The broad outline of a Cyber Republic should have emerged by now. Many details are still missing, but the purpose of this book has been to provide a first iteration, an imperfect yet adequate paper prototype to trigger a broader discussion for an evolved system of liberal government fit for the Fourth Industrial Revolution. I have argued that such evolution is necessary to address the sense of unfairness and inequality that has gripped millions of citizens following the global financial crisis and the Great Recession, to strengthen our democratic institutions, and to prepare our societies for the impact of AI on work and wealth creation. We therefore need to find ways to clean up politics by broadening democratic participation, but also to reform free markets. With this purpose in mind, I have focused on three specific problem areas. The first is how to extend citizen rights so that we become more directly involved, and personally responsible, for policy making. I have argued in favor of using a citizen assembly model in order to complement representational democracy, and I have shown how conversational AI systems based on cybernetics can be used to solve the problem of knowledge asymmetry between experts and nonexperts. Second, I proposed to reconnect AI to its cybernetic roots, so we may avoid the existential risk of an artificial superintelligence having goals that are different from or conflict with those of humans, but also in order to unlock new economic and social value from new types of human-machine collaboration. Third, I tried to present an overview of how we could leverage web 3.0 cryptoplatforms and cryptogovernance, combined with data and AI, in order to deliver new, peer-to-peer markets that can reform capitalism, solve problems of wealth and income asymmetry, compensate for loss of income due to automation, and ultimately democratize the AI economy of the twenty-first century.
In this chapter, I would like to add some more detail in the Cyber Republic paper prototype by looking into how we can use cryptogovernance to transform aspects of government. For this, I will again narrow my focus to two specific areas of government responsibility. The more important of the two is, perhaps, the management of the commons, of things like public infrastructure, utilities, and natural resources. Governments have traditionally managed the commons by enacting protection laws and by applying centralized oversight and regulation of the oligopolistic markets that exploit the commons. I will therefore look into the possibility of an alternative, decentralized model to manage the commons that might be more efficient and more effective. This model will be based on the economic ideas proposed by Nobel laureate Elinor Ostrom (1933–2012), and I will argue that it could be realized using the same cryptogovernance approach that was discussed in the case of peer-to-peer markets.
But first, I will look into how local city governments can become platforms of technological and social innovation by creating data trusts for citizen data, and I will discuss how this approach could further invigorate citizen trust in liberal institutions. Cities are the places that provide the greatest opportunity to reinvent our liberal system of government. They are the veritable engines of economic growth. Over 4 billion people live in cities today, more than half of the global population, generating more than 80% of the global GDP.1 According to the UN, and as urbanization continues, by 2050 the number of city dwellers will rise to 68% of the world population.2 The economic potential of cities is enormous. In 2010 scientists from the Santa Fe Institute showed that every time the population of a city doubles, citizen productivity per capita goes up by 130%.3 In fact, not only does productivity increase but innovation does too. The bustling chaos of city life is a cauldron for fermenting new ideas, inventions, experiments, and discoveries. The very word “civilization” comes from the Latin word civitas, which means “city.”4 But there is a caveat. Not all cities can deliver economic prosperity. Many megacities in the developing world are falling behind despite the millions that move there. At the same time six hundred cities—the City 600 Index compiled by McKinsey—are projected to generate more than 60% of global growth to 2025.5 What separate the City 600 Index from the rest are the high levels of security, the wide availability of public spaces, and the excellent communications and transport facilities. In other words, for cities to become powerhouses of economic growth, they must provide opportunities for interactions and connectivity.6 City dwellers need to meet people outside their inner circle, engage in accidental conversations, interact with novel ideas, explore art shows, and listen to talks and debates. Without a rich and efficient web of connectivity, cities are mere amalgamations of small isolated villages clustered together. So how can we maximize connectivity in cities? Data, AI, smart sensors, and the Internet of Things are some of the tools that we can use to take connectivity in cities to a whole new level and transform cities into “smart cities.” But technology without proper governance can easily lead to undesirable outcomes. A typical example of this has been the smart city that Google aspired to create in Toronto, Canada.
In 2017 Sidewalk Labs,7 a sister company of Google, earmarked 800 acres of disused land in Quayside, Toronto, to build a smart city from the ground up that would include ultrafast Wi-Fi, driverless cars, innovative ways to collect rubbish using subterranean tunnels, and a dense network of sensors. But the company’s vision of a sensor-laden neighborhood relaying data to a private company quickly run into trouble, triggering much controversy among Toronto citizens and civic groups. The Canadian Civil Liberties Association sued the Canadian government over the plans, arguing that it was “inappropriate” for a firm like Google to design privacy policies to govern city neighborhoods.8 The privacy advisor of Sidewalk Labs ended up resigning a year into planning, writing in her letter of resignation, “I imagined us creating a smart city of privacy, as opposed to a smart city of surveillance.”9 Many other voices protested against “living in a lab” run by a private firm. The protests revealed how the business model of web 2.0 platforms is a mismatch for civic life. Google’s winning formula for digital has been to harvest user data in exchange for free services, such as search or email. Transferring this formula to the physical world of a city failed to account for the difference between digital and civic experience. Cities are complex ecosystems with their own internal dynamics.10 We may not think twice when asked on a web page to give consent to cookies, but it is a completely different game to know that our moves are watched over by cameras and that the data are fed to a private company that is largely unaccountable for what it might use those data for. Google’s strategy in Toronto backfired because citizens are nowadays more aware than ever of the perils of surveillance and loss of privacy. Following the backlash and the protests, Sidewalk Labs recoiled from its original ambitions to harvest and own every piece of citizen data and called for the establishment of an independent civic data trust that would be responsible for data governance.11 By doing so, it conceded to the emerging trend that citizens of smart cities are not willing to share their personal data with private companies directly but would rather trust an intermediary organization with fiduciary responsibilities and, preferably, democratic governance.12
Meanwhile in England, the Open Data Institute collaborated with the Royal Borough of Greenwich in London in one of the first pilots in the world to design, build, and test a civic data trust.13 The pilot focused on data about electric vehicle parking sensors and data collected by heating sensors in residential housing and aimed to develop best practices for balancing, on the one hand, citizens wanting to ensure that their data are not used to cause harm and that their privacy is protected and, on the other hand, the benefit of giving access to innovators who would like to use these data in order to develop new products and services that will improve citizens’ lives. Although it is still early days in the establishment and launching of civic data trusts, and there is still much to explore and learn, the appetite for using them is growing. The potential for transforming local and national governments is enormous. Citizen data are an essential part of a city’s and a nation’s infrastructure, especially as governments undergo digital transformation and try to reinvent themselves as key players in facilitating and accelerating, rather than impeding, the digital economy. Therefore, it is vital to having a way to secure and protect citizen data, while giving access to that data to drive economic growth. Civic data trusts can provide the required institutional layer, as well as the data architecture, to do this successfully. The London pilot demonstrated how a data trust could evolve further by incorporating more data sets and thus provide opportunities for exponential innovation.
Consider, for example, the interdependencies between traffic lights and energy; waste and transport; and communications and energy. The London pilot showed that traffic-monitoring sensors for a congestion-management application could also accommodate environmental and other sensors and thus deliver open hardware and communications layers with a high potential for reuse. In a future iteration, a smart city might import additional data from multiple other sources—for instance, social media data to improve its sensing capabilities and as an information feedback mechanism to alert car drivers, cyclists, and pedestrians. Creating such an infrastructure of data and sensors would allow deep integrations into city planning tools for housing, green areas, and siting of hospitals and old-age care centers that could improve citizen health and safeguard wellness. Such an infrastructure would also allow the expansion of a smart city’s applications with additional capabilities, such as AI systems, policy controllers to enforce privacy and security, and tokenization capabilities through a public blockchain that can enable citizen data monetization.14 A civic data trust for a smart city could thus be a platform for building applications that reinvent administration processes and vastly improve the experience of citizens transacting with government departments as well as business. So imagine several apps that can help you file your taxes, or start a company, or book an appointment with a hospital. Citizens would access those apps via a decentralized “app store” and select and pay for the ones that they like most. By combining market economics and data trusts, cities can revolutionize how their governments serve their citizens. This approach to protecting, enriching, and sharing citizen data can also scale from the local to the national level.
For example, one may imagine a national data trust that delivers encrypted “citizen IDs” that include every record about a citizen, including heath records, education, work experience, skills, financial information, and so on. Each citizen ID data record could be kept on a decentralized, blockchain-powered data trust that is cogoverned by elected representatives plus citizen representatives whose records are on the chain. Given the properties of cryptonetworks, discussed earlier, access to citizen data will be encrypted but also allowed on a get-only-what-you-need basis. For instance, if a bank needs to check credit history, it will not get access to a citizen’s full financial data but will get only a green, amber, or red light reflecting the citizen’s credit risk. The same service could extend to immigrants, to help them create and validate new identities and records as they settle and integrate in their new homes.
Such types of data trusts are already being explored in Africa, where one of the biggest problems is financial exclusion of millions of unbanked citizens. The Kiva Protocol, pioneered by the Sierra Leone government and Kiva, the Silicon Valley microloan company, is a blockchain-based biometric system that links a person’s thumbprint with his or her identity.15 In Sierra Leone, where per capita GDP is about US$500 a year, just 20% of the 5.1-million adult population have bank accounts. By creating a universal credit bureau for its citizens, Sierra Leone is hoping to spur lending by banks reluctant to loan to people without credit histories. But the country’s ambitions are greater than that. Having a secure and trusted citizen ID system can offer additional benefits that include allowing the government to reach more people with its services, cutting costs for mobile operators and start-ups, and bringing thousands of small businesses into the formal economy. As the country’s chief innovation officer said in an interview, “From the individual, to the start-up to the government to business, the proof of ID becomes instantaneous, meaning more access to services for Sierra Leoneans. This is a great step that a small country is taking.”16
Sierra Leone is showing the way to solving one of the biggest problems in the world today. A recent report by the World Bank estimates that roughly 1 billion people worldwide, the vast majority of whom live in sub-Saharan Africa and South Asia, lack basic ID credentials.17 McKinsey estimates are much greater, pointing to 3.4 billion people who have some sort of ID but limited ability to use it in the digital world.18 Those “invisible billions” include children without registered birth certificates, women, disabled and rural inhabitants, and refugees. As the World Bank report highlighted, all these people find it difficult to access health care and social services, enroll in school, open a bank account, obtain a mobile phone, get a job, vote in an election, or register a business.19 Inclusive and trusted digital ID systems can unleash the economic growth potential of billions and generate new markets and also reduce fraud and leakage in the delivery of public services. Data trusts, being systems and architectures for data governance built with privacy and security by design, can deliver the required solution to this huge, global problem of trusted IDs and thus help enhance democratic systems of government through inclusion and transparency.
How decisions are made, and by whom, in sharing resources that belong to no one and yet to everyone at the same time has been one of the biggest problems in political governance. These “commons” may range from basic infrastructure and natural resources to public spaces and buildings, or less tangible things like access to knowledge or data. Sharing the commons is neither easy nor straightforward. The American ecologist and philosopher Garrett Hardin (1915–2003) coined the term “tragedy of the commons” to underscore how individuals acting on self-interest can destroy a shared resource. A well-documented example of failure to manage a shared resource is the Grand Banks Fisheries off the coast of Newfoundland in Canada. The bountiful supply of cod that sustained human communities for centuries was challenged in the 1970s when improved fishing technologies allowed much larger catches. By the 1990s cod populations had collapsed, and as result everyone in the fishing industry suffered.20 In a centralized world the tragedy of the commons is usually addressed by enforcing top-down regulation by a central government or an international agreement between central governments. But is there another, more efficient and more democratic, way to manage the commons? One that may be a better fit for an evolved and decentralized system of liberal government, as Cyber Republic advocates? The answer has been given to us by the first woman to win the Nobel Prize in economics, Elinor Ostrom.
Ostrom’s research on what she termed “common pool resources” (CPR) demonstrated that, within communities, rules and institutions can emerge from the bottom up to ensure the sustainable and shared management of resources in an economically efficient way. There are several historical examples that demonstrate how a bottom-up, self-organized system of rules is more economically efficient than the centrally planned rules and regulations of a Leviathan state. The Enclosure Acts promulgated in England in the eighteenth and nineteenth centuries privatized lands that were hitherto “common,” used for grazing livestock, hunting, or cultivating.21 Privatization of the commons led to a more intensive and productive cultivation of the land but had many unintended and dramatic consequences. English shepherds and farmers depended on freely using the commons; with access now limited or restricted they were forced to move their families from the countryside to the cities, in what economist Karl Polanyi defined as the “great transformation” of English society.22 This new, low-cost labor that gathered in cities was key in exploiting Watt’s technological breakthrough—the steam engine—and fueling the First Industrial Revolution.23 But at what a terrible human cost! Families had to live in squalid conditions, their physical and mental health severely impacted. It took a century for the welfare of workers to start improving, with new labor laws and a welfare state.
Ostrom, writing in her seminal book Governing the Commons,24 noted that at the same time England was enacting the Enclosure Acts, a substantially different definition of the law on land was made in Törbel, Switzerland. There, the management of land was assigned not to a private or a government entity but to the community of people that used it. This was common and stable practice at Törbel for centuries and clearly demonstrated that a “third way” was more efficient and effective than either top-down government regulation or privatization. Besides Törbel, Ostrom showed examples of common lands managed by communities in the Japanese villages of Hirano and Nagaike, the huerta irrigation mechanism between Valencia, Murcia, and Alicante in Spain, and the zanjera irrigation community in the Philippines.25 The property in the form of vicinal neighborhoods, typical of regions of Italy like Emilia and the Belluno, the Ticino in Switzerland, as well as the eighteenth-century Ampelakia commonwealth in central Greece,26 are also examples of collective, bottom-up institutions that have managed commons efficiently. Modern examples are the open-source movement in software and, of course, Wikipedia, wherein the commons is knowledge.
Ostrom identified eight design principles of stable, self-organized, local CPR management.27 The first condition is the clarity of the law, but in addition to being clear rules must also be localized and shared by the community. Another essential element of self-government is the establishment of collective and democratic decision-making that involves all users of the resource. Mechanisms of conflict resolution must be local and public and must be accessible to all individuals of the community. Furthermore, control of the resource must be exercised by the users themselves.
Ostrom’s prescriptions for self-regulated commons could be implemented in the constitutional layer of a cryptoplatform (see figure 9.2). Once these prescriptions have been deliberated in a citizen assembly, they could be coded into smart contracts on a distributed ledger that would control the management, or operating system layer, of the commons. A value-adding layer and a supervisory layer would then follow. This layered approach effectively creates a decentralized system for the governance of the commons where principles of cryptoeconomics may also apply. Thus, the cryptogovernance platform could reward those who contribute to consensus, that is, in the enforcement of the governance rules of the decentralized, blockchain protocol.28 As an example of this taking place already, the firm Benben in Accra is developing land-title registries for Ghana using blockchain;29 while the countries of Georgia and Honduras are also doing the same.30 This decentralized, blockchain-powered approach protects local populations more effectively from eviction by powerful corporations or corrupt governments. Smart contracts could be used to also underwrite the property rights of indigenous or local populations to natural resources in their area, including mines and fisheries. For example, fish might be traded on a platform only if local communities have approved harvest quotas by a democratic process.31
Cryptogovernance of the commons could unlock economic value that remains currently untapped because of the high compliance costs and inefficiencies that usually accompany any top-down regulation, or because of oligopolistic models of restricted privatization, or both. We have already seen how decentralized civic data trusts can accelerate innovation in smart cities by creating open platforms of shared data. We can only imagine the potential for economic growth that liberal democracies can unleash by democratizing the governance of the commons.