3/9/2023 0 Comments Plutocracy 1Three out of the ten largest ethereum balances today are held in smart-contracts including the account with highest balance, storing more than 2% of all ether in existence. It is precisely their expressiveness that makes contracts ideal for storing large pools of funds, with strict controls around spending conditions to prevent theft and misuse. There is no secret associated with such an address per se, but there is a set of conditions expressed in a programming language- the “contract”- associated with the address which determine under what conditions the money can be spent.Ĭontracts allow expressing detailed logical restrictions around how money can be spent: for example a contract can be designed to only permit sending funds to a small number of “whitelisted” addresses, only if 2 out of 5 shareholders agree but not before March 2021 and no more than 1000 ether per day. The latter is the notion of “programmable money” pioneered by Ethereum. There is a private-key, carefully guarded by the owner of those funds and he/she wields control over that pool of money by cryptographically signing messages using that secret. The former are what we traditionally associate with cryptocurrency. Recall that there are two types of Ethereum accounts: externally-owned and smart contracts. First problem is that by virtue of insisting on signed messages, it can not accommodate funds associated with smart contract. The challenges with Coinvote are more complex. By looking at a snapshot of the blockchain at one specific moment in time, Coinvote avoids double-counting votes from ether that gets shuffled around. She can cast a vote using this pool of funds, then immediately “loan” them out to Bob- or even another blockchain address she controls herself- who casts another vote from the new address. This is important because funds can move around. Votes are not counted when they are initially cast but at the end of the polling period, based on blockchain balances at a specific point-in-time. Let’s start with one design subtlety that Coinvote gets right: preventing multiple votes using the same pool of funds. Even if one buys into the dubious plutocratic ideal that votes count in direct proportion to the voters bank account, Coinvote and similar polling models are fundamentally broken because they fail to account for the quirks of how funds are managed at scale. Publications such as CoinTelegraph blithely cite these poll results as if they were representative of the vaguely-defined “community.” But the design is fundamentally unsound. This system has been used for gauging community opinion on contentious questions, ranging from the EIP-999 proposal to rescue funds trapped in the now defunct Parity multi-signature wallet to more speculative questions around changing the Ethereum proof-of-work function. The signature establishes using cryptographic techniques that the voter is indeed the same person who controls the purse strings for the associated blockchain address. Instead of participants cast their vote by sending a specially crafted message, digitally signed using the same private-key associated with their blockchain address. Voting itself does not involve any exchange of funds. Anyone can create a poll and participants vote yay or nay on the proposal, with their vote weighted by the amount of funds they hold. One example popularizing this notion as something of a Gallup-poll for the Ethereum community is Coinvote. Were it not for the extreme volatility of cryptocurrencies against the US dollar, the corresponding slogan would be “one dollar, one vote.” From the design of proof-of-stake algorithms that grant mining shares based on how much capital the miner has committed to the system to the design of polling mechanism that attempt to gauge community opinion on various proposals, influence is unabashedly measured as a function of account balance. “One person, one vote” may be the rallying cry for electoral reform, but governance for cryptocurrency- to the extent one can speak of governance with a straight face in this ecosystem- often operates on a different and decidedly plutocratic principle.
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