Heeyeon Jeong, CTO/Co-founder/Cryptovalley Lab
◆Ambilaterality of Capitalism and Democracy
Capitalism is an economic system governed by capital for the purpose of pursuing profit, which is closer to human nature and more feasible for one’s self-actualization. The capitalistic economic system has proved its superiority over the socialistic or communistic one, in the aspect of economic performance of mankind. Meanwhile, democracy is a political and social system where people reflect and realize their will through voting in making decisions. Voting is the key symbol of democracy, and legitimate voting is very important to the functioning of democracy. Democracy has proved that it is superior to totalitarianism or dictatorship in terms of human rights and individual freedom, granting equity to every individual. Thus, capitalism and democracy are very good institutions that mankind has created until now.
Nevertheless, these two systems also have shades in parts. Capitalism has accelerated the extremity of wealth by maximizing the profits of shareholders who are the capital owners. Democracy grants one-person one-vote equally without qualitative consideration of individuals’ different capacity and level of responsibility; therefore, there is a risk of a decision to be leveled down or distorted.
It is true that efforts have been made to solve such problems under capitalism as labor force being simply put to maximize corporate profits and income distribution becoming more unfair. The examples include the differential voting right system for shareholders, the concept of sharing economy, and the application of sustainability index and ESG index, which have been supplemented continually. Democracy has also been evolving with supplementations by several institutions such as indirect democracy, deliberative democracy, etc.
The authors have expected that if the advantages of capitalism and democracy, which are very good institutions created by mankind, are well fused, they may be usefully used in decision-making and voting, especially in the blockchain field. The true meaning of blockchain economy is to pursue the ‘inclusive economy’. Thus, the authors have explored the possibility of consensus algorithm matching with the inclusive economy from the convergence of these two institutions.
◆Collective Power and Blockchain
Encountering a certain issue, people often want a person or an organization who has brilliant or extraordinary ability to define it and/or make a decision on it. It is true especially when the value of efficiency and agility is high. Military and private companies are examples of such cases. However, issues with ecological characteristics differ from this. In an ecosystem, acceptability, adaptability, robustness, and resilience are more important. Ecosystems have a property like river water that is not straight but meandering. Meandering flow may seem less efficient than straight flow, but it makes an ecosystem preserved better.
Ecosystems are characterized by diversity. They become even more powerful when diverse properties are gathered through collective intelligence. It would be the same logic as a rope made of twisted multiple strands is stronger. This is true collective power.
Blockchain fundamentally builds on the competence of a decentralized group as the basis of trust. Therefore, an ecosystem made up of blockchain is the field where collective intelligence should take a really important role.
However, it does not work that way in reality!
Even in the case of delegation, the consensus algorithm or voting by proof of stake/investment is strictly on the continuum of capitalism. If you track the amount of coin stake or investment, it is connected to the power of ‘capital’. After all, the power of capital enables decision-making and policy change, which is highly likely to prioritize the goals of capitalism. If left unmanaged, blockchain can become a more effective, broader worldwide ‘tool for extremity of wealth’. In fact, this point is also the anguish of the authors who are involved in 『Blockchain Economy』 as the co-authors of the book of the same title.
Collective Decision-making Methods - CPOS© and CPOI©
Assume N to be the number of nodes that are delegated and participate in actual decision-making(voting), in a certain period or epoch when a decision needs to be made. Assume s(i,j)) to be the amount of stake(investment) that a delegator j delegates to the node i. Finally, assume n(i) to be the number of delegators who delegated to the node i.
Where, the total stake(investment) delegated to node i is:
S(i) = ∑_(j=1)^(n(i))▒〖s(i,j) 〗
The total amount of stake(investment) participating during the cycle is:
V = ∑_(i=1)^N▒〖S(i) 〗
The total number of delegators/voters participating during the cycle is:
D = ∑_(i=1)^N▒〖n(i) 〗
Thus, the average amount of stake(investment) of all delegates(voters) is:
Where, the Collective Voting Power© of node i is defined as follows:
P(i) = S(i) + αMn(i), 0<α≤1
Where, α is an important system parameter. This α determines how many percent will be allocated equally to every delegator on average as the basic contribution value, in return for voting or delegating. αM is the contribution value that is applied only to calculating the collective voting rights, neither regarded as an individual delegator’s asset nor applied to the calculation of individual rewards. The α could also be changed by voting. In this formula, the number of delegators n(i) plays a very important role. It is because delegators will delegate to the nodes they support. Even if a node has the same S(i), that is, the same total voting power, it will actually have bigger ‘collective voting power’ when gathering from a larger number of delegators.
When this formula is applied to the case of DPOS(Delegated Proof of Stake), the result becomes CPOS©(Collective POS); and when applied to the case of DPOI (Delegated Proof of Investment) which has been introduced firstly by K STADIUM, the mainnet of KOK blockchain, the result becomes CPOI©(Collective POI).
Regarding αMn(i), the latter item in the above formula, the authors want to call it “Collective Voting Power Factor”. In order for this factor to function properly, there must be a transparent, verifiable, and immutable reputation system for nodes so that voters can easily view and participate. Such a reputation system should enable to see the activity log of each node, voting tendency, philosophy and vision for the concerned ecosystem, technical and management capacity, etc. Voters(delegators), instead of pursuing profitability only, should enhance their discernment with awareness of participation so that they can collectively participate in the important governance of the ecosystem to which they belong.
As in other cases where collective intelligence should function properly, it is desirable that voting(delegation) be done deliberately, in order for CPOS/CPOI to be even better decision-making methods. In other words, it is recommended that voters(delegators) be able to freely withdraw/transfer/change their voting/delegation through intense debates and verification in the voting/delegation process. The authors want to define this method as “Deliberative CPOS/CPOI”©.
In a sound ecological group, 10 million stakes, made up of one thousand each endorsed by 10 thousand persons, are worth more than the same amount of stake by one person. For such a larger number of people, greater influence and responsibility should be guaranteed.