If you Google “Blockchain Constitution” you will discover my prior post on “Why every Blockchain needs a Constitution” as the number 2 hit. Today I would like to expand upon why and how one would go about creating an meaningful, enforceable constitution.
As those who have followed me over the years know, it is my continuing mission to discover free market solutions for securing life, liberty, and property. I started this mission because I believe it is possible to create a well ordered society without resorting to violence. When people think of anarchy, anarcho capitalism, libertarianism, and voluntarism they immediately think of all the problems that would exist without government. What do you call a system of governance that is purely voluntary and absent of violence? Can any such system have teeth?
What is Governance?
Governance is the process by which decisions are made by a group of people. At its heart is the concept of dispute resolution. Any time two or more people are involved in making a decision disputes will arise. A solid governance system is a process for dispute resolution over which there is prior agreement and therefore no dispute. If people can agree on the process, then they can usually live with the outcome.
What should be Governed?
The biggest challenge for any group of people is the allocation of Rights: who can do what and when. The most basic Right is property rights and from that all other Rights can be derived. Our first property claim is our body and from that claim our right to control how it is used.
Contracts are a process by which people agree to grant and exchange Rights under certain circumstances.
A free and prosperous society is derived from efficient governance over property right disputes and therefore all contract disputes. This means that a system of governance ultimately must govern all of our mutual Rights. If we can agree on an efficient and honest, logically consistent, process for determining who owns what and when, then we can have a peaceful and prosperous society.
How should Rights be Governed?
Ambiguity over rights is the source of most disputes. Any time things are ambiguous, or subject for interpretation, there is an opportunity for dispute. It could be said that an ounce of dispute prevention is worth a pound of cure. If we want to minimize ambiguity then we need to formalize contracts in computer code and have them evaluated in a transparent and reproducible manner. In other words, smart contracts can be considered a means to reduce ambiguity in contracts and the dispute resolution process.
Ideally everything could be resolved by perfectly executing computer code, but that would require the code to have perfect knowledge, a sense of equity, and the ability to discern between the explicit instructions we gave it and the intent of the instructions we gave which may not be the same thing.
For this reason it is necessary for us to have humans involved in governance to cover the situations where code fails or is unable to resolve disputes.
Property Rights are a Treaty
It is commonly held that our rights are derived by virtue of being human; however, not all humans agree with that premise. Many people believe in the law of the jungle, that might makes right. Rights are a concept that we grant to others so that others will grant them to us in return. It is a peace treaty that frees us from the need to defend ourselves against those who sign it and enables everyone to devote more time and resources toward more productive activities.
Under this view of property rights, you only have rights by virtue of your explicit consent with two or more people who grant those rights to you. Without such an agreement we revert to the law of the jungle. No one claims a bear is violating their “rights”. Nature knows no rights; we only imagine them to exist. The bear never agreed not to maul you, and likewise unless other people agree not to maul you they haven’t violated your rights by mauling you. Afterall, did you ever promise not to maul them? What consideration did you give in exchange for the rights you imagine to have? Does the other party you expect to respect your rights consider the terms fair?
This philosophical approach may appear repugnant to those who are convinced that they are owed certain rights by virtue of being human. This is a view I once held, but now see as wishful thinking of an individual wanting to impose terms of a peace treaty on everyone else. Instead what this individual should be doing is organizing his own community among people that will grant rights to each other with an eye toward mutual defense against aggressors.
We demand the government to recognize our rights and we all protest when we feel the government is violating its constitution. The fact is that governments are strong, powerful groups of people which represent a force no individual can defend against which makes us wish we could prove they are in the wrong and we are the victim. Sadly, they force us to sign their contracts under threats of imprisonment or death if we refuse. Then they claim we consented despite the obvious duress.
It is not possible to enter a contract while under threat of overpowering violence. Therefore, there is no contract between us and our so-called government. Therefore there are no more rights between us and our government than between us and a bear. In fact, the government doesn’t actually exist! It is a figment of our collective imagination and any violation of our perceived rights can only be by individuals with whom we have not signed any contract.
A Constitution is a multi-party Contract
Any two people can create a contract where they agree to recognize each other’s rights and agree to allow a 3rd party to resolve any dispute. The most common way this is done is via an arbitration clause in a contract. The ruling of binding Arbitration is generally enforceable in all countries around the world by virtue of numerous arbitration treaties.
There are many reasons to agree to Arbitration including:
- Faster
- Cheaper
- Privacy
- Choice of Law
- Fairness
- International Disputes
- Controlling Jurisdiction
- Knowledge of Judge
Without an arbitration agreement between two parties, a dispute can be brought in any number of countries with any number of different applicable laws, non of which the parties consented to. The parties can shop jurisdictions for those most favorable to them and least favorable to the opposing party. Governments around the world can pass new laws and set precedents that might invalidate the intent of the parties contract.
If we want to create a free society with an honest dispute resolution and property right allocation, then we must take control of Jurisdiction and Choice of Law. Fortunately, this is easy to do with an internationally recognized Arbitration clause and dispute resolution forum that employ the Maxims of equity.
Counterparts
You may have seen clauses like the following in various contracts you have signed:
This Contract may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all counterparts together shall constitute a single agreement.
What this is saying is that two different people can sign two different copies of the same contract and it has the effect as if both signed the same contract. This language is incredibly common even though it is almost unnecessary as most courts will recognize signed Counterparts as one document even without such a clause.
Therefore, two parties who both sign a separate copy of Constitution can be considered to have signed the same contract where the Constitution is a contract.
Constitution as a Contract
A constitution can be viewed as a contract and enforced as such around the world. This contract can establish choice of law, choice of arbitration forum, and allocate any other lawful rights among the parties. In order to be viewed as a valid contract it must have several elements:
- Offer
- Acceptance
- Consideration
- Mutuality
- Competency / Capacity
- Ideally a Written Instrument
The Offer
The constitution is an open offer to anyone willing to accept it. In this offer the offeree is agreeing to participate in dispute resolution and to take reasonable, non-violent, actions to recognize and restore the property rights of another using a mutually agreed upon process (e.g. smart contracts). The person accepting this offer is granted validation of their property right and the benefits of an efficient process for managing and transferring their rights.
Acceptance
There are many ways to demonstrate acceptance, including: digital signature, physical signature, verbal agreement, depositing a check, or other actions that demonstrate your voluntary choice to partake in the benefits of the agreement. Use of a blockchain and signing a transaction that incorporates the hash of the contract is a valid proof of acceptance.
Consideration
A constitution that offers both parties an equal trade of rights and obligations comes at equal expense and benefits to both parties. These benefits have material value to the parties and come at material expense.
Mutuality
Nothing could be more mutual than a Constitution that imposes equal rights, benefits, and obligations on all parties.
Competency / Capacity
This particular loophole may allow some individuals to escape the enforcement of the contract, but is of little concern to the vast majority of people.
Written Instrument
A public Constitution identified by cryptographic hash and signed by digital signatures is about as solid and verifiable, indisputable, written instrument as one could hope to come across.
Enforcing the Contract
Ok, so we have identified that a constitution can be drafted as a simple multi-party contract that all parties executed in counterpart by virtue of using a particular blockchain. How does one go about enforcing the terms when you may not know anything about the other party other than their blockchain account name.
Serving Notice of Dispute
The first and most important aspect of bringing a suit against someone is knowing how to properly serve them. This is something that must be specified in the contract and recognized by the arbitration forum. Fortunately, a blockchain is a public record where notices can be delivered to any and all parties to the constitution. Afterall, unless you have an account it is unlikely you signed the constitution / contract.
If you publish notice of your dispute to the blockchain and the other party refuses to participate in the arbitration process, then he or she will lose by default and a ruling can be made against the account. To prevent abuse the loser has to cover the legal costs and time of the winner’s fair market rates.
Know your Customer
Generally speaking, if you are doing business with someone and there is some probability of dispute then you should likely gather information from them that will help you prove they have signed the constitution and submit an arbitration ruling in your local courts for enforcement. This can happen in many ways, but the simple process of asking them to send a signed payment request or a purchase order via the blockchain is enough to tie their account to the address you are shipping the good or service to.
Pseudo Anonymous Dispute Resolution
May services, such as VPNs, allow customers to pay via Bitcoin and take no other identifying information. If the user of the VPN violates the Terms of Service then the VPN operator may have claims for damages, but no ability to know how to bring them to justice.
A blockchain with Constitution and built in method for delivering notice of request for Arbitration can enable the VPN service provider to get a ruling against a Pseudo Anonymous account. The account owner will either have to identify themselves or defend themselves Pseudo Anonymously or they may lose the dispute by default.
Once a ruling is entered the entire community will be aware of the judgment and if the real identity of the account owner is ever found then it will be binding on them. In all likelihood the rulings would even be enforced by governments around the world.
The ideal situation in these cases is for accounts to be bonded and insured. In this way individual identity can be kept private from everyone while still enabling certain guarantees of payment in a dispute.
Block Producers can Expel Accounts in Bad Standing
All blockchains have a group of block producers with the power to collectively block any account they desire. Bitcoin miners use fees as the basis for blocking certain transactions. Steem uses rate limiting to do the same. It is also possible for Block Producers to block transactions from accounts until the individual behind the account complies with a public ruling against them.
The benefit of having 21+ elected block producers is that it requires sustained unanimous consent to execute such a punitive measure. The reality is that the elected producers can and should set up a smart contract based process to reach consensus on when to utilize this power to enforce a ruling.
Businesses can Shun Accounts
Just like producers can block transactions, businesses can quickly review the record of any account to determine whether it is in good standing. An account in bad standing can be denied service based upon the principle of freedom of association. The goal of a governance system is to make it easier to get verified background checks.
How is this less corrupt than what we have today?
Those of us who are sensitive to abuse of power and corruption of individuals within a system may be feeling sad right now. The promise of rule by benevolent artificially intelligent blockchain overlords just seems so ideal after centuries of government corruption.
What good does it do us to construct a blockchain with a constitution that enables users to bring other users to arbitration in a court governed by corruptible people? Won’t this result in arbitrary rulings and ultimately arbitrary law?
Here are the key differences:
- All parties explicitly consent without threat of violence
- All parties explicitly agree to refrain from aggression and aim for logical consistency
- A much larger part of your rights is governed by logically consistent code
- Enforcement is limited to non-violent actions on a public ledger
- Precedent (aka the fallacy of appeal to authority) can be explicitly excluded from being valid basis for an arbitration ruling, all decisions should be independently derived from facts and reason. This prevents one bad / corrupt decision from compounding over time and hopefully prevents legislation by judges.
All of that stated, the single biggest things that drive corruption out and integrity up is free market competition, transparency, and immediate public referendum.
No system is perfect when it must be designed and operated by humans with competing value systems and agendas. Hopefully we can find new ways to work together that raise the bar enough to make a difference in the quality of our lives and those of our children.