1/ A year later, @NickSzabo4's essay on blockchains and social scalability remains a must read. H/T @Naval. unenumerated.blogspot.com/2017/02/money-… Some key takeaways:
2/ “Social scalability is the ability of an institution to overcome shortcomings in human minds and in the motivating or constraining aspects of said institution that limit who or how many can successfully participate.”
3/ While social scalability is about human limitations, not technical limitations, it can be beneficial to think about “the social scalability of a technology that facilitates an institution”.
4/ We can look at 1) the number of people who benefit, and 2) the point at which the marginal cost exceeds the marginal benefit (due to our own cognitive limitations) of participating in an institution as ways to measure a technology’s social scalability.
5/ “The more an institution depends on local laws, customs, or language, the less socially scalable it is.”
6/ How is social scalability improved? Largely through innovation.
7/ Classes of improvement include 1) reduction of vulnerability to intermediaries (trust minimization) 2) increase in # and diversity of participants who are able to aggregate and disseminate valuable information 3) greater capability of cross-participant mutual discovery
8/ Modern IT continues to be at the forefront of these improvements. Examples: social matchmaking and social networks, commercial matchmaking and online marketplaces, and of course… trust minimization and blockchains.
9/ Now, to the crux of the essay: “the predominant direct social scalability benefit of blockchains is trust minimization”, and in this specific context, “trust-minimized money”.
10/ “Scalable markets and prices require scalable money. Scalable money requires scalable security, so that a greater number and variety of people can use the currency without losing its integrity against forgery, inflation, and theft.”
11/ How does Satoshi ground-breakingly address this notion? “By substituting computationally expensive but automated security for computationally cheap but institutionally expensive traditional security”
12/ This is especially important as traditional network security via root-trusting access control is not prone to social scalability. Furthermore, accomplishments of Bitcoin’s explicit design inevitably come at the cost of performance (ie block size) & resource usage (ie mining)
13/ ... and that’s ok! … “That is what proof-of-work and broadcast-replication are about: greatly sacrificing computational scalability in order to improve social scalability.”
14/ As an aside, award for essay’s simplest and most beautifully articulated sentence goes to: “Typical computers are computational etch-a-sketch, while blockchains are computational amber.”
