# SESSION 3: RE-IMAGINING MARKETS

THURSDAY 21.5.2020 10amPST/1pmEST/7pmBERLIN/8pmHELSINKI

PLACE: ECSA ZOOM https://zoom.us/j/2022138511

Telegram: https://t.me/joinchat/IivZHxdMBb3PKtNDr5QdVg

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READING: Section 4: RE-IMAGINING MARKETS

4 Framing the Economic Space Protocol: Re-imagining Markets

4.1 Decentralised or distributed
4.2 Market is a ‘space of exchange’
4.3 Sociality as a design field
4.4 An economy of events and performances, not just prices
4.5 Social objectives
4.6 P2P issuance of tokens
4.7 Tokens, money, coins and ledgers: a clarification
4.8 Tokens and network derivatives
4.9 Exchange, clearing and netting
4.10 Knowledge and individual economic spaces
4.11 Trust
4.12 Governance
4.13 Significance

LINK TO THE TEXT: [**THE ECONOMIC SPACE PROTOCOL (ECSA ECONOMIC PAPER)**](https://docs.google.com/document/d/1TuTnsh50jtB710D5YwEuIxPG-bT1ZkokCLErV0l8Z60/edit)

LISTENING (15min): Jorge Lopez/ECSA: [**What is a Distributed Exchange Protocol?**](
https://www.youtube.com/watch?v=TGuPuXapz68&feature=emb_logo)

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# [VIDEO: RE-IMAGINING MARKETS](https://www.youtube.com/watch?v=09v5oqT496g)

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# NOTES

Akseli: Ok, here is a quick summary of the last session (Session 2):

Two sections we did. 1st we did was design principle: approaching economy as a network. Doing network that works like the internet for the economy. Without central hub where peers can communicate direcgtly with each other. We look at how is it possible for peers to talk in internet with each other? They share a protocol to communicate and act like hubs, transmitting and sending message. We would like to do the same with economy.

The next section was Hayek section. Where we set our agedn and reveal market price profit as protocol. Protocols that agents need to adapt to interact with it. Our aim is to open these protocols to everyone so that everyone will have the same caapcities for . We would not use these protocols only for capitalist profit exchange. In the end of the section, we show indexing protocol and show price as index. We ask if price is just index, why we use price as the priviliged index. BEcause it texpresses the politics of capitalist society. We conclude that these values and behavior and subjectivity embedded in these values fall of from certain protocols. How money is controlled, property relations...

If we challange these protocols, we also challange these norms and subjectivity that are embedded in these protocols.

Agenda is set, and then we move to the markets.

Agenda in this section we show how the way we conceive of markets is different from conventional economics. How markets are protocols, space of exchange, we in the markets just parameters that define the economic properties of the object circulating-populating these spaces.

This is the start of the section.

Dick: We wanted to talk about Hayek not just because he is a popular figure and we needed to critique Hayek's role in in the wider community that we're in,but also becauseour analysis going to focus on information. But, we are more interested in the information coming out of exchange rather than information going into exzchange.

We like Hayek's emphasis on information in markets but we want to be able to develop a framing of the social that comes out of the data you gather by agents engaging in the process. So, we want to flip HAyek on its head, and I hope this becomes apparent today.

In this section I think there are two issues on the table, at least for me.

There are two issues on the table in this section. 1 is when you set to frame the markets you also need to take hold of vabulary of it. This section is somewhat encyclopedic in that it's trying to say well they define things this way but we define them this other
way. Reason we need to take control of language is because so many terms we want to use are embedded in profit-seeking agenda of markets. If you want to frame them in a different agenda, then you you actually need to start redefining some categories.There are limits on redefining but that's what we want to do. And we'd really like to hear feedback about how well you think we've covered these categories to set up alternative meanings.

2nd issue I would like us to focus today is the underlying issue. In protocol design, as in economic theory, the alaysis start from two agents in a market and builds up from there. So, there is always this problem that social becomes aggregation of individual market transactions. So, how do we come to set up a sociality that is not solely out of private indiviudals coming together. How do we sort of build the ontological primacy of the social when we don't have a state? Normally in markets individuals do these sorts of things and then the state jumps in over the top and redirects markets towards social conceptions of value. But in a distributed economy of course there's no state performing this role.

So how do we assert the ontological primacy of the social over the
individual? And we can't do it simply by assuming that our agents are all ethical and care for the social. We have to have it somehow embedded in the protocols that the social comes first and individual agents interact in a framing that is already social. So that's the specific issue of how we do that.

Today I'd really like to hear from the people assembled from protocol designers, from peer to peer analysts, from social theorists, agent based modelers is how do you go about reconciling the focus on individual agents as the building blocks of analysis, how do you focus on reconciling that basis with the primacy of the social? That's the underlying analytical turn that we're trying to put in place: how do we assert the primacy of the social in the context of individual agents interacting in the market?

Jonathan:

I think when you frame that's what discussion was very powerful, particularly the recounting of Hayek's notion of collapse of information as a kind of information compression because it's in that compression that the social was actually lost. It's in the sort of rebuilding of the robustness of that information that is inherent in change we were sort of reclaiming social.So I think it's important to recognize that that's the space of reclamation and intervention.

I want to say one thing about that in terms of protocols because
the protocols, as you said protocols of money, reflect as they exist now the politics of capitalism in the way which capitalist society adjudicates value. Those protocols are in the economy certainly but I think one of the ways in which we can really
get at the social in this context is to see that they also structure sociality and the senses. They actually enforce a certain kind of prioritization and perception on agents or individuated by the very economy which they participate in.So the subject form is arguably a result of you know process of exchange.

You can look at the history of Renaissance subjectivity. There Marx has an analysis of the subject bringing their commodity to
market and then posit as equal to another subject so the whole rise of equality is also a result of that exchange.So you have a sort of argument about individuality being tied to these protocols. If you're conceiving of markets and through the
auspices of individuals in a way you've already accepted an outcome of capitalism as a first premise. And if you really want to go all the way down you have to mean to reengineer imaginary around agency as well .

Leanne: In the chat, I was responding to Dick's question about agents based modeling. Most agents based modeling is a modeling of expectations with relation to the group. You could also have more structural modeling where it's the modeling of interacting balance sheets and so that's also very common. And because it's an agent-based model you have to define the institutional architecture , which is the protocol. And I think you're capturing those
things right you're emphasizing those things rather than some individual representative agent, some average that represents everyone.

Dick: I understand the institutional context, but well, to put it
bluntly, how does agent-based modeling by someone on the left of politics you know a post-keynesian how does that build the institutional architecture in a way that is different from someone on the right of politics?

Leanne: I think it is obvious. For example if you are modeling exchange the you have to have an auction mechanism, so maybe
you have a continuous double auction you have to have some ordering of the agents as they enter that auction.You can't
just have as a neo classical who's not agent-based modeling, who's just optimizing some utility function and you find the equilibrium point. You have to actually model step by step each interaction just because you have to get an output and so you have to be very clear about the architecture and the institutions.My institution might be rather limited but for example an auction mechanism.

Dick: People like Posner and Wield, they are into auction- design, I wouldn't call them on the left. There the notion of the social is an enhanced liberal notion, not a post-capitalsit notion of the social. So tease out a little bit how do you do it differently from how they construct the social.

Leanne: They would be doing more game theoretic, Nash equilibrium, math based solutions. Whereas agent based auction doesnt have equilibbrium necessariliy because they are looking at the evolution. And agents dont have to be rational either, so you dont have to havea game theoretical mindset, where you are going to always minimise your losses. You can give them whatever behavior you want , if you want them to act socially, adaptively, there is no requirement for the modeling to get the result. So, a lot of economists, I presume Wield does this as well, it is dependent on getting a solution, so they have to have certain assumptions. In my case, it is not to get a pre-ordained solution, you just simply run it.

Jorge: Connecting agent based modeling to protocol design. The idea of agent based modeling is required first step to design the protocol. But rather than staying at the level in which we describe the interactions, the protocol uses the method to set boundaries between agents. So it is more like a game. It is interactive agent based model, they utilize the same framework. Interaction is the guilding block, because protocol is about guilding interaction bases- interaction boundaries.

The other is connected to Dick's question about reconciling agent based modeling with the social. I was very focused on the individual agent, what I didnt notice however, is that there was this blindness to the fact that usually the model is taken as given, projected to the agents and not really endegenous to the interaction itself.

What I realized is rather than say here are these agents and these are protocols in which they interact, if we conceive of an agent in relation to a network where the network is a combination of the agents and the protocols that are operating, it really shifts things. And for us actually that's our model even though from the beginning I didn't acknowledge it to be like that. But the protocol revealed itself to be the place also were agents design and decide and invite each other to create different forms of interactions. In that sense in our protocols we're designing are
all about to within the network itself desing more protocols and create more networks. And I think that is the closest thing to a conception of the social that the again computer-Protocol networks- in this discourse has but it's definitely there, although I didn't realize that we were a little bit our emphasis on how things are built sort of removed the fact that the network is plotted for agents and it's kind of already there. I mean, to build a network you need another a higher capacity network in which upon to build our network. For instance for society and
Internet, we need a first society and a shared space and then we build the internet. So there is this emphasis or at least an introduction of the social, but I think this is the operating space where social can be also modeled.

Eric: We are discussing this in relation to blockchain? We are discusising programmatic economy in relation to blockchain and cryptocurrency, and crating model networks. To what extent does deflationary nature of blockchain occlude new notions of social? Because all of these current block chains are predicated on deflationary economics and network.

The thing that I've been thinking about a lot lately is just sort of the the network tax right like you're taxed for the usage of the network. To what extent do these two things figure in to what you guys are describing? These are fundamental substrates that everything else is built on top of right?

Jonathan: We've actually we re-thought those substrates to a really large extent to the point where those questions -they're not by no means irrelevant- but they don't really apply to the model that were working on. Not the deflationary notion nor the
idea of a blockchain based ledger really encompass the design principles here.

Eric: Okay, so we are not talking about blockchain?

Jorge: Well, blockchain is a very loaded term. It doesn't necessarily imply or mean what most people think it implies/ means. It just means that it's being used in particular words that are not necessarily the only operative space that they have.

So we've questioned all this, I mean blockchains is really just the persistent storage of the network, but different networks have different economic logics, and yes this economic logics are deflationary. We have designed different economic logic with different goals in mind.

Jonathan: I wanted to to go back to something that Jorge was saying about protocols and the necessity of design network embedded in a pre-existing network, which can then recursively transform that pre-existing network as you know capitalist economy for example has done.

But I think one of the interesting things about this agent-based modeling leading protocol design is that what it also suggests is that protocol design is also design of governance. By scripting viable interactions I mean even in the most basic primitives. With a set of primitives effectively what you're doing is you're imposing rules of a game and those rules have to be designed in such a way that are being designed in this case I think that they don't replicate existing inequalities or the opportunities for the forms of inequality, which are most dominant in contemporary capitalist economics, particularly the banking system and around central banking issuance. And there's other fallout from that, I just wanted to mention this process of governance regulation being
intimately related protocols. This is another place in which the social sort of brushes against computational architectures.

Jorge: There is a side conversation on the chat about the differences between agent-based modeling and mechanisms ,I think is really insightful and interesting, so I would love to hear these being discussed.

Felix: I was just trying to clarify the differences between mechanism design, which I understood as reverse game theory basically seeking to come to an outcome, to build institutions to arrive at a certain outcome and then on the errand agent-based modeling, which is more evolutionary.

Akseli: Let's add there how is the mechanism design different to the protcol design as a question.

Leanne: I know that Wield is using CAD CAD and doing a lot of simulations with his bonding curve and and stuff. I think Cadcad is popular among engineers. MAthlab and Python is common among agent based modelers. I feel like your analysis reminds me a lot of Godin Sunder's (?) work. Are you familiar with literature on continous double auctions and random agents and protocol, where structure of market is far more improtant than behaviour.

I think that would be very interesting.

Akseli: Can you write it to the chat? In the meanwhile I'll ask Jorge then, I mean we talked about the mechanism design when Felix mentioned it last time and we weren't quite sure what was meant but we know that Michael --'s background kind of in the control
systems theory and what's the difference Jorge with the protocol design?

Jorge: I don't specialize on on agent-based simulation so I don't know the nuances. The only thing I know again is when one is interactive and one is parameterised.
I think there is room for both, both can be evolutionary and be judged based on their equilibrium.

But I am just venturing to conclusions without really knowing the Cadcad for instance in that. I dont think there is much difference, one is interactive, another one is parameterized.

Felix: Cad Cad is packaged, and I am sure you can also do agent based modeling. But I have not used it myself and I dont want to talk about it further.

Akseli: Let's move on. I do have a plan to go through the different sections because we have basically thought them through and kind of especially in order to explicate like the differences to the conventional markets understood in within the conventional economics.

There is some inventive stuff already in this chapter. The first one is about the difference between decentralized and distributed model, which I think is good summary of the difference.

Jonathan: The economy is already a distributed function or set of
functions, but it's not fully decentralized because of the way in which certain nodes operate. They have rights and capacities which not all agents have. But in a decentralized protocol any agent could function using any of the capacities and would be on par with any other agent.

Akseli: Yeah that summarizes the point. It also has consequences like a distributed exchange which we will come to a little bit later, it is different than the decentralized exchange, community in Ethereum space right now for instance.

Dick: I stuggled for a long time with how to think about the difference between distributed and decentralized. The notion of letting go of coordinating agent was intellectually quite a struggle for me. It is one statement I needed to begin with.

I still struggle with it because the issue that distributed agency can itself deal with unknowables is challanging for me. On the other hand, as I work through this stuff with other groups, I've sort of come to work out what the design mechanism is. How do you displace dealing with an unknowable probelm, displace a centralzied agency into distributed agency. I became a bit of convert about this model of thinking. I can almost do it naturally (Cheers and applauds from the audience.)

Akseli:In distributed model evryone has same powers of clearing and issuance, which have consequences.

Claire: Some of the questions I have come out of that exchange. When I read that part of the paper where it talks about everyone having the same capacities, I guess I clearly whether these are technical or political questions, and what that implies? It is probably my being bound by links to the state and other questions about economic structure and about why we engage with markets, about market imperatives.

Leanne: I'm feeling something similar. I am just a little sceptical whether a market price is already a centralizing process. What I see here is distributed exchanges, I am still sceptical aobut whether you will still maximize welfare with distributed prices.

Jonathan: The question about whether its political or technical, my answer would be both. This is recognizing the existing protocols and could have doing a critical analysis of how they function and what society they ratified is actually a form of critique but a kind of activism and a redesign as activism as well in my view. But it doesn't guarantee the political outcomes that we might agree that we want -emancipation, socail justice, those kinds of things.They no way presume that the playing field beyond the protocol or the sort of game space well is level.It just sort of change the rules and the emergence of this rule set and its articulation through use might actually change the rules exterior to it. So, that's one brief answer.

Felix: I also like political tehcnical up both. To me it is really an economic question, if we design economy as a set of protocols, we have no state, no sovereign anymore. The sovereign ceases to exist, so we have either have possibility issue more money all we all have to, but no rationality for someone getting more position rights and return than others. So I think it is also an economic question how you tackle liquidity.

Dick: I guess on this question of how you have distributed pricing and it can somehow compile to an image of the social good- or social dialogue, I think that's the real challange. We try to turn that question around. The question is how do you embed social incentives in individual engagements in the market. For us, the issue is stake. If you say there are trailing consequnces of ehcange and these have to be followed through, and if you can index them, agents interacting can realize the consequences of exchange they engage will affect them directly. Clearly it is economic riddle how you do that. It is very exciting how we frame this question. But to actually tease more at this stage would would sort of jump ahead of the story.

Leanne: I kind of feel what you are saying is it is just not distributed pricing where we are negotiating prices betwwen parties, somehow the algortihm is going to tell me, not just me but a group of us, it is not totally distributed, when I think of distributed I narrow myself to bilateral relaitonship. You are getting the feedback that the equilibrium would harmonize that unitary price by incorporating all that information. You are getting it because it is coming back in the indexes that you can now incorporate and use into your decentralized negotiation.

Jonathan: What is the mechanism that will prevent collapse of information into price? To me that's a question that is not yet answered.

The answer to that is we are the ones to keep them from collapsing back to the dollar. This is what's meant by opening a spread with capitalism that it's actually worth being invested in an alternative economy, which has other values and can build out as into a different kind of Confirmation than capitalism, which would keep one in this economy.

Dick: another answer is that as soon as things get gravitated toward single index of price, the Hayekian approach to information is about info leading into fomration price. We are talking about information that comes out of the transactions in the markett, and associated data sets. Every time things get compressed into price, then it actually creates a whole new dataset about the social. So
it may look like it's converging back into price but then it triggers something broader so that stops at converting back.so that momentum can of converting everything to price logically can never take holding.

Jonathan: Something capitalism has been good at, there is nothing better than converting information into price.

Dick: For them.

4.2: Market and spaces of exchange

Akseli: Markets are exchange networks, protocols of agent interaction. That's opened up in that section.

4.3 is the point of sociality in design field. Here the point is
How do we move from ontological priority of profit maximization and into getting the sociality on the design table.

Felix: I wanted to highlight the infection point and difference between offers and acceptences. The actual buying, so basically that offers and acceptences of whatever to do something comes before the market. Never mind, I can't find it right now.

Akseli: 4.3 4.4 are also about social objectives that other rationalities out of profit maximization becomes also possible.

4.6 p2p issuance: The next issue is about p2p token issuance. How we consider these agents, where agents get additional rights that they dont have in the current system. Let's stop here for a moment. What does p2p issuance mean, and what does it change?

Felix: Marketplace and market space. Seeing that marketplace is preconceived market space is defined between two actors agreeing on whatever under whatever conditions.

Dick: So here is the implicit issue of a ledger that offers and aceeptences being recorded on a ledger. And the role of tokens in supporting the ledger rather than ledger supporting tokens. That inversion starts talking in in this framing.

Jorge, would you like to talk briefly about how - Merly's work was improtant to us in getting to this notion of a reciprocal-coordinated-distributed issuance?

Jorge: SO basically there is the ledger record keeping medium of accounting practice. What pery maryl (?) revealed to me is there is already distributed issuance, and that is banking system. They keep a ledger, and that is very important capcaity that you and me dont have. The capacity to issue credit. There is a hierarchy to this network, and the pyramid starts with base-state money and everything else as ultimate form of that settlement. Everything else is network of agents that are on constatnt trading of credit.

What it reveals also is different kinds of credit have different liquidities and different cost and different premiums. But somehow for you and me we think that what we only see is the US dollar as if it was all based money, but it's not. Again, this structure is hidden. What we've done prior to Marilyn even is open these protocols by which the banks are are able to issue and most importantly clear. So not only do they record keep but they record modify mutually because that the act of clearing is against a protocol is an agreement that allows two records to change simultaneously. For instance, even right now companies have their own Ledger's, their own accounting books, but what they don't have is the capacity for instance to clear that will require to belong to the same network phones and the same protocol. So like us again
we need to depend to this third party the banking system in order to even clear among ourselves. The mode by which we interact with particular banking system is familiar enough by giving credit. So
whenever we hold money we're giving credit to the system. Then we think that we're actually the recipients of it, but it's not. IT is essentially the other way around.

Jonathan: It emphasises the cost people pay is liquidity premium for access to central issuance. It also expresses a kind of monologic around issuance in a fully integrated and centralized system. And I think what's important here in this section Co issuance and the ledgering of that relationship is that the token, the shared issue becomes more robust because it's specific to a particular relationship which might be structured by an agreed-upon performance metric that is articulated in a p2p network. And the fact that it's specified in that way makes it carry a semiotic load. I mean the same way I saw on the chat the way which local currencies engage more reciprocity, more local knowledge because there's a shared social in that arrangement that is not available in a completely stranger mediated banking system.

Akseli: the next section starts to go in deeper into this. I put Jorge's presentation at MIT as a pre-watching. The next section really goes into the role of tokens in this distributed exchange protocol and how it starts to change our conception of money.

Jorge: I still feel our confusion on a distributed and centralized differences. Let's see I can add more.

Distributed exchange is precisely a protcol where every participant can engage in one exchange-trade but also many different operations predicated on trade. Such as buying selling, issuing and clearing, exchanging liability. These distributed exchange is open protocol, everyone can participate. There is massive assymetry of power arising from not everyone being able to participate in this protocol. At the core of it is process of offer matching. When you trade in a particular market, there is some exchange algorithm that takes everyone's offers and starts matching them. The exschange serves as the mediating agent to execute this algorithm.

Distributed exchange implements the same algorithm, but instead of central institution the algroithm is run by protocol. Matching doesn't happen in one central place. Rather the offer is published in the network, and as it moves around gets matched and basically all these nodes are communicating with each other. The origin of pre computer excahnges actually follow that logic. They were already distributed and decentralized.

So basically, to implement this particular protocol one needs needs to start thinking of a multi agent system, how is it that this matching can occur without there being the need for there to be a centralized coordinating agent?

It has to do with this capacity to share a prtocol and transitively apply certain logic. From certain perspective, betwork looks like functions like central agent. You could claim it is centralized, the same way for certain perspective as you could say banking is centralized. If you leave the hood, you really see it's actually decentralized, the same as the banking system is actually decentralized distribution. It's a network, it's a distributed network with a very hierarchical topology but
still a Network.

So for us what's important is the interfaces that are exposed to us so the advantages of having a distributed protocol k, on a central exchange is that allows you and me to participate on this network. When I say you and me, I'm really talking at your agent and my agent because we don't see ourselves. We have this capacity and the advantage of having one protocol for exchange and then some protocols for trade so protocols for buying and selling some protocols for issuing and clearing it all of this interoperate and there's no central parties. So basically it allows us to do things like mutual issuance and mutual clearing.

It basically means that everyone can participate in the creation of liquidity.I mean again if we look from a certain perspective, even that a place where everyone participates in creation will look like one central agent with eyes everywhere coordinating liquidity. But we know, when we look under the hood that is really many parties, many agents utilizing the distributed change protocol in order to call in a liquidity.

Basically two main operations to take into account. One is matching, the other one is netting, which is basically the capacity to cancel the positives with the negatives. That allows to issue and to clear with netting basically. Then you can have credit issues entirely clearing but also sort of other operations like, for instance, we can have mutual stock exchange and then exit our positions automatically when a condition happens.

To go in specifically, netting for instance is, let's say I owe Akseli, Akseli gives me an hour of class, I give him 10 units of IOU, next time I have something to offer to Akseli, when Akseli issues his IOU, our IOUs cancel each other. There's no point for them to be simultaneously, which effectively gives liquidity to my previous IOU, so they net each other. My negative balance clears with his negative balance because my negative balance is positive balance and the other way around. Netting is just like this, okay there's already a number in here before; I add another record I'll just subtract from here.

It is a very simple accounting operation, it is just like when we have protocol we can actually do it. When we don't, that's how debt accumulates in our system because it doesn't have ways to clear.

**4.7**

Akseli: The key question is what happens to the. Very radical is token is not means of exchange, it is the distributive exchange that is the means of exchange, and token is the message which is going aroud there.

This is the first place where we seperate three functions attributed to money into different protocols. It is new conception of what money is and what money does.

Dick: We have one token for exchange of goods and services, one for liquidity, another one for staking. The agenda here is to open space saying in the context of fiat money, we have embedded notion of single money necessity. But if you're operating on on a ledger where the role
of the money item is actually to go through the offer and acceptance processes and the netting process that Jorge explained, then you don't logically have to have a singular money. You can have a different form of money to attach to each process, and there will be no logical process by which they will collapse into a singular form because the ledger recognizes these different roles of exchange of credit and of stake.

Tt's to our benefit shall we stay for later on in the analysis that we can keep them as the strict discrete tokens even though they will exist in some quantitative relation to each other. But the system will keep generating them as different tokens that stand in certain relations. But again that will be jumping ahead in the story and here all we wanted to do is throw open the notion that functionalist definitions of money are in fact highly constrained definitions, and tokens open up a whole lot of new opportunities.

Akseli: we try to get rid of privately or centrally issued money. And
this is the time where we start to make that separation more clear. But please do not confuse what we are trying to do with that.

Jonathan: A historical note. I mean to understand money as a method of abstraction, of an emergent and increasingly complex system of abstraction is the entree I suppose. This question about whether or not what we're creating is new money forms or I'll just use the token for now. With that question what is it money or tokens that we're creating really is asking I think is whether or not it's possible to occupy and decolonize money. I mean that the money form jas evolved to a historical process. We sort of entered into this process in order to
remake aspects of it.

One could think about that as occupying money or decolonizing money actually and re-engineering it. Whichever political perspective is really interesting because, if you think as I do, this is part of the way in which something like socialism is going to come about. Then it's not giving up as some Marxistists do on money, saying well money is the root of all evil forget about money.

Money is the way for society to scale, that's a preeminent, a communications system. What we have to do is have to redesign its function in order to keep that vivality by creating spaces of mass emancipation and transformation.

Akseli: Well put, Jonathan.

Dick: So money is an index. The question is an index of what? We're
trying to rest it away of being an index of profit maximizing and utility maximizing, and turning it into an index of something else.

Leanne: In your system can you have differnet moneys representing different indeces?

Dick: we can in principle, every index is token and evrey token is money, so there is infinite possibility. Whether there is demand for these moneys, market to embrace them, that's the point. The monetization of indeces, requirement is others will recognize it as such and lead towards socialization of money to a scale to give it liquidity.

Leanne: Couldn't you have certain communities that want to isolate money and keep it for their goals, like local currencies. Putting capital controls on the money for example?

Dick: I assume you can, the benefit of what we are doing though is to say when offer is put to market, it goes to everyone and you dont control who accepts it. Can you descale to give it locality, sure, why not.

Jorge: That becomes how much liquidity a money has is also a protocol design issue. I think both are needed, what is needed is to define a balance by which each is favored in which context.

Dick: Eric is raising the issue of speculation.

The thing about speculation is that it does require someone to be on the other side of the offer who's prepared to accept to pay a price that keeps on escalating or to buy an index that keeps on escalating in value. Can we say that we have mechanisms to categorically stop speculation, no. But transparency in the network, we will later go to the concept something around the fundamental value that is open to everyone. Then the spread between a notion of fundamental value and a price will start to become apparent. But we have to say, yeah you can't stop people speculating, but the incentives to speculate in the momentum of speculation is less likely to be there than in the current economies.

4.8 Tokens and Network Derivatives

Akseli: The network derivative. One of the most important concepts we have. Risking together, staking together, speculating together are there. Jonathan, can you say a word about the network derivative?

Jonathan: First, I want to address some of the questions about speculation and also protecting communities from that, and the question about multiple currencies or an infinity of currencies.

The possibility to locally denominate value is implicit in the fact that one coissues liquidity and also share stake. These are all denominations which creates reciprocity in very interesting ways, which is in archive on a ledger is actually a system of representation. I mean it's a numerical or its quantitative record but it's also a ledger of sociality, social relationships. That's I think a very important dimension which I know I've said a couple times over these sessions. It makes the price signal more robust because it communicates more than mere price communicates relation. Those relations will require kind of another design layer actually to be more tunable and more protected, and I'm not sure if we're there or not. I know that I'm not there being able to say exactly how that works. But it's imminent in a way in the imaginary.

As far as token and network derivatives go, I guess one of the insights came from this idea that well something like Bitcoin is actually a derivative on the network. That what you have when you have Bitcoin. It is a an instrument which allows you to access the vitality of the network. It really indexes the vitality of the network as read by the social.

And so you're wagering on the other layer, is not the Bitcoin per se but it's actually the perception of what the network can do going forward in the future, that's the under layer.

So you have a piece whatever that network means. So that's I think is the vitality of that network broadly defined and part of that comes out of a kind of a media theoretical definition of not only monetary media but media more generally, which can be seen to function on the attention economies. Basically that they are attention aggregators aggregating human sociality or participation metabolic capacity, the cognitive capacity, labor, names and archive it in such a way that it becomes actionable; it becomes a database, basically passages which then has other possibilities. So the entire network is embedded in a social network and indexes whose value is indexed in this sociality of the future.

A token then can be the exposure to vitality of that network.

Leanne: Bitcoins underlie fundamental value is transaction demand, if everyone decides to use it then evreyone will stick with it, therefore there is a reason to have it. It is kind of fragile, it could easily dissipate, it doesn't seem like very stable. In genereal, sociality doesn't sound stable to me.

Jonathan: Ithink about the USD in the same way actually. The US dollar the under layer is US hegemony, and it's command over sociality. And fluctuations in its value with respect to other currencies are effectively understandings about the US hegemony in the future. So the social dimension and the performativity of a network already underpins other monies. Bitcoin makes it more obvious in way because there's no nation-state anymore. So the question like where does Bitcoin gets its value, it's not realy... I think it's not very well answered by most people. I would say is that it's the energy inputs plus precisely this kind of attentional relationship, a speculative attention relationship on this Futurity. We're gonna go into digital monies. Is Bitcoin sort of like the digital currency value of all the others, all these questions which are constantly being debated are really ways of organizing attention and people buying or selling it or being indifferent to it.

Jorge: I just want to add that the reason why it seems fragile and stable, it has to do with the fact that it doesn't acutally encode those metrics and performances. All of these fundamentals are projected, whether it accomplishes that or not is secondary issue. It's really indexing anything that is projected up to it although like challanging the US hegemony, well that's a projection, whether it succeeds or not is not measuring that. So what we're saying is, we need to create indexes that actually do measure objectively and quantitatively the things that they're supposed to represent, and I think that's how we give them a base.

Also the other thing that is kind of implicit in this discussion and I think Bitcoin and Ethereum get wrong is that the qualities of a currency are different from the qualities of an asset or token or index.

Even though it's supposed to be a currency we're seeing like Bitcoin is actually behaving more like another kind of index, a stable one. For us, we make a very clear difference between the two and that's actually part of why we have different tokens because we want things that we want to index other things, and those things can go or not, but if you were to use those as currency in order to put, for instance, your house, you don't want to do that. It's like a massive risk position. So, we have different kind of tokens to index stability for instance the thing or to track a stability, which allows you to precisely create debt and expect again through protocol that this thing is going to stay in the same value. It is basically just a measure that is preserved by the network.

Dick: we talked about whether we set up a Keynes beauty contest. Of markets being reflections of other people's opinions of other people's opinions of other people's opinions. And we sort of explicitly will not reference the beauty contest but deal with this shortly, but I think the stake and how stake follows through so that then if you're going to take a position on the beauty contest on
on who is beautiful or what is worth backing on the basis of what you think
other people think is worth backing, you're going to face the consequences, the stake consequences of having placed that.

I think by focusin on stake we are much more likely to elicit people int supporting what they actually want to support, rather than by supporting things that I think other people will support. Because there is no profit for backing a winner that everyone else backs, so the logic of value doesn't gravitate in that direction. I think it's logically embedded in a profit seeking activity and a singular index logic, it lies behind Keynes' beauty contest.

We are aware of that as an issue, let's see in a couple of weeks whether we are subject to that logic.

4.9 Exchange, clearing and netting

Akseli: Let's try to rush through the last section. This is getting more interesting and interesting, and then after the network derivatives there's a small note on the difference between tokens and indices, but then we go the next four point nine is the exchange netting and clearance, and in fact here the
distributed exchange protocol becomes more important. This is important moment because we bring to the fore that these are the core protocols which need to understand and which we are using.

This section ends in very important moment when we say that in fact in this new economic space, where economic agent has different offers but using this common asset as a means of computing the exchange rate but the common asset does not have to be exchanged or owned by anyone, which is radical.

roberto: Maybe a side comment, but sort of has to do with this last the second of the text, it's on perhaps some kind of a precedent for the data structures that are thinking about how to be designed in terms of these index metrics on the social. I mentioned there in the box about the market profile theory, this is actually an option market theory used by commodity traders in Chicago during the 1960's which was displaced as a kind of a method by volume profile which is priced based. The interesting thing about market profile is that it's a non-price sort of index, which captures value areas that try to register imbalances in the market structures. And it is for me an interesting sort of legacy, perhaps precedent for a new kind of post capitalist metrics with other indices. So I just I wanted to mention it because it also has an interesting framework for thinking but also visualizing what could be perhaps a distributed way of thinking about other forms of market profiles.

Leanne: Can you put a link to the chat Roberto?

Dick: that's really intersting. Anywhere we find different ways of indexifying without price is interesting and it's always especially interesting when it's at the Centers of Finance.

Ben, I know you've written about implied volatility, and this volatility as a measure of comparison across different assets.

Roberto: In some exchange we had with Akseli on volatility, sort of systems if you think about it, how we can bring uncertainity into our work-flow, so to speak, and the idea of actually not depending on Gaussian distribution for when designing systems or models for interpration of tokens and networks, complex systems. How we deal with the uncertain is actually a kind of great challange for all of us because pergivity with respect to the world really works because of the long tails.

So I was really thinking about market profile for example, the contrast between market and Bowlin-. Bowling tends to predict the markets and is actually
based on Gaussian distributions. Market profile does the same also try to model
normal distributions, but accepts that the market is so complex that we can
perhaps identify the anomalies or the weaknesses in market structure.
Thinking about volatility and market structure is something that is not intuitive but certainly it surely needs to be in the conversations on how because if we want our systems to survive, we really need to think in a kind of a strategic way of not becoming too fragile to what we desing.

Ben: What connection you want to make, that's what I was trying to understand Dick?

Dick: In frontiers of finance, we can see units of measure that are not priveleging price, if you measure things in volatility and that's how you compare difffernt things, it is a new framing. It's a sort of framing we're gravitating towards, but of course it is not only volatility but also our indeces.

Ben: Roberto kind of indicated in his comments. There is a very weird development, you can see it in models of subjectivity that underpin market behaviour. As Leanne pointed out, it basically goes back the the standard model
decision-making under uncertainity, and so it goes back to expected utility theory and it's the axiomization it in Morgan Stern that really kicks this off.

I actually was a student of Donald Davidson and he used to open every course on the philosophy of action in his courses with a history of the decision-making under uncertainty because he wrote a book with Patrick Stuppies-? on this stuff.But in Diversity and Commons- Thinking Fast and Slow, he indicates that in fact we don't think like you know according to expected utility theory and most 90% of our decision-making is not as he calls system two or system one of which
includes a huge effective effective biases. All these things not just heuristics that in prospect theory that you can make little models of but basically affect, which you can't really make models of

And that's the question is where does that fit in to any kind of quantitative metric that we're talking about? And that obviously is what makes Merlin's whole issue of you know liquidity crises that strives them, you don't know where the money is gonna come from. That you know especially if the the short term interest rates and short term papers is folding up and stuff like that.

I was reading literally that March 18th we almost crashed. You can't predict those things, so that's the question, whether or not the whole pricing structure we have kind of reinforces a model that doesn't really work for social-liquidity models. Which is what Merling was really suggesting, that Fischer Black was moving away from those model that he invented to his period of time at goldman sachs. And he actually said that if Fischer hadn't died of I guess throat cancer, he might have flipped over because this is trainers model originally.

So there's something I think in the can of worms here that we're trying to express. And we're saying that maybe these distributed protocols get closer to the kind of filigree kind of ripple effect because people don't realize is
that in Kahneman's book he actually uses a flow model. He actually invokes Chicksa Majali's (?) notion of flow as a way of demarcating system 1 and system 2 in chapter 3 of his book. So there's a lot of stuff going here that I think is much more fundamental and the real question is whether a distributed protocol helps model this level of phenomena. I think I can make an argument now that it might, but I'm not sure of it yet, so I'm not going to say anything until I talk
to Jorge and Dick, and couple of other people.

We began talking about this just this last week, I mean last couple weeks
in our own little group. And also, you may notice in our paper we make really no mention of Marx at all, which is the another theory of money. We make mention of Hayek and that's an interesting model because you could argue that Marx tried to build a totality of exchange that money represented out of simple exchange, alienable exchange. I mean the question the end kind of indicated you always go back to simple exchange to build a totality and I'm not sure that's the right way to go. I mean I don't think you can start from simple exchange and contract and build a totality. That's what I think a distributed network with matching basically brings in is that you don't start with a single exchange, you start with the whole system I mean and that's exactly what we as anthropologists look at. We always saw the gift in exchange as there's a product of a social system is a cultural system not as the building block, that was always the residual
category in the gift.

Akseli: But that's also the reason for why we are struggling to basically expaling this.

Jonathan: Which was problem in Marx's Capital 2, start with commodity because it is an emigre story, was a great Victorian novel, but the original insights were around property and ideology.

Ben: you can also argue that immanent critique starts with the totality and then has to reconstructs it from its parts, since Mois Poston (?) argued that Volume 1 was the only volume written as an immenent critique.

4.10 and the rest.

Akseli: It is imporatant section, exchange netting and clearence. We emphasized that, then there is little bit about trust. Trust in our conception of markets and governance, which will be dealt in a way. Last section is about the significance of this. Kind of what happens to medium of exchange, it becomes the distributed exchange protocol. what happens to the store of value, it becomes the network derivative, what happens to the unit of account is it becomes shared denomination agreement, which is a really great summary and quite radical.

That's the direction of the rest of the paperwork, then we are going to explain how will that work.

Jonathan: It's worth pointing out if you're saying the medium exchange, the distributed exchange protocol then money sort of starts to disappear.

Akseli: That's the conclusion, which is radical and a very serious suggestion.

Dick: And that's where the notion of information derivative comes from. What
we're trading here is really exposures to the social. That's sort of the
underlying philosophical principle

Jonathan: I just want to say one thing for people who are not sort of like
deep in ECsa. I think the way some of us has the conversation about markets
during the last hour and a half is really really accurate in some ways and
very important to have. But I also think it misses an important dimension, another set of concerns which are equally informing. It's kind of like what I was saying about perspectives on the network. I mean if you look at it one way
you see centralization, if you look at it another way you see something else. I
think it's similar here about markets, I mean the idea of a market logic and remaining in the market logic is kind of a fundamental dimension of this but the
emphasis is also on the sociality and social relations and that these things are also actually seen as themselves as social derivatives on the volatility of
a value or the value form.

Then we want to sort of emphasize the capacity of social derivatives that to express themselves computationally and have more traction in the economy than they do at this point, where they're just relegated to language or poetry or movements without having an access to economic protocolization.

Akseli: that's a great summary, Jonathan. Thank you.

Felix: Are we going to get into performance indexes deeper in the next sections?

How is performance measured, or what actions would trigger a change in the performance index?

Dick: It is the substance of next week.

Zoom Chat:

From Leanne Ussher : In ABM we emphasize interaction of agents.

From Leanne Ussher : balance sheet interaction

From Leanne Ussher : but also rationality - learning from the group. e.g. herd behavior.
From Leanne Ussher : institutional architecture is also emphasized.

From Leanne Ussher : I wanted to say that mechanism design is more game theoretic

From Leanne Ussher : where as agent based modeling is more evolutionary

From Jorge : I see. I would like you to expand on that.

From Leanne Ussher : Weyl and Posner do mechanism design. And tends to assume that agents are rational, and focus on nash equilibrium outcomes.

From felix : so mechanism design Impacts the nash equillibrium and seeks to move games to other Outcomes, while in ABM there is no determinate 'outcome', just reaction upon reaction?

From Leanne Ussher : I would agree. Of course there are all different types of ABM

From Jorge : Perhaps we can discuss this a bit at some stage, via voice with the group?

From felix : Leanne, have you explored cadCAD?

From felix : yes

From Leanne Ussher : no. I use mathematica, personally.

From Leanne Ussher : but I do know cad CA

From Leanne Ussher : gode and sunder

From Jorge : Zargam is behind CadCad… he was invited to this talk. I wish he was there.

From Leanne Ussher : Good and Sunder emphasize that the architecture of a market, or the institutional design of a market is more important than rationality.

From Jorge : agree

From Leanne Ussher : I guess I’m a little dubious if the collective intelligence is available in completely distributed system

From Leanne Ussher : https://www.jstor.org/stable/2138676

From Jorge : The economy is already a protocol. And so is the state.

From felix : indeed, but 'naturalized' to most people

From Jorge : yep

From felix : does it make sense to think of shared spaces / of shared protocols as narratives that have their politics inscribed?

From felix : or am i just replacing Grammar with narrative

From Leanne Ussher : I feel like a centralizing management tool, is what is necessary.

From Leanne Ussher : But then I’m going back to the state

From Jorge : Felix: YES

From Jorge : Although they are not always explicit, and just implied, but definitely felt when “”playing

From Jorge : Grammar is the way a narrative can be articulated… as a protocol.

From Jorge : Language vs expression

From Eric Drasin : side note: https://openmoney.org/ self issuing monetary system developed by Michael Linton

From Leanne Ussher : yes, I agree. Local currency advocates who discuss mutual credits are very clear about reciprocity - issuance and destruction

From Leanne Ussher : Perhaps because local currencies are small, reciprocity is essential,

From Leanne Ussher : Thomas Greco is also an advocate, and very hayekian, and then probably Linton is more on the left for mutual credits

From Leanne Ussher : Lietaer is likely the most left for mutual credits

From Leanne Ussher : I would like to hear an example - of exchange - e.g. if I want to sell my second hand car to my neighbor. Do we settle on a price that is informed by the network?

From Jorge : I come from this background.

From Jorge : 20 years ago, I was commissioned to build one of these systems, and that is how I got unto this space. :)

From Leanne Ussher : William Stanley Jevons said something similar

From Jorge : Took me a bit of time to come up with a way to implement them as a protocol… not a central system.

From indy johar : hi wonder if it is worth challenging our passive conceptual frame for the market is the financial market as opposed to the real world market and economy - which has different functional realities?

From Jorge : And these “”monies” would interoperate.

From Jorge : Not be isolated islands… for small communities.

From Eric Drasin : how do you protect communities

From Eric Drasin : from price speculation

From indy johar : markets are good for commodified goods .. not necessarily for situational value creative goods

From Roberto : With respect to designing a structure of data metrics other than price in trade negotiation, Market Profile comes to mind. (As a theory and tool developed by Peter Steidlmayer in the 1960s for the Chicago commodities’ pits).

From Jorge : Yes, and the challenge and goals would be how to build enough interoperability for both, so you can make a living, by being creative ;)

From indy johar : is QE a current world a network derivative

From indy johar : ?

From Jorge : Quantitive Easing??

From indy johar : yup

From Eric Drasin : a force field?

From Jorge : Don’t quite understand the framing… maybe engage through voice?

From Eric Drasin : can you give a concrete example of this?

From Dick Bryan : Indy raises issues of markets working for commodities. The issue that creeps into this section is about pleasuring ‘performances’. these will be intangible, data driven ‘commodities’ that are going to be valued not by their price - for no social contribution is reduced to price - but by adoption/replication/citation by others in the network. so we open up ways to value intangibles.

From indy johar : totally agree thanks for articulating much better than me - @Dick Bryan

From Leanne Ussher : But I would say USD is taxes and its police force

From Eric Drasin : could you say that bitcoin is a hedge against US hegemony

From Leanne Ussher : sociality sounds very decentralized
From Leanne Ussher : but if you encoding or indexing expectations
From Leanne Ussher : then you return to Keynes’ beauty contest
From Leanne Ussher : So you are trying to index the real side of the economy.

From Jonathan Beller : Not necessarily, since the indices are proposals about what is beautiful? But in the end we don’t escape intersubjectivity.

From Eric Drasin : so the network determines exchange value for different tokens?

From Jorge : The (martket) network, that we all participate in.

From felix : ok but by creating many different Moneys trading on many different markets, don't we thin out order books (even if there are no centralized order books)?
From Jorge : That is precisely the distributed regulation mechanism at play… that determines how many successful “moneys” there can be. Uptake defines value.
From felix : gotcha

From Roberto : Market Profile by Peter Steidlmayer in the 1960. Auction not using price exclusively. https://en.wikipedia.org/wiki/Market_profile

From Leanne Ussher : what about Keynes’s international clearing union

From Leanne Ussher : wouldn’t this be an alternative starting point.

From Roberto To Economic Space Agency(privately) : Oh, oh, I just realized… Great conversation!