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Principle and pragmatism in the Ethereum microcosm

By Daniel M. Ryan
web posted July 25, 2016

Although it's continually knocked by the detail-driven, there's a lot of truth in the maxim "Human nature is the same everywhere." Keeping in mind that it applies best to behavior patterns rather than specifics, it's the reason why we can identify with so many different peoples and find their strategies familiar. Case in point: a study of a village named Sedaka in the Kedah state of Malaysia. At the time James C. Scott was studying its people, the late 1970s, Malaysia was in the midst of implementing policies that combined land reform with development. As you might have guessed, the government's development initiatives turned into a crony-capitalist honeypot. It was used for political gain by the dominant party, the United Malays National Organization (UNMO). Like Mexico's PRI at the same time, the UNMO was the party of the movers-and-shakers. If you wanted to get something done in Malaysia, you had to play nice with them and likely cut a deal with them. Although not the only party, it was the dominant party by the measure of who got what.

A small village in East Asia filled with Malayan Muslims: what could these folks have in common with us? With regard to a crony-capitalist system that's dominated by one party, plenty. Malaysian politics at the time saw UNMO comfortably acting as the "Party of Government" plus the "Party of Prosperity." In a crony-capitalist system, the two dovetail all-too-well. At street level, it was the Winners' Party: the party with the people to know; where the profitable connections were made, where the economically ambitious joined. Like Mexico's PRI at the time, the platform and patter were secondary. What mattered were the movers-and-shakers. If you wanted access to them, as well as preferential access to development funds, you joined the PRI or the UNMO. If you want to be a winner, you sign up for the Winner Party.

What Prof. Scott found, and recounted in his 1985-published study Weapons Of The Weak, was an ethos that permeated the clubhouses and meeting places of the UNMO. They prided themselves on their pragmatism, and their results-oriented thinking. Palm-greasing wasn't a problem; it was the way deals get done. Corruption was just an offshoot of building the nation and getting prosperous. It would only become a problem if it got out of hand, or if the slush funds fell into the wrong hands. So long as the dirty deals got things built, there wasn't a problem.

The ethos of the seemingly permanent-opposition party the Islamic Party of Malaysia (IPM), or Mexico's PAN, was profoundly different. Folks who belonged to the "Party of Principle" take greatest pride in their integrity. They saw corruption as a serious blemish on the nation. They did decry it in large part because it shut out the politically powerless from the development programs that had been ostensibly set up for their benefit (most so the land reform in Malaysia.) But, their words show that their practical objections were intermixed with a moralistic view of politics.

Interestingly, this party was far more multi-class than the UNMO. Rich, poor and middling belonged to the IPM - while the soul of the UNMO was definitely upper-middle-class.

Granted that the above thumbnailing paints with a broad brush. If you started off with the UNMO's and IPM's platforms and built from there, you'd miss their different souls (if you will.) But with these broad brushstrokes, there's a real shock of recognition. Despite the Democrats' patter, we all know that the Dems are the Pragmatist Party. Any would-be mover-and-shaker figures out quickly that if (s)he wants to make a deal that involves (or can be blocked by) the U.S. government, the party to be friendly with is the Dems. We see it in Silicon Valley, where young and enthused libertarians shed off their libertarianism and fall into the hands of the Democrats – most significantly, when their companies become big enough to attract the attention of the Washington insiders. If keeping the company growing and saving jobs means letting in some you-know-whos, they do it. More and more, the Democrat Party is acquiring the soul of upper-middle-class folks who see their prosperity linked to government policies. Thanks to the Clinton Cash scandals surfacing, we're becoming more and more aware of the Big Corruption under the flap of the Dems' Big Tent.

And on the other side, despite the even more profound differences between the platform of the IPM and the Republican Party, we see a similarity of behavior pattern. Despite espousing profoundly different values than Malaysia's IPM, we all know that the Republican Party is the place for values voters. As such, its membership is multiclass like the IPM's. It's the party where you found calloused-hand ordinary folks side-by-side with billionaires. Common values trump disparate incomes. Until the Trump Train barreled through, you also found a party that almost seemed content with being the perennial loser if the cost of winning was besmirching one's soul. And even now, as Ted Cruz is finding out, a leader's integrity impugned calls forth a run-him-out-of-town pile-on. In the Party of Principle, a leader's breached integrity makes him something of a monster.

Admittedly, this incisive similarity can be pushed too far – but for one, it does explain a lot of anger at the Trump-opposing Republicans. How many Trump supporters do you know who are frustrated with the Republican Party ending up the Loser Party? Note that these same folks care very little about the more checkered parts of Donald Trump's business career.  What they care about is that he's a winner. He's the one who'll get things done.

Yes, the political souls – the inner motivations – of a village thousands of miles and several decades away do have something to teach us about how we tick. So does the successful resolution of a crisis that rocked the cryptocurrency Ethereum, solved through a blockchain-excising hard fork whose go-date was last Wednesday. Although no government agency or official was ever involved – all the actions were voluntary – the defeat of the hacker who stole from The DAO has a lot to teach about us political animals.

Rising Above Principle…

Walter Heller, well known in 1960s Washington as the most sunny-side-up mover-and-shaker in the Lyndon Johnson administration, got widely razzed in the 1980s when he urged the government to "rise above principle." Nevertheless, his motto shows a lot about the Pragmatist mind. To this kind of person, principles are like the brakes on a car or the safety-inspection teams in a plant. They're necessary, but only as helpers. You pay them due heed, but you don't let them run the shop; otherwise, nothing gets done. It's vital to have working brakes, but when you want to motor you step on the gas.

Also vital to the Pragmatist mind is splitting principles into two categories: ones that never should be broken and ones that can be broken in an emergency. From this angle, principles are like the rules of the road. You obey them to a reasonable degree when driving normally, but you throw a lot of them out the window in an emergency. If the driver of the car you're tailgating slams on the brakes, you don't worry about the illegality of driving on the shoulder or median: you swerve, as quickly as possible. Only an idiot would care about the integrity of the shoulder or median in such a situation, and only an idiot would see a slippery slope encouraged by an emergency swerve. Only an annoying pissant would stick to why you were tailgating in the first place.

This attitude was all over the bloglike platforms of Ethereum supporters. To a veteran observer of politics, their broad-brush arguments were strikingly familiar:

  • Let's not worry about what we should have done then, let's worry about what we must do now.
  • People who aver that the Ethereum blockchain should be left immutable are dogmatists, ideologues, jealous competitors, trolls, religionists, cultists.
  • We have people to save. Let's worry about their naiveté later.
  • We have an ecosystem to save. Why would we wreck a great, innovative cryptocurrency in order to cleave to an overly restrictive principle?
  • We are with the people. Excising the theft from the Ethereum blockchain is popular, and blockchains are consensus mechanisms in their core. If the consensus cries out for a surgical excision, shouldn't they have their way?
  • If we don't fix this mess ourselves, the government will step in and throw a new regulatory burden on our shoulders.
  • Criticisms of the rollback that claim the rescue is an  operation by an inner elite to save their hineys are silly. Sure, there has been leadership, but it's only moral leadership. The power to decide is always in the hands of the community.
  • Blockchain immutability is a Bitcoin principle. It's appropriate for Bitcoin and its offshoots. Ethereum is a different beast; it's more advanced. A transaction rollback doesn't rip apart the Ethereum ledger; it can be done surgically. Thus, this Bitcoin principle is inapplicable to Ethereum. Only Bitcoin maximalists don't see it.
  • Just as silly as the inner-cabal criticism  is the moral-hazard criticism. It's not like we got up on one side of the bed one morning and decided to mess with the blockchain. There was a multimillion-dollar theft, with thousands of victims. How can moral hazard be an issue when we're just reversing a brazen theft?
  • This rollback is a one-only, or at worst a hardly-ever. It won't be precedent-setting.
  • Blockchain immutability is not a suicide pact.

…And Getting It Done

One of the striking aspects of the hard-fork crisis is the fact that those above-noted heavyweights have been working day and night for over a month to make sure it got done. For reasons explained in this previous article, it was an operation that would have been a lot messier had it not been completed when it did.  The mission required a lot of effort and programing talent to make it a success.

Contrariwise, the ordinary miner had to do very little. All that he or she had to do was upgrade his or her node to the hard-fork-compatible client and keep on mining. The ordinary user only had to upgrade his or her wallet. The ordinary DAO holder just has to send his or her DAO tokens to the original DAO address; the code there was replaced by a simple refund contract. Yes, it was that easy: send your tokens to the right address and you got a refund of 1 Ethereum ether per 100 DAO tokens. If you bought them in the first two weeks of the crowdsale or on an exchange after the crowdsale, you got a full refund.

This disparity of effort puts a real question mark on the charges of a self-serving conspiracy. When "inner cabal" matches up with "the folks who are working their tails off to save everyone's bacon," the usual image of a self-serving cabal doesn't fit.

Nor does the image of a group of save-ourselves jibe with the furious research done to help future smart-contract programmers program more securely. This research plainly bespeaks a responsibility ethic that would have been absent had the self-dealing characterization been accurate. To the extent that they were motivated by selfishness, they saw their self-interest as aligned with the salvation of the entire Ethereum community as well as Ethereum itself.

No wonder that the blowback and criticism was confined to the cryptocurrency press. When the mainstream press noticed what was going on, the coverage was usually favourable.

A Principle Lament

Really, the Ethereum folks who sided with blockchain-immutability Principle are in a tough spot. They're in the same storm cellar that the opponents of the New Deal found themselves in back in the 1930s. Those opponents primarily relied on a Bread-and-Circuses slippery-slope argument. As we now know in long retrospect, they were right: just look at the ‘Hood. But the trouble was, they were right way too early. They were two generations ahead of their time. During the time of the New Deal, there was nary a hint of "welfare queens" or system gamers. Instead, there were reams and reams of evidence showing people accepting the New Deal aid reluctantly and as a last hope. Those anti-New-Dealers found out to their cost this bitter rule of politics: as on Wall Street, being right too soon is another way of being wrong. Worse, they were wrong in the teeth of suffering that made it easy for their enemies to cast them as unfeeling brutes or clueless snowflakes.

The Ethereum world has come to that hard – for some, frustrating – moment when long-term vision presents a picture that's wildly at odds with the facts on hand. Yes, the hard-fork bailout has planted the seeds of moral hazard. But the trouble is, the seeds now planted take a very long time to germinate. The seeds of the housing bubble were planted in the early 1990s when banks were leaned on to loosen lending standards to politically-sexy "victims." It was widely decried at the time. None of these decriers had an inkling that it would set off a housing bubble. Instead, they denounced it as pandering.

It took fifteen full years before the seed germinated, waxed and delivered its bitter fruit. Fifteen long and eventful years. The stretch of time was so long, it took a specialist in the issue – or an ordinary guy with a specially steely-trap memory – to even make the connection. Too much real life had taken place in that decade-and-a-half interim.

So it's no surprise that the Ethereum folks who've stuck to blockchain-immutability Principle are now a small and beleaguered minority. Not only are the optics all wrong for them, but also their prophecies of trouble will not be fulfilled in any real way until far, far in the future. Until then, they have little choice but to act like the dogmatists they've been portrayed as. With events like these, karma is a snail.

Fortunately for them, their Principle is still mainstream on the cryptocurrency world. They have options that go beyond indignantly watching the recovery of Ethereum's price. They can pick up sticks and migrate to a friendly ecosystem.

But in the Ethereum world, much like at the Republican convention, the "Winner Party" has won. ESR

Daniel M. Ryan, as Nxtblg, is shepherding the independently-run Open Audi Initiative Prediction Market Shadowing Project. He has stubbornly assumed all the responsibility and blame for the workings and outcome of the project.





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