited by unreliable memory.== Some other species have large brains, build their own homes, or make and use tools. No other species has produced such an improvement to the workings of reciprocal altruism. The evidence indicates this new development had matured by 40,000 B.P.”

Szabo goes on to discuss the properties of such collectibles and gives multiple examples of their development through history, basically linking up everything above. Importantly, he makes the point in the context of all this history, that

“A novelty of the 20th century was the issue of fiat currencies by governments. While generally excellent as a media of exchange, ==fiat currencies have proven to be very poor stores of value [due mainly to inflation].==”

It’s fascinating to consider the money we use today as a novelty, rather than a given. In any case, we then arrive at the conclusion:

1. Collectibles were crucial in ==lowering transaction costs== such that our ancestors could trade between tribes and not just with kin, without succumbing to either the value measurement problem or the prisoner’s dilemma.
2. Collectibles entirely ==replaced reputation as the enforcer of reciprocation==, although violence still played a major role in enforcing rights as well as being a high transaction cost that prevented most kinds of trade.
3. To be useful as a general-purpose store of wealth and means of wealth transfer, a collectible had to ==have certain functional properties and be embedded in at least one institution with a closed-loop cycle==, so that the cost of discovering and/or manufacturing the object was amortized over multiple transactions.
4. With its ==unprecedented technology of cooperation==, humans have become the most fearsome predator ever seen on the planet.