Digital Citizenship: Blockchain Technology’s Third Order Effect

Key Points

  • “[digital citizenship is] the state of being vested with the rights and privileges of a citizen within a digitally organized society”
  • “As the concept of digital citizenship becomes more accessible and understood, people will prioritize digital societies more for their financial, democratic, and transparent attributes”
  • “state and non-state actors could gain or lose geo-political standing based upon actions taken on the digital plane”

Many who interact with cryptocurrency rarely look beyond its initial benefit of turning piles of money into larger piles of money. I don’t blame them, since the benchmark for performance has been set at a modest 264.92% by Grayscale’s Bitcoin Trust. Yet, for those lucky few who spend their mornings rifling through the neanderthalic wisdom provided by crypto Twitter we are left to ponder what happens after the Lambos and Gucci belts.

I define digital citizenship as the state of being vested with the rights and privileges of a citizen within a digitally organized society. In practice, digital citizens enter into a social contract with a state or non-state entity by consenting to surrender some of their freedoms in exchange for protection of their remaining rights or maintenance of the social order. There are varying degrees to this social contract just like any other between the citizens of the United States or communist China. This variation can be observed across four forms of digital society: on-chain governance, decentralized autonomous organizations (DAOs), metascapes, and state-crypto partnerships.

On-chain governance is “a system for managing and implementing changes to cryptocurrency blockchains. In this type of governance, rules for instituting changes are encoded into the blockchain protocol. Developers propose changes through code updates and each node votes on whether to accept or reject the proposed change.” A recent example of this was Bitcoin’s taproot upgrade. To approve this upgrade, Bitcoin miners voted by adding a “signal bit” to the blocks they mined on the chain over a set period of time. Additionally, the threshold for approval was set to 90% of mined blocks during that period of time. This type of governance generally can be considered a low degree of social contract since the miners aren’t giving up much freedom to maintain their society or in this case Bitcoin.

DAOs are organizations or companies operated by code instead of people. Token holders have the ability to vote with their token balance to pass referendums which are in turn implemented using preprogramed functions. Generally, DAOs emulate a form of direct democracy government with open access to the world and code that is open source. A complex example of a DAO is none other than my favorite blockchain platform Polkadot. A few weeks ago, I participated in a referendum on Polkadot by voting for its new logo and marketing style to be used for the foreseeable future. I signed my vote with a unique identifier and a ~$1 amount of my DOT tokens. This vote was a first of its kind amongst blockchains and cryptocurrencies. For perspective, this would be the equivalent of all shareholders of Chipotle or Ebay voting on a new company logo and marketing material, then having them instantly approved after the voting window closes. Overall, DAOs have a medium degree of social contract because stakeholders must spend or freeze capital for a period of time to maintain the status quo or affect changes to it. Especially, when one considers a recent vote that took place on Polkadot valued at $1.3B.

Metascapes are interactive digital instances or worlds that casually mirror modern society’s norms and construction. To clarify, I haven’t seen or heard the term metascape used before, but I want to distinguish unique projects and companies from the amorphous term they inhabit currently dubbed the metaverse. A popular metascape that recently raised $93M in a Series B funding round is The Sandbox. The Sandbox “is a community-driven platform where creators can monetize voxel ASSETS and gaming experiences on the blockchain”. In other words, people can create, share, or purchase just about anything they can think of in a virtual format. As well as, publish and play games, buy and sell virtual real estate, and develop unique virtual personas. Metascapes have a high degree of social contract since participants are not only expending capital in these digital societies, but also forming irrefutable identities to interact on them under a set of terms and conditions.

State-crypto partnerships are joint ventures between governments and cryptocurrencies or blockchains. The scale of these partnerships is quite variable from municipalities like Miami or New York to nations like El Salvador or China. An exciting example of these partnerships is CityCoins and its current projects MiamiCoin, AustinCoin, and NYCCoin. The purpose behind CityCoins is to “give communities the power to improve their cities, while providing crypto rewards to individual contributors and city governments alike.” Think of them as a new revenue stream for the city that rewards community members for participating and holds city officials accountable for their actions. For instance, if city officials govern unfavorably in the eyes of their constituents, then those constituents can allocate their capital elsewhere which decreases or entirely eliminates the city’s crypto revenue stream. Alternatively, city officials can legislate discounts on public services to community members who hold their city’s coin to bolster the population of coin holders and subsequently the crypto revenue stream. Of note, coin holders DO NOT have to be residents of that city. So, it doesn’t come as any surprise that the city of Miami has raised ~$21M USD worth of crypto revenue, approximately 20% of its annual tax revenue, in roughly 3 months. Overall, state-crypto partnerships have a variable degree of social contract from low to high since the level of freedoms exchanged for the protection of rights also varies when comparing anonymous holders of MiamiCoin to registered users of China’s central bank digital currency (digital yuan).

Now for the fun part as I posit three potential impacts of these different forms of digital society. The first is state citizenship becomes secondary to digital citizenship. As the concept of digital citizenship becomes more accessible and understood, people will prioritize digital societies more for their financial, democratic, and transparent attributes. This will accelerate voter disenfranchisement which in turn will further centralize state power towards more autocratic forms of state governance. Unfortunately, this impact has the potential to escalate itself if state-run societies continue to remain unfavorable relative to digital ones.

The second is the rise of global constituencies. Populations are no longer defined by traditional borders. Digital societies will procure unique mixtures of cultural identities, but similar social norms. For example, a person from Utah and a person from Spain have different cultural identities, but they both participate in the governance of Polkadot because of shared social norms such as support for democratic values. Therefore, digital organizations must be structured to be flexible yet well defined by standing for a mission and vision, but can evolve with the expansive society they serve.

The last impact is the redefinition of state and non-state power. Digital citizens can easily assemble, organize, and coordinate action. So, power is no longer only defined by traditional metrics of economic, diplomatic, or military power. This means that state and non-state actors could gain or lose geo-political standing based upon actions taken on the digital plane.    

I hope this post produced many questions and thoughts on what digital citizenship is and could be. Please join the discussion in the comments section.

Bustle Rack

https://www.coindesk.com/tech/2021/11/18/polkadot-chief-promises-freedom-from-ethereums-economic-enslavement/

https://cointelegraph.com/news/zec-price-jumps-20-in-one-day-as-zcash-devs-unveil-transition-to-proof-of-stake

Here are crypto projects I am researching right now:

Helium, Pontem, Deeper Network, Ethereum Name Service, RMRK (pronounced remark), Guardians of the Metaverse (NFT) 

8 comments

  1. interesting piece, specifically intrigued by CityCoins. Do you see any issues with having a separate, concurrent crypto revenue stream in addition to traditional tax revenue streams? It also plays to your final point on state vs nonstate power. I’m sure as a blockchain guy you’re all for power to the people, but it’s a bit concerning to envision a parallel crypto budget outweighing traditional tax streams and elected officials, only leaving certain types of people still involved in having say with the physical state.

    1. See my response to Christina. One issue I do see is government relying too much on crypto revenue to balance their budgets and when there are market swings or a falling out with their crypto constituents then the government goes belly up financially. Although, most already are in the status quo so perhaps that won’t matter.

  2. I’m curious on your take of digital societies. Are you saying people will focus more on their digital lives and ignore their participation in state citizenships? This seems like such a difficult concept to accept and foresee. Do you really think that in the future people will value their digital identities more than their real-life identities? I’m still struggling with that aspect, any further readings in order to see what you’re seeing?

    1. That is exactly what I am saying, especially in countries where you have great civil unrest, autocratic government, or censorship. I could see it happening in states like Russia, China, Iran, Pakistan, Burma, Australia, Greece, Italy, Spain, Portugal, Venezuela, to name a few. The US is still the most secure and prosperous nation so it will be awhile until it makes the list. Digital identities allow people to generate wealth outside the purview of government, work remotely, and acquire skills amongst many more benefits. At the very least it puts digital identities at parity with state citizenship and at best it completely eliminates the necessity for it. This concept is an amalgamation of different readings in geopolitics, crypto, finance, business management, and more so I do not have one go to source for it. However, I would follow Patrick Stanley and BowTiedBull on Twitter. I would follow the Hoplite Group, Rand Corp, Modern Warfare Institute, and foreign militaries on LinkedIn. Read Battlefields by HR McMaster and The New Rules of War by Sean McFate. These are a start.

  3. Wow – so interesting! With regards to the state-crypto partnerships (“for instance, if city officials govern unfavorably in the eyes of their constituents, then those constituents can allocate their capital elsewhere which decreases or entirely eliminates the city’s crypto revenue stream”), in some ways I see this as a more obvert example of how government works today – in other words a select few with deep pockets controlling and shifting the narratives, in this case it is crypto pockets and potentially not even constituents! How do you think state-crypto partnerships create more accessibility for average citizens to help improve their cities/towns, while controlling for the influence of outside interests?

    1. These partnerships can control for this by properly managing the blend of benefits provided by them. For example, if you want to create more accessibility for average citizens to help improve their city then have crypto revenue be put more towards benefits that only they stand to benefit from such as subsidized mass transit for token holders. If I live in NYC and cannot access Miami mass transit then I am discouraged from influencing Miami’s government, at least with this example. On the other hand, there could be benefits that leaders would want to implement to draw more investment from outside their citizenry to boost crypto revenue without losing their autonomy. To continue with the transit example, Miami could partner with airlines to subsidize plane tickets, using crypto revenue, for foreign token holders to incentivize tourism travel either for a specific season, special event, or all year. Governing leaders simply need to think about how to blend the benefits of its partnership with crypto to reach their desired outcomes.

  4. I always learn so much from your posts, Chris! Thank you. I’m curious to hear what you think the governance of crypto should really be. What Polkadot has as well as the on-chain governance that works via a social contract sounds fun, but untenable. John Locke would take a note from Hobbes and say that life without government is “nasty, brutish and short.” Social contracts and DAOs sound great, but can they really support the growing popularity in this new ‘society’? Inevitably our government is going to step in – what advice would you give to them?

    1. To clarify, social contracts are primarily a Hobbsian concept not a crypto one. I was applying that concept as a framework for how to delineate between different forms of digital society/governance. Thus far DAOs like Polkadots have supported and implemented transactions worth billions of dollars of realized and unrealized value without issue. What I have found lacking with DAOs is a high participation rate from less wealthy members of the community which oddly enough is not unlike or current system of government. However, with DAOs they have the ability to increase the voting power of less wealthy members to curb this trend which they have done for some referendums. Our government, much like many others, do a terrible job of governing mostly because they can’t get out of their own way due to corruption and bureaucracy. So, the advice I would give them is this: become intimately knowledgeable about the types of projects and transactions they seek to regulate and if they decide to regulate keep it as simple as possible. If players can easily understand the rules, it makes it easier for them to play the game and win.

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