Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Puja Ohlhaver: Why Community Currencies Are Crucial for Governance in DeSoc

Episode Date: March 1, 2025

In the digital networked age, people’s attention often overlooks local problems in favour of global ones, which don’t necessarily impact them in their daily lives, or over which they don’t have a say due to the skewed Pareto distribution of power in modern day societies. Puja Ohlhaver, in her recent research paper ‘Community currencies’, proposes a dual-currency model that prices attention and influence in each community, with the ultimate goal of creating a Gaussian distribution of power, either locally, or globally through the dynamic interaction of multiple local communities. This model allows community members to stake their currency to earn non-transferable governance rights, creating a substrate for decentralised societal coordination that favours social innovation.Topics covered in this episode:Puja’s backgroundWeb3 research‘Community currencies’Pareto vs. Gaussian distributionsGlobal vs. local power distributionsThe community currencies modelMeritocracy vs. influenceQuadratic fundingGovernance, bribery and the crisis of legitimacyExperimenting with community currenciesEpisode links:Puja Ohlhaver on X'Community Currencies' Research Paper'Decentralized Society' Research PaperSponsors:Gnosis: Gnosis builds decentralized infrastructure for the Ethereum ecosystem, since 2015. This year marks the launch of Gnosis Pay— the world's first Decentralized Payment Network. Get started today at - gnosis.ioChorus One: one of the largest node operators worldwide, trusted by 175,000+ accounts across more than 60 networks, Chorus One combines institutional-grade security with the highest yields at - chorus.oneThis episode is hosted by Friederike Ernst.

Proof-of-Stake protocols tends to end in like a Pareto-Distribution in oligopoly. Proof-of-Personhood protocols, like my paper on Idina, Compressed to Zero Show, it also ends in an oligopoly. In proof-of-stake, you're, you know, it's an oligopoly in terms of stake. And in proof of personhood, it ends up being who can control as many accounts as possible. And so the real challenge is how do we actually move out of this like one, you know, prado distribution to something that's more like a Gaussian distribution of power? And in order to do that, you know, my fundamental contention is that we need to move away from global protocols.

So what we actually need to do is re-contextualize humans into the different communities and affiliations that differentiate us, even if each one of those communities succumbs to kind of a Pareto distribution, the interaction between all of them and how they recombine through diversification and plurality will end up, hopefully bring us to something more like a normal or Gaussian distribution of power, which is, I think, the best that we can do in terms of decentralization. Welcome to Epicenter, the show which talks about the technologies, projects, and people driving decentralization in the blockchain revolution. I'm Friedricha Anz, and today I'm speaking with Pugher, who is a researcher and lawyer and innovator, so very interdisciplinary for sure, and things about using blockchains and AI to empower communities and advance decentralized cooperation.

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Deploy on the EVM-compatible NOSIS chain or secure the network with just one GNO and affordable hardware. Start your decentralization journey today at NOSIS.I.O. Hey, Pujer. Thank you so much for coming on. Thank you for having me. This podcast has been a long time coming. We've been trying to schedule this for at least two years. and kind of like the subject matter has changed multiple times because you keep publishing new things.

So before we dive into the paper that you put out a few weeks ago, tell us about kind of yourself and how you came to find yourself in this kind of like decentralized governance space, kind of among us crypto people. Sure. Well, I consider myself amongst the crypto people, too. But my history, I look a lot younger than I actually am. So I have quite a long professional history, starting in public policy. And out of college, I was thinking about questions of economics and politics. And I tended towards more the libertarian side of things. And then I went to law school. And at that time, we had the financial crisis. And then I started digging more into how financial systems work, how monetary policy works.

And then after that, I worked in corporate law and corporate governance in Wall Street, got bored, started a medical device company, and then was hit with the pandemic and got pulled back into public policy and questions around. you know, managing the pandemic. And I was, that was my first interaction with Daniel Allen's group, whom I'm now part of. And at the time, she was at the Harvard's Center for Ethics. And so I sort of put my public policy hat back on. And then when the pandemic was over, I shifted gears to thinking about consensus protocols and in particular this problem with about MEV. And as I was thinking about that, you know, it kind of, I have sort of this intersectional background across law, politics, and economics already. And so it started this now several year investigation into how do we represent identity in order to actually have functional governance in these distributed

protocols in Daos. And that has now been, you know, a two-year, I think, investigation. And several papers, which we've tried to talk about a few times. And yeah, that's where we are. You said that kind of like when you first came into this space, it was kind of in the context of MEV. How did that happen? Because it's quite a leap from what you did previously, right? Because MEV in a way, it's very, it's a very technical,

somewhat esoteric thing, especially kind of coming from a public policy background. Well, so I was watching crypto for a very long time. So before Ethereum launched, I was in Palo Alto as an entrepreneur building my company. And my recreational hobby was going to Hacker Dojo and listening to different protocols talk. And that's actually when I met Vitalik Bouturin for the first time before Ethereum even launched. And my take on blockchains then was like, well, this is. is a really interesting technology.

And there's a lot of applications for actually, you know, coordination around shared goods and public goods. I saw the applications to finance as well, but I was less interested in that. And then I, but I followed, you know, pretty closely what was happening over the years. I mean, in the ICO boom in 2017. And then when the MED crisis happened, I was following that very carefully, too. And so I just sort of was in small groups talking about it, and I had my own take. And because I worked on Wall Street and had a securities background and corporate governance background,

I had some thoughts about order flow. And so that just, I think, made me unique and the ability to kind of frame these problems or at least conceptualize them. I don't claim to have the answers to these problems, but at least in terms of appreciating what the challenge was. I had enough of a background to engage that conversation. Cool. Maybe that's kind of gloss over kind of the papers that you've put out recently in this space. So kind of, I mean, we'll dive into the last one kind of more deeply,

but can you take us through the work you've done? Sure. So the first paper was a decentralized society paper, finding Web 3 Soul, and that was written with Glenn Weil and Battalic Buderan. And that was just a very primitive and initial step towards introducing non-transferable primitives, in particular memberships to social groups, which could be possibly revocable. And they're, you know, thinking about identity, this seemed like a very basic primitive to have, and everything in crypto is transferable. It's like, okay, well, what happens?

happens when you introduce something that's non-transferable and what can you do there. But that was just sort of a first step of let's see what happens if we assume that there are these things, you know, called memberships to groups, which we can represent. But that had its limitations. You know, in particular, your membership to a group is not binary, right? There are degrees of membership. It's not either in or out, usually. And then, of course, there's this other problem around standardization.

identity is not just about your membership to social groups, it's also about, you know, where you have economic stakes and economic interests. And when you try to separate these two things, right, money and voting, for example, these systems can conflict and it leads to all kinds of problems like capture and overreach, which my current paper talks about. After the decentralized society paper, I decided to take a look at a proof of person. protocol in depth. And the reason why is we had made a critique in D-Soc around proof of personhood that nobody really took seriously. And I kind of anticipated

with the rise of AI that a lot of AI companies would be relying, like in particular Open AI, would be relying on protocols like WorldCoin to establish, you know, rails for democratic governance. And I didn't think this was going to work. I thought this was going to and just oligopolistic control and competition. So I was very fortunate to meet Misha, the founder of Idina Protocol, and he was willing to open the hood on his protocol and analyze it and see what actually happened and basically validate some of the critiques that we had made in D-Soc

while also expanding it as well. So in that paper, you know, the big insight was that when you try to separate humans from bots with, you know, a global authentication mechanism, even if you succeed at doing that, which is what Idina did, it invites this secondary problem, which I call de facto civil resistance, where you have account consolidation or a set of participants who have a large incentive to informationally control. other accounts and extract rewards from them ending in oligopoly. So that brings us to the community currency paper, which I just released. And, you know, there's actually a missing paper in between about sublinear identity staking, which was like a second phase in the IDNA protocol. And as I was writing that, the community currency idea came to me, and I thought it was just more much more important to get that out. And I put the sublinear identity experiment on the back burner. And that takes us to where we are now. Cool. So the community currency paper that you put out

has two subtitles. They are the price of attention and cost of influence in a networked age or the price of entry and cost of exit in a networked age. That's quite a mouthful. Maybe before we dive into kind of like what kind of the larger problem is and kind of like how you think we can address it, what's the TLDR of the paper? So a lot of people in crypto particular are interested in decentralization as a goal. And what are we decentralizing?

We're decentralizing power. And so how do you think about power? I think about power on two dimensions, which are actually literally and figuratively two different sides of the same coin. I think about power in terms of information and control. And this is like kind of a cybernetic view of things. It's also a view that's kind of encapsulated

in like securities laws as well. And so when you think, about decentralizing power, you have to think about decentralizing information and control. And, you know, what is information? It's the stuff that we sort of take in and process and what we focus our attention on, right? And what is control? It's the stuff that we're trying to influence, right? So that is the sort of TLDR high-level view. I'm trying to come up with a framework for decentralizing, not just information and control, but by extension, are very scarce human resource of attention, right, and influence.

Okay. And that kind of leads you to kind of posit this concept of community currencies to kind of combat this balance that is to be attained, right? Yeah. So one way to think about it is, you know, proof of stake protocols, since this is a crypto audience, it tends to end in like a Pareto distribution, right? An oligopoly. And, you know, proof of personhood protocols,

like my paper on IDNA, compressed to zero show, it also ends in an oligopoly. In proof of stake, you're, you know, it's an oligopoly in terms of stake. And in proof of personhood, it ends up being who can control

as many accounts as possible, right? And by extension, the stake, which those accounts hold. And so the real, challenges how do we actually move out of this like one you know prado distribution to something that's more like a Gaussian distribution of power and in order to do that you know my fundamental content contention is that we need to move away from global protocols if everybody is completing on a global stage only a handful of

actors will and they'll build coalitions or win and build coalitions around that and so what we actually need to do is re contextualize human humans into the different communities and affiliations that differentiate us and the conversations, right, and communication that differentiate us and represent those as groups. So like even if each one of those communities succumbs to kind of a Pareto distribution, right, the interaction between all of them and how they recombine through diversification and plurality will end up hopefully bring us to something more like a normal or Gaussian distribution of power, which is, I think, the best that we can do in terms of,

of decentralization. Can you define what a Pareto distribution is and why you think it's less desirable than a Gaussian distribution? Another way to think about it is like oligopolistic competition. So just where a handful of actors end up having power, right? And so it's like a skewed distribution, right? And whereas a normal distribution is where, you know,

just statistically you have the nice natural bell curve, right? And you have some, you know, tail ends, but it's not, it's not just all, right, in an oligopoly with a handful of actors that control it, right? And that's kind of like, if you look at like Ethereum, for example, or Bitcoin, like we have these staking pools that are gigantic or mining pools. And, right, that's not, and there's sort of a struggle to like, how do we encourage local, mining or like local staking and home staking. And there's this like perennial tension about, okay, how do we actually get more actors in

the system rather than these, you know, gigantic, you know, oligopolistic coalitions. Okay. I see what you're getting at. If you kind of look at a collection of kind of networks of networks. so kind of like almost kind of like you know, federation of networks or something

where kind of like there is a power distribution in each network and they're kind of like coupled much more strongly within the network than kind of to the other networks. That's kind of the distribution that I think you're pushing for. Does that also come with downsides? Because kind of if you kind of have one big

globalized network. Isn't it possible that you can do much more advanced and ambitious projects than kind of you can undertake if you have a thousand smaller networks? Well, I'm actually imagining both. I'm just trying to actually imagine, like you do need global-skilled network cooperation. Right? We do need to solve global problems. we just want to avoid a situation where in solving the global problems, we empower a set of

actors that start influencing and controlling the resolution of local problems, which they have very little information over, right? And that can snowball into surveillance. So the challenge is to actually have both local coordination and global coordination, but in a way where global coordination doesn't just swallow up, you know, local communities that actually have a greater stake in the resolution of the problem. And so a lot of, you know, in the paper I talk about two key principles. Plurality is one, but subsidiarity is the other. And without subsidiarity, we, we end up in a sort of power competition at a global scale. And, you know, I think that's bad for risk management. that's bad for information integration

and also bad for human agency. Okay. Can you give us an example of where you think, kind of like this global power distribution has kind of eeked out the local optimum kind of that the stakeholders, kind of the local stakeholders would have achieved, but couldn't because there was kind of like this overall. I mean, I think we're seeing that in real time, right, today in politics, right?

So attention is, we all are participants in social media. And in the conclusion of my paper, I talk about how this is actually a tacit global attention auction. And it's also kind of merging with financial auctions, right? That's kind of the proliferation of meme coins and so on. And that's leading to outcomes that are not just sort of disconnected from local circumstances, but polarized in a way that is just disconnected across the issues. So for example, in democracy, I'm an American.

You know, the design of American democracy was there was this presumption that, you know, representatives could come to Congress and reconcile their differences and that they would be representing a population that had distinct interests that were localized to their geography. And what sort of our participation in global social media and global attention channels has done is actually divorced us from our local. local circumstances and our local geography and polarized us on issues that are really kind of disconnected from what we care about in our daily lives, right? And people are just sort of outraged about things that are really far away from them. And so we're seeing already kind of the breakdown of, you know, democratic governance in places like my country in the United States because people are polarized, not even on, you know, the basis of things that matter to them locally, but sort of what they've been, what they're seeing on social media

and what sort of outrages them and what gets the most engagement, right, in attention hacking. So that's like a very clear way in which we have, you know, we're failing to provision, you know, shared goods and public goods. You know, the other way, which is the, the, what the, paper talks about is in corporate governance and failures in corporate governance and corporate capture and corporate overreach. Our participation in like non, you know, decontextualized communication and social media there is also having an effect on our ability to, you know, steward corporations and like shareholder governance. So there's this guy Ezra Klein and kind of like He makes the point that this polarization that we're seeing kind of comes through the decline of local news outlets and newspapers.

And the fact that kind of you have kind of like if you have one kind of global attention auction, kind of the things that are most salient end up being things that are kind of like most reported and kind of like the local nuance and the kind of like in a way unpartisan or bipartisan nature that kind of like newspapers used to have when we were kids that this is kind of this goes out of the window

because kind of it's just in a way more fun for people to kind of read outrageous news rather than kind of like balance and well reported and kind of like not all that fun things to read kind of like about local politics and so on. Do you think kind of like this is a symptom that kind of you guys are describing symptoms of the same situation in some way? Yeah, yeah. I mean, absolutely. I think we're we are all seeing the same problem. and we're trying to come up with different solutions. My solution in the paper is to introduce community currencies

that actually reflect the groups and memberships in which you participate to. And one of the things that I allude to is that we can, this can unlock things like quadratic funding for news or plural funding, which is even richer for news, and enable the provisioning of information and news at many social levels, rather than just sort of at this exclusively global level, which ends up becoming, you know, power contests and even like meme contests, right?

Yeah, I mean, then maybe let's dive right into the model, right? Kind of like, because you are putting forward a very tangible way to kind of address this. And it's kind of, it's got this kind of, it's got basically it's a dual token. system and kind of there are tokens that are transferable and there are tokens that are non-transferable and kind of like you try to achieve this balance by kind of having them into play. Why don't you walk us through kind of like how the model works? Sure. So any community has a set of members, right? And each member at their discretion can irrevocably lock some amount as non-transferable community stake. And the square root of that determines your voting power, and that can be further

attenuated. And the remaining portion remains transferable, and that's a kind of currency that you have that you can use to buy attention or enter into other communication channels. And so whereas today, we kind of have a very simple one token, one vote system where money just buys both, you know, influence and attention or, you know, voting power, right, and your ability to communicate, this actually just forces a tradeoff between the two, where you have to decide, you know, at every inflation interval or, you know, community-based income that you receive, whether you're going to stake more for greater influence in that community, or whether you're going to keep more transferable tokens for yourself as a medium of exchange,

and use that to communicate with other communities and gain information. So it introduces actually a trade-off space between information control, which is, as I was saying at the start of this podcast, are like the two sides of power, right? And basically, if you kind of sum up both of these parts for every person, are they constant? Does every person kind of get the same amount of income to kind of distribute across these two vertical? Because? Well, each community will be different, right? And so each community will decide how much inflation it has. You know, a community is formed around a shared set of commitments. There's all kinds of communities, right? There's churches, there's civil society, there's research groups, there's artist collectives, right? And they're going to have their spectrum of sort of like non-financialize

to financialize ways to distribute tokens even. And so each community will be different in its policies, but it will at least be transparent, right? So you can at least see, for example, if I'm a member of a church and it's kind of a scammy financialized church, that'll be a little bit more obvious to me than, say, a church that is less financialized, and then I can make a decision there.

So, you know, the model accommodates like a spectrum. And I think the nice thing about it is it's like the decision of community members themselves and how they, you know, whether they decide to stake or whether they try to have currency to communicate with other groups, that like it enables an expression of like degrees of membership within the group. And it also enables like, you know, rapid recombination and evolution of a community with new. members along, you know, partial differential. So it's not the sort of like in or out thing. Okay. So I take it. I can be a member of arbitrarily many groups. Yeah. If you're accepted, right? I mean, again, each community has like their own sort of criteria. Some may be completely open,

right? And some might say, well, you're sort of socially farther from us. And so we're, and there, and you have less overlapping affiliation. So maybe we tax you or maybe we decide to put a, you know, enforce a bond so we can sort of protect ourselves. Like every community has a different level of risk tolerance. Okay. And basically this community currency that I get from that community, I can use both kind of like for staking in the community, kind of to grow my influence within the community.

But I can also use it to kind of use. said buy information in kind of in the larger society. How do I picture this kind of like buying information or influence that kind of you talked about? So when I say you're buying information, I'm saying you're transferable set of tokens you use to gain access to other channels. So other communities will have every community has a communication channel. And that's even being in person is a communication channel. being in a telegram group is a communication channel, right? And so when you want to enter that community and join that conversation, right, on a public square like X or Blue Sky, you just,

anybody can join, right, it's a free for all. There's no boundaries around communication. And so these transferable tokens enable you to, you know, buy access to, you know, that channel. And you can even think about it in terms of, like, say there's like a community resource, a pond. You want to use that pond, but you're not part of the community. But you just want to access it. That's like a good analogy. You would have to pay to go use and like swim in the pond, right? And the community will like collect that, you know, your tokens.

And that goes into like their treasury. And if you wanted to like, say, influence the pond and how it's governed, then you would have to, apart from just going in, you'd have to then pay more or stake irrevocably and lose those tokens, but then you participate in the stewardship of that community, and then you receive as community-based income, you know, a CBI as a member, and how communities decide to apportion that is another question. One thing that I suggest is making it proportional into the square root of your stake. but communities again will differ on this

depending on how financialized or non-financialized they are and how is the pricing done so kind of like for instance say I want to participate in Twitter kind of like who decides on kind of like what the entrance fears and can it be paid in any community token I assume every community has their own token it's not they're not fungible right

yeah so every community community has their own currency. Yeah. And they will trade those currencies, you know, members of the community will trade their currency for access to other right communities and their channels and their resources. And the laws of sort of supply and demand work here. So I'm not setting interest rates. I'm not saying, specifying even how communities will, again, even apportionate their CBI. How they do that depends on their internal governance. And the model that

I propose is basically square root voting, where your, you know, influence in the community is proportional to the square root of your irrevocable stake or your community stake. And, you know, there's mechanisms that can come on top of that, like delegation,

right? People can vote proportional to square of their stake to hire a delegate or an agent, right, to help manage their resources. But I think the key point here is that, you know, your influence in the community governance is a function of your irrevocable stake. And you should, you know, I strongly encourage a square root on that. And then even going further with like bridging bonuses and correlation discounts, that's a little bit more complex. But, you know, that's, that's the fundamental

to model. Okay. Maybe let's make this more concrete, right? So kind of like, let's say kind of this, this model is kind of set up somewhere and I join the community anew. How do I gain community currency to stake or spend, I mean, provided the community will have me, right? So kind of like, say I go to my local tennis club and say, I would love to be a part of this community. what happens then? You're kind of alluding to like this cold start problem, like how do we get this thing off of the ground, right? Yeah. So, you know, I think actually a really good place to think about this is like music, because music is a shared good. And by the way, another point of this paper was to acknowledge that most goods are not private or public, but in between and shared amongst groups, right, where people have different degrees of benefit.

And like music is kind of a classic example of that where it's not just say an artist that's coming up with music but it's also the artist's interaction with their say their followers and their audience and you know an artist could say okay everybody who comes to the show is going to have this community currency, these tokens, I'm issuing it, everyone can decide, everyone can stake or not stake and other sets of artists can do the same thing, right,

and then form a kind of alternative economy in music. And if you stake for influence, for example, with an artist that might influence the artists like where they tour next or, you know, how they distribute their music or something, and it becomes a sort of shared asset that everybody has participation in. You know, an artist collective could do the same thing. A research group trying to form shared intellectual property can say, okay, we're a set of people. We all have, you know, research interests. And as this research

community, everybody is going to get some set number of tokens, or they could even differentiate amongst themselves somehow. And then just allow for staking for influence or using it as like a communication currency to engage other research groups. But of course, it requires other research groups in place that are willing to like accept that, right, as a token and see that as something of value. So, yeah, I mean, I didn't really go into the paper about the cold start, you know, chicken egg problem. But I think there are enough sort of verticals where this could take off where people just see

both fiat currencies and both, say, you know, digital currencies like Bitcoin and Ethereum, not really, you know, expressing being as socially expressive or expressing their value or being extractive for that matter. How does this kind of tie in with meritocracy? Because currently kind of like, I understand that there's often kind of oligopolistic kind of power structures at play. But people who wield disproportionate influence often also wielded because they're just very put together and kind of they have good ideas and they make.

they make valuable contributions. So is that somehow reflected in this community currency proposal, kind of like as someone who's kind of a thought leader in my community, will I have more influence? At one point in the paper, I make this suggestion of community currencies also serving as prediction currencies, right? And so, say, as somebody who, in the classic case is like, say, a politician, right? And you kind of want to be able to let a politician also share in your upside and downside as a community and even like stake and make a bet, right, and prove that they're

actually better at predicting outcomes, right? And that's like a meritocratic mechanism. The problem is, for example, specifically in the case of prediction, which is where a lot of people who are focused on meritocracy, you know, that's where they tend to emphasize. The problem is, depending on your position in a social network, right, if you have a lot of money, a lot of status, a lot of followers, you can actually influence the outcomes you're predicting. And so you're not so much predicting something in a meritocratic, clean way. you're actually influencing the outcomes. And so a lot of social contagion phenomena are exactly this, right? When shortages or like bank runs that can be started just by people who have a lot of influence, say over the deposits in a bank, and they send an email out to those people.

I mean, we saw us in the Silicon Valley bank run, right? Any bank can go under if everybody runs for their deposits at the same time. And especially if a VC sends you an email and says, hey, you know, this bank is going to go under, that suddenly every goes, you know, runs and then it goes under, right? And so was that prediction or was that influence? And so part of the goal of community currencies is to enable us to, you know, separate prediction and meritocratic contributions from just massive amounts of influence someone is to accumulated because they have a lot of, you know, followers on X or, you know, a lot of, a lot of money. Does that answer your question?

Yes and no. So to me it sounds a bit like you're throwing out the baby with the bathwater, right? So kind of like you're saying, okay, if you kind of have a very steep kind of distribution of power in a society, you automatically kind of get worse outcomes. than if it is more equitable. So where I think kind of like it's possible that this happens, but I think kind of if you look at kind of the amount of power that kind of like some people have today, it also enables us to do really cool things, right?

It enables us to kind of do things like travel into space or kind of do things that kind of like any local community has no change. chance of kind of achieving. And in some way, kind of you need to, you can't make everyone's crazy ideas come true, right? Kind of like there needs to be some sort of mechanism to kind of

select. So, you know, I actually think, so I think a lot about innovation because I was an inventor, an entrepreneur too. And the problem with, it's not that I'm trying to, my goal is not egalitarianism or equality.

right? That's one person, one vote. And that has its own set of problems, which the IDNA paper went into. But in order to, if you think about where innovation comes from, right? It comes usually at the intersection across unique information streams. It doesn't come, it doesn't arise within the center of a field, and it doesn't arise within homogeneous populations. The problem is if you embrace this sort of oligopolistic, by the way, there's two problems with the oligopolistic competition. One is that it actually stays oligopolistic and it doesn't turn into win or take all, right? The risks of becoming winner take all and monopoly are just really severe and I think that's understated.

But even if you assume you have just oligopolistic competition, like you don't, you know, the structure of communication underneath, you know, each of those oligopolis, might actually stunt innovation and stunt creativity because, you know, there's lots of pressure to conform. And, you know, in the paper I talk a lot about surveillance and how that, you know, when you introduce a kind of third party that has a lot of power, people start paying attention more to that third party with a lot of power, rather than paying attention to their environments, or not just local environments, but medium-level environments and even higher, you know, other higher-level environments.

And that's bad for innovation because we sort of all become informationally the same as we adapt to this thing that has a lot more power than we do. And us, you know, becoming informationally the same is, you know, it's more trending towards, you know, humans acting like bots and humans acting like agents and, you know, agency and being informationally unique, I think, is a key ingredient to innovation. So it's seductive to think, okay, well, let's just sort of centralize

power and information and something that has, that's taking us to the moon. And we haven't been able to, you know, get to the moon in a long time. But, you know, there's a There's also a third way which harnesses the collective intelligence of people that can get us farther to the moon. It can get us to Mars, right? Like, I also like space exploration, right? I want to explore the solar system. I just don't want to get stuck at Mars. And I think there's a real risk of that happening when you don't have enough participation and enough, you know, information differentiation amongst a set of participants.

So I'll stop there and let you challenge me more. Yeah, so I'm 100% for participation. I'm just kind of against giving everyone kind of the same vote in kind of in these societal endeavors, regardless of what their actual contributions and skill sets are. But there's not the same vote. That's not the model, right? Okay, then maybe I haven't understood it properly. So tell me how kind of the influence kind of varies from person to person

and how kind of I as a participant would kind of choose between kind of staking my currency and kind of investing it or spending it elsewhere. So I have a bunch of groups that I can choose to participate in, right? And me, and this is kind of where the voice and exit part comes in, right? Me, you know, just losing interest in a community and moving to another one, it doesn't separate me from that old community. I still receive CBI just sort of declines over time with inflation. But I join a community where I'm like, okay, this is adding more value to my life. This is generating goods that I care about more, shared goods, whether it be, you know, nicer rose gardens or whether it be like moon missions, whatever.

right? And people will like self-sort into those communities that are delivering relevance to them. But this happens also at many scales, right? You know, there's local communities, there's umbrellas, there's coalitions, there's NATO, right? Then there's like planet Earth, right? And so in all of these communities, it really depends on how much you've staked, right? And everyone is going to state differently. and your stake gets step one square rooted, but also attenuated based off of how informationally similar you are to everybody else. And this is where the bridging bonus and correlation discounts come in. Right. So if, you know, I have, say, 16 tokens state my, with a square root that's like four, that's quadratic staking. I get, you know, four votes.

But if I'm in this community and surrounded with other people, that are very similar to me informationally as measured by their stakes and they share the same set of biases, then my influence actually becomes, you know, declines. It gets a discount because I'm not actually contributing any new or novel information to the group. And those people that are, you know, more novel informationally unique, they get a little more influence and that's how we spur, you know, information exchange of useful and non-obvious information. So it's, it's a little bit of, It's actually what it's doing is treating, elevating people who are very informationally unique in the system and have, and then when you combine that with, you know, prediction currencies, also with an ability to, like, predict outcomes. So it's actually, it's actually like hyper meritocratic.

And the reason why I start the paper about corporate governance and democratic governance is precisely this point, which is that they both, these systems, which are the two competing systems and narratives we have today, right? The sort of Mars mission people are like, well, let's turn the world into corporate governance. Well, no, corporate governance has these major shortcomings, right, in terms of capture and overreach. And the same thing is true, a democratic governance. So, like, can we actually capture the strengths of either of these systems and compensate for their weaknesses with something that is much richer and much more, you know, like less

sclerotic because both of those systems can become very sclerotic, right? I can see how both of those systems kind of, you know, can fail and do fail. Let's kind of move it back to the Eli 5 level that kind of clearly I'm on here. So let's say kind of let's come back to kind of like your Rose Garden example, right? So kind of like say we are both kind of members of the Rose Garden Society. And you are, you are, you are a horticultural, culturalists and kind of like you you are a world-renowned rose expert and I'm kind of the pretty flower kind of person okay and and then you go oh but that's not actually rose that's a pee in you and I go yeah but still pretty so so kind of clearly in my view kind of if the goal of

the society is kind of to further kind of you know rose garden culture in some way shouldn't you get more say than me? Yeah, but I can, right? So I can. So if communities that reward expertise, right, and deliver more roses, if everybody wants roses, well, will become like larger, like have more participants.

They'll have, right, they're achieving their objectives. So if the objective of the community, it depends with the objective of the community. So the objective of the community is, we want more rose gardens and somebody comes in and they're completely confused about what's a rose in a peony, right? They're probably not going to win, say, quadratic funding to maximize a set of roses for that community. And I think a key part here maybe that's missing is how do communities fund their goods. Yes, I think that's kind of, that's exactly what we're missing here, yeah.

And so the ideas is through quadratic funding, right? So community, and this is actually one of the, there's a lot of open questions about how this works, but, you know, either through inflation or through the communities of applicable stake, those can serve as like actual matching fund pools, where, you know, participants in the community when they're deciding, well, what do we want to do next, right? And they, everyone put, you know, there's some sort of set of proposals and community members each put, you know, their funds on what they think are the important things to fund, right, in that community. And then there's, like, matching funds proportional to the square root of your individual contributions. And that's what gets funded. And then there's, like, the plural funding, which is a step further than that. But even under that model, right, the quadratic funding model, what ends up getting funded are things that are, you know, There's broad-based consensus in the community that that's what the community wants.

And when I say broad-based consensus, I mean, it's not simple majoritarianism, right? That's what the square root does. It correct against that. And then if you really want to correct, you know, say you're living in a society of bots, right? And there's a lot of bots in your group, human bots, humans acting like bots, then you can do a correlation discount based off of how information unique there. and then you arrive at a set of like goods that the community thinks is valuable. And it's actually more likely to be a stable configuration or like a stable set of goods

because very different people within that group think it's valuable. And that's like what's key. And if you don't like that outcome of that stable configuration of like, okay, this is the broad set of goods that most very different people in this community agree on our good, then you can exit, so to speak, and spend. your currency, your transferable tokens elsewhere, but still continue to receive the CBI, which diminishes over time. Does this approach kind of assume that all of these different measures that kind of you could do, that you could take to kind of improve the state mix and match so that you can

kind of like take any linear combination and kind of they work? Because often kind of like, maybe the The rose garden example is not the best here, but say kind of like certain measures for kind of increasing rose output by kind of sprinkling with some fancy kind of fertilizer and kind of genetic tweaking and kind of like putting kind of sunlights over the rose gardens and so on. Maybe they are not cohesive, right? So kind of maybe they don't form a cohesive strategy. So kind of like how do you account for the fact that sometimes different solutions cannot be kind of paired in any combination?

So it's the plural community asset resource exchange. So it's like I actually really like this analogy around roses because there's like sunlight, there's water, there's fertilizer, there's a lot of resources that the communities decide how to manage. one of the features of this model that I'm proposing, which might not be coming through, is how dynamic it is. So I expect groups to change their goals a lot and to adapt a lot. It's very, very adaptive based off of the feedback, right,

of the set of members who have staked and what they want. right so like i imagine in setting the agenda for community like there's probably periodic intervals okay we are going to quadratically fund some things some projects that enhance value for our community everyone is going to come up with their set of proposals some are going to be like look we need more roses and we can like get so many more roses if we have better fertilizer or we put in like these, you know, winter protection guards on the roses. And then someone's going to be like, you know what? I think we would, I think peonies and roses are complementary, and they invite a specific kind of bee that cross-pollinates them both, and we can get more of both if we do peonies,

you know, and they make their case. And then somebody else is like, well, you know, I think we should pay over the roses and make a parking lot, right? And so, like, these different proposals will get you know, different funding, quadratically, you know, based off of the set of members. And, you know, some communities might have charters, which they will never become a parking lot. And some communities might be open

and allow, like, that adaptation to happen very quickly. But it really depends on, you know, what the members of the community, you know, stake and vote on, right? So it's unspecified. It's just a way sort of, it's a way for communities to, you know, coordinate and express themselves, but how they coordinate and what they, you know, what they coordinate around and the restrictions on that really depends on the community.

And as a person, for example, I'm going to probably, you know, be more interested in the community that has certain restrictions on like not paving over, ever paving over the Rose Garden with a parking lot, right? I have so many questions. Yeah, go for it. Now we're rolling. Now we're rolling. How do you get people to kind of care about these issues enough, right?

So kind of this is something that kind of we see as a problem field in Dow governance all the time. So kind of like voting turnout is historically, is really, has been really low. And then kind of now you make people kind of vote on things like Rose Gardens. How do you make sure people take this seriously and don't kind of rent their vote or delegate their vote or kind of bribe others or don't do kind of like don't vote at all? There's like three questions asked in that. So I'll try to take each one one by one. I don't think delegation is bad. You know, and actually part of a lot of the people.

paper is spent talking about principal agent problems and using community currencies to align, right? You better align your agents with principles. In terms of voter turnout, you know, you can use the set of participants who do show up to vote with a correlation discount or bridging bonus. You can elevate consensus across even that set of people who show up. That surfaces, more likely surface shared goods and common goods. So I, I don't think the voter turnout problem is a real problem, and neither is delegation. In terms of bribing, now that is why I have a whole section, and actually the section immediately following introduction of the mechanism, it just goes straight into enforcement, because everybody

who's dealt with, you know, a Dow or crypto protocol knows that this is the hardest problem. And so, you know, we can shift gears and talk about that. You know, so the bribery problem here specifically arises, you know, the square root. When you have your influence square rooted based off of your stake, it creates a very, very strong incentive for people to just, you know, rent their votes or sell their votes rather than or buy somebody else's votes, rather than just stake. it's rather than just staking more at a higher cost, right? Yep. And so this requires attention and scrutiny to focus, you know, on bribes importantly. This is also an attention problem.

And in the paper I introduced or I reintroduce this idea that we introduced in D SOC around community recovery, which is the idea that every community will have a kind of comprehensive. computational jury that will, when presented with evidence, investigate something, right? Whether it's, you know, to differentiate, is this a bribe or is this coercion? You know, is this a victim or is this a perpetrator? And using these computational juries across multiple perspectives, and this is also where state comes in, because stake differentiates you, where you have staked as a participant differentiates you, you know, informationally.

and that tells you whether you're a good unique perspective in this particular case, particularly in reference to the allegation of bribery or coercion. And that computational jury is leveraged to adjudicate these cases. The key to making this work is not just harnessing multiple perspectives and informationally unique perspectives. It's also, you know, subsidiarity and making sure that, you know, higher stake issues get more attention. And the key here, which I think a lot of people will miss, is the higher stake issues always have to be more local issues. If the higher stake

issues are always, if global currency or global stake is more valuable, right, than local currency, then the sort of game, you know, game theoretically, it just sort of gobbles up all the local layers and we end up kind of back in this global oligopoly situation. Or when, or take-all situation, right? And so, you know, the presumption of, the assumption of, the assumption of subsidiarity is key to all of this, which takes me to, I just want to address your next question, like, why, like, why would this ever matter? How would this ever take off? I think we are in a crisis of legitimacy, right? We are in a crisis where people feel not in control that, you know, politically, they feel like sort of there's too much power at the top that's illegitimate,

that doesn't reflect their interests, that's, you know, and in fact reflecting, you know, a set of captured elites interests. And, you know, I don't, to turn this crisis of legitimacy around requires starting where legitimacy starts, you know, where legitimacy takes root. And legitimacy takes root in local communities and pro-social interactions between people, family churches. And so, you know, this isn't a sexy mechanism for crypto, right, where everybody's just competing to be like the biggest, largest global whatever. But if you're a parent, if you have kids and you want your kids to kind of grow up, you know, in an information environment that was more like 20 years ago, with some sort of sense, you know, sense making and not believe sort of

in conspiracy theories and have their attention curated to what matters most and is relevant that is tied to actual predictive outcomes and measurable benefits in their life, then you're going to have to start thinking about, well, how do you re-contextualize attention? And how do we not just like auction it off to the highest bidder? And so I think, you know, people who care about future generations, care about kids, care about, you know, legitimacy will have a very strong incentive to start experimenting with this. Do you have any plans of kind of like putting it into action kind of imminently? And where?

I think there are a lot of interesting experiments. You know, there's a lot that was said in the paper, right? I mean, we haven't even talked about the AI and like... Yeah, it's a very long paper. It's like, yeah. We link to it. We link to it in the show notes. It's like 50 pages.

It's like 60 pages. It should, it should, it should, And by the way, I just want to comment on that. Like, I threw it out there because I want to get this kind of feedback on, like, where the gaps are and where I need to communicate, because I've just kind of gone too down in the rabbit hole, right? I think, as I said before, I think music is a really interesting starting point because, like, I don't know, I think music is declined and there's not enough good music. And, you know, artistic institutions as well.

research groups, you know, open source slash closed source research groups, I think is also a very interesting starting point. The nice thing about this mechanism is like I don't really have to do anything, right? I can just throw it out there and there's so many different communities. Even within crypto, right, there's like the Ethereum community. There's a lot of communities, there's a Bitcoin community, right? At some point, they got to start being relevant to local people, right, in their lives who like, haven't been lucky enough to like buy these tokens early, right? And so if they want to be relevant, they have to like help them produce goods that are valuable in the strictest economic sense,

right? So I think, you know, my goal is to just sort of talk with different groups or whoever's interested and let them do these experiments and see where it goes. I think about, you know, this kind of economic network from the perspective of, like, you know, plant networks and root networks and fungal networks. So it doesn't really matter where it starts. I think it'll sort of start everywhere and there'll be lots of different experiments. And if it doesn't start anywhere, then like, you know, I probably, I might start it with, you know, churches or something, which are, you know, non-financialized institutions and declining in participation. But I also think They're very important for social cohesion, and they bring a lot of value.

So, you know, I might start with, like, parent teacher or not or parent kid groups, you know. So, yeah, I think there's just so many places, you know, where it can go. And it'll just be like a lot more fun, right? And a lot less adversarial and antisocial. It's a pro-social mechanism. So if it's not making people like, you know, joyful and happy and creating goods

and like creating economic shared goods, then, yeah, then it's failed and then I have to think, go back to the drawing board. So where do we send people who kind of want to send, who want to find out more about this and maybe start their own community currency? Yeah, they can just reach out to me on X.

I'm not really good at responding. I think I have to. reach out to like the re-gen communities and talk about it with them. I probably also have to break the paper up into four different papers. Probably yeah. I have to do that first. Yeah. Cool. Super nice. Thank you so much for coming on, Pujia. Thank you. Thank you for having me.