Operation Saylor - Episode 16/120
Hi again and welcome to another episode of the Operation Saylor. This is update number 16, corresponding to October 2023.
If you are reading this for first time, you might want to check Episode 1, where my plan and details are explained. That will get you in context.
Stats
- BTC stack: 1.35916794 BTC
- € stack: 407.20 €
- Current total value in €: 37,475.22 €
- € into BTC: 30,000 €
- Paid back to bank: 5,493.00 €
- Outstanding debt + interests: 38,451.33 €
- Installments to go: 105
Charts
Log
Welcome again fellow reader. Another quiet month has passed by. This month I've decided to take the chance to explain to you this interesting idea that has been flying around my mind lately. Well, it's actually been doing so for months or years, but I've found myself intensely fascinated by it recently.
Imagine that we have two parties. Let's stick to tradition: Alice and Bob. Alice and Bob want to do business together. They sit down and write a contract that defines their relationship. They foresee different scenarios of how things could go and write clauses that address what each party should do in those cases. Once they are happy with the text, they sign it and shake their hands.
The thing is paper only takes you so far. The fact that someone has signed that they will do something does not magically imply they will. There is such a thing as not complying with commitments. So, how can they be sure that the other is going to keep his word and follow through with their agreement? Here is where trust plays a role. If they both trust each other, for whatever reason, they will sign the agreement and do business. If not, they won't.
Now, this is a terrible situation. If one could only do business with people they highly trust, their action radius would get severely tightened. How many people in your life can you fully trust when it comes to doing serious business?
How is this solved in the fiat world? With laws and courts. In the fiat world, you happily move around signing contracts with tons of people and companies about which you know pretty much nothing because there is a legal system where you can escalate disagreements and contract violations. And the simple threat of court justice typically makes most people comply with agreements, which creates this wonderful sense of security. I'll make a disclaimer here to acknowledge that legal systems are far from perfect, there are still many real world issues and flaws which make things more complex than what I'm describing here, and the vast majority of the world doesn't even live under such a safe legal system even. Let's just stick to utopia for the purpose of this rant.
Right. Now we move on to the wet dream of many bitcoiners. We make the state disappear. Bloop, gone.
We are back in the jungle where trust is your only weapon to support contracts with others. Your action radius has shrunk dramatically. How do we colonize Mars when you can't even rent your car to some guy without fearing he will simply drive away with it and never come back?
This is where the idea that keeps me fascinated kicks in and saves the day. Let's visit again our friends Alice and Bob. Alice wants to rent Bob's car, but Bob has no reason to trust Alice. He is afraid that Alice will run away with it. How can we overcome this friction and enable business and the value it generates? By leveraging game theory and multisig wallets. Imagine that Bob proposes the following to Alice: they will both start a 2-of-2 multisig, where each of them will hold a key. Alice will put 0.5BTC in it, which feels like a reasonable amount given that the value of Bob's old Camry is somewhere around 10K USD. Bob adds 0.1BTC to the multisg as well. They both agree that Alice will rent Bob's car, and when she returns with the car in mint condition, they will dissolve the multisig by paying back to themselves the amounts they put in. If Alice damages the car somehow, they will negotiate some part of Alice's BTC to be handed out to Bob as compensation.
Isn't it magic? The very moment Alice and Bob add the funds to the multisig, the game theory around their relationship has changed dramatically, for the better. They now have a significant incentive to collaborate, communicate, negotiate and compromise. Fucking each other over is now way less attractive, because it could mean parting ways with the funds they have shared ownership over. They can now do business under the amounts that are locked in the multisig with much higher confidence without having to trust each other. I started with the car rental example, but if Bob now wants to buy Alice's used PS5, he can be quite confident she's not going to scam him with a broken PS5. Because who would risk the 0.5 BTC that Alice put in their multisig just to earn a few bucks through a silly scam.
Just to name it something, let's name this practice a bonding multisig. Alice and Bob have bonded themselves with the multisig.
The idea fascinates me and, with some creativity, can be extended in many directions. A few examples:
- Instead of doing a 2-of-2, Alice and Bob could do a 2-of-3 and pick a third party as the arbiter for any conflicts that would arise between them.
- If instead of two parties you have three, four or whatever number, you can scale up by doing a 3-of-3, 4-of-4, etc.
- A funny phenomenon is that trust also propagates in a similar fashion to the Lightning Network channels. Imagine Alice and Bob have bonded. Charlie is friends with Bob, but not with Alice. Alice and Charlie want to do business together, but they don't trust each other and have not bonded. The good news is that, Bob can now step in between and act as the trust link between both parties. Alice will do business with Charlie if Bob says Charlie is trustworthy because Bob has something to lose, so he's not going to risk it lightly. And Charlie can trust Alice because Bob has a way to punish her if things go south. So, in a world that would have a web of bonds, you could trust people "far" from you depending on your connections.
- Building on top of the previous point, another parallelism with the lightning network would be the idea of hubs. There could be people or organizations who would bond with a lot of other parties. These hub entities would act as trust brokers, enabling all the people connected to them to interact with each other safely. Just like now we have monster nodes like WoS or ACINQ that can connect you with most of the LN.
Many of these ideas are being used practically today in the Bisq network. But I think they don't need to be restricted to a DAO or to a purely digital ecosystem like Bisq is. I could picture this taking place in normal society pretty much everywhere. Do you want to live in pillar's citadel? You need to bond with the townhall so the city can trust you will be well-behaved. Joining your local masonic lodge? Bond to prove your commitment with the organization. Joining a criminal gang? Show your loyalty is with the gang and not with the state by bonding. Renting a house for your family? Bond with the landlord to keep your business together safe and sound.
It makes me wonder: will we reach some point in the future, where the simple idea of interacting with someone with whom you have not bonded would be seen as crazy?
I hope you found the idea interesting. If you have any thoughts, I would love to hear about them. Perhaps also, if you have any reading material with similar or related ideas, you could link to them to enrich the discussion (I'm sure I'm not the first person to think through all of this).
As always, thanks for reading and see you around next month.