Will Ethereum and EOS Obviate Government?

This interview with Daniel Larimer, the creator of Steem and BitShares, is eye-popping. EOS is his latest project. It is a further evolution of the work done on those two systems to generalize the technology as a platform for building and deploying distributed applications similar to Ethereum.

I don’t talk about this very much anymore because realpolitik dominates so much of our daily lives, but like Larimer I am an anacho-capitalist. It is fascinating watching people, in their near infinite creativity, march forward creating solutions to problems few people can even frame into words.

Taking Power from the Courts

For years, I’ve understood that so much of governments’ power derives from its dispute system, known as the courts. It it the main function of government, creating a stable and fair court system for people to resolve disputes of property.

And, even if we get control of the money supply, i.e. through cryptocurrencies like Bitcoin, we still aren’t solving the big problem, the courts and the law under which all of our activities are subject.

Taxation and inflation (just another form of taxation) are the lifeblood that corrupts government in its most basic function. And we would be willing to put up with all manner of government inefficiencies and abuse if the courts would actually work as they were intended to.

But, they don’t. They are, like everything else government touches, a means by which those with money and power, granted to them through government largesse remember, protects that money and power.

Smart contract systems like Ethereum and now EOS are designed to get around all of that. To put contract sovereignty back in the hands of the people who enter into them, not the judges who interpret the law which intervenes between the contracting parties.

The EOS-olution

Where EOS promises to be better than Ethereum is in its scalability — number of transactions per second it can handle — and governance, which itself is decentralized through its Witness system, similar to that of Steem and BitShares.

Ethereum, as Larimer explains it, at its core, is like Bitcoin, difficult to scale up because of its linearity of blockchain validation. EOS is built on the same Segregated Witness system that now processes more transactions per day on Steemit than Bitcoin and Ethereum combined do.

We talking orders of magnitude here, not ten or twenty percent. Even with SegWit2x, Bitcoin will be incapable of doing the work needed to operate as a currency for the entire financial world.

And yet, what EOS is capable of is still it an order of magnitude smaller than Facebook’s current traffic. What this says to me is that there is still plenty of room for both competition and innovation.

So, as Steem was an evolution from BitShares so EOS is to Steem. BitShares was the proof of concept for the type of blockchain it uses. Steem is proof of concept that distributed applications can be built on this type of blockchain. EOS is looking to be the platform for generalized distributed app development, like Ethereum.

Solutions Without Borders

The inherent problem with governments is their need to codify everything into law which is difficult if not impossible to change. And the path of change is always towards more centralized control not freedom.

Centralization creates barriers to entry and rent-seeking behavior. Systems like Steem or EOS are subject to the same codification and corruption potential that governments do over time. They won’t accumulate at the same rate as the checks and balances are far more powerful in the voluntary market rather than the coercive one.

But, because they are decentralized and ultimately voluntary, they are subject to competitive forces that will mitigate these effects. We see it in technology companies all the time. And I suspect that companies like Twitter and likely even Facebook will fail in the end as they forget that the customer is always right.

The more I delve into the promise of the crypto-space the more I realize that this is the right time to have done so. The changes available are immense and have enormous potential to radically alter the way power is distributed as the current systems fail.

The smart governments are the ones embracing these changes rather than fighting them. This is why Vladimir Putin meeting with Ethereum designer Vitalik Buterin was so important.

Putin realized the potential to not only improve the basic functions of his government, making it more transparent and user-friendly, but also it would help to further insulate Russian society from the effects of a collapse of the West’s banking system.

China is moving in a similar direction in backing a digital Yuan based on blockchain technology.