# The Sovereign Orderflow


**competing mechanisms to reduce ex ante IR to ex interim IR** -> resolves the problem of utility being zero when calculating absence of the coordinator

competing mechanisms => https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.457.1229&rep=rep1&type=pdf
equilibrium is not always clear
=> competing mechanisms by DarkDAO

specialization (refinement of society, x-domain mev) <> coordination cost

many cooperative games have no stability in the outcome it can reach (no “end of history” state in politics, the 51% can always come together and take all the reward)
2. jews have coorelation with coordinator structures (subgroup that is easy to coordinate against to)
3. refinement society is not monotonic (best worst case), higher coordination make tyranny over jews

governance is also moloch, just slower and more refined, here the coordination mechanism of MEV is encoding governance as a hard set of rules because we need high throughput

sharded rollups make sense, but not app-specific too much, because an execution layer can be scaled by adding k more parallelizable threads for zero-cost scalability, only past this k does app-specific chains make sense

Is it an overkill or a desired feature for application layer projects to offload computation heavy tasks to builders/searchers in the coordination layer?

refinement of society -> retarded ppl grouped together, so they can get better prices

PBS is utilitarian with linear utility (the most crude one, but it is the most robust one, meaning it is not susceptible to any kind of erosion of security)

managing a country with tax (blockspace value, correlated with the value of the activity) and print money (subsidize with token, validator reward for security gain) (population as orderflow)

Hayek: builder specializein some areas (like merging uniswap trades)

capitalism as an passive coordinator

a selfish Moloch == Freedom Monster

2. jews have coorelation with coordinator structures (subgroup that is easy to coordinate against to)
3. refinement society is not monotonic (best worst case), higher coordination make tyranny over jews

-
- in a crypto setting, the coordinator is not selfish, but the coordinator is not actively filtering transactions that could danger the equilibrium (without relay attacks through frontrunning you can filter some of them, i.e., the zero sum ones, but not the ones that selfishly divides the positive sum utility) → in a trad setting, this would be the coordinator is someone that is unwillingly selfish in the sense that he can allow any kind of ordering to happen, so it really is the same as the selfish point, it’s just in crypto it is not willingly selfish, plus we have an assumption that preferences can be expressed and captured in one way or another, like in a mob boss scenario, if the mob boss is uncorruptable and punishes ppl who take more than they should, then it solves MEV.

Fair ordering is like for those that do not benifit from the positive sum searching anyway, they need to be awarded with lower latency, but they cannot really because MEV is not a priori, MEV is a posteriori. So unless they know beforehand (opt-in), then they can —→ Arbitrum is really like enshrining latency/privacy as their designated social choice function that is better than any other social choice function

governance is also moloch, just slower and more refined, here the coordination mechanism of MEV is encoding governance as a hard set of rules because we need high throughput

sharded rollups make sense, but not app-specific too much, because an execution layer can be scaled by adding k more parallelizable threads for zero-cost scalability, only past this k does app-specific chains make sense

Is it an overkill or a desired feature for application layer projects to offload computation heavy tasks to builders/searchers in the coordination layer?

refinement of society -> retarded ppl grouped together, so they can get better prices

PBS is utilitarian with linear utility (the most crude one, but it is the most robust one, meaning it is not susceptible to any kind of erosion of security)

managing a country with tax (blockspace value, correlated with the value of the activity) and print money (subsidize with token, validator reward for security gain) (population as orderflow)

Hayek: builder specializein some areas (like merging uniswap trades)


The instability theorem:

OSS tyrant of the poor over the rich → refined governance of ppl living in communities (dangers of refinement using example of batch auction winner’s curse) → free to move from nation states, Dubai as liberal monarchy selling land as a business model, ppl can leave as they want

90% of the land up for buying to form own cities and then those cities interact with each other → Motivation for crypto cities is that ppl settle with likeminded ppl, Pilgrims as an example

Crypto is speed-running experiments for governance

providing for your family and training your kids is pretty futuristic if you think about post-work non-rat-race world

why applications are sticky? sovereign individual → x-domain MEV → OSS → **DAO as blockbuilders on OSS → blockbuilders are basically parties, Anarchy, Communism, etc,.** → builder support different preference expressions (modal logic FRP)

because of cryptography the utility of violence will diminish soon (upon whose monopoly nation states survice)

it is basically a paradigm shift from being coarse to refined (same as the tyrrany of the commons, etc,.), though groups of ppl still have influence like Competitive Territorial Clubs or Crypto Cities

flaw: not counting identity or cultural inertia, su zhu’s argument of ethnic communities

What are the limits of network effect

grandma NFT → everybody has different moral standards, the reason you think users are to be treated or the grandma should not worry is just your moral standard

blockchain as cities

social choice theory

- business model of OSS
- OF scales, merging does not
- seems from experience that there are starting to be diminishing returns from improving merging which leads credibility to the theory that OF would be more important → population is actually more important than beauracracy??

- commit to additional slashing conditions -> kinda same as OSS → **will OSS parties be developed like cities? → coordinator tax, tax as selling blockspace revenue**
- **make a list of the ordering protocols we can think of!!!**

## Optimization Problems solves you

- **Economic calculation problem: market for discovering preferences is better than central planner (better communication)**
- parallelized optimizations make planning much easier (advocation for modular), but ofc this contradicts Glen weyl's argument against network state ⇒ network state requires assumption of low switching cost (exit)
- but if you have multiple domains each with an optimization, then you've recreated the idea of firms, and between them is the anarchy of the market (ofc they can take other forms, e.g., stock market socialism, worker's cooperative, etc,.)
- psychic coordination (absent communication constraints) + tractable optimization problem ⇒ central planner is ok
- Planning is certainly possible within limited domains — at least if we can get good data to the planners — and those limits will expand as computing power grows.
- But planning is only possible within those domains because making money gives firms (or firm-like entities) an objective function which is both unambiguous and blinkered. Planning for the whole economy would, under the most favorable possible assumptions, be intractable for the foreseeable future, and deciding on a plan runs into difficulties we have no idea how to solve.
- non-convexity comes from network effects (e.g., pay minimum fee to get service going) -> being prevalent is means oligopoly is what happens
- people have preferences over non parallelizable execution, and their preferences can depend on others' preferences => it's basically social choice theory, and there are no universally satisfactory mechanism, many paradoxes and pathologies
- monkey paw => ppl not knowing their true preferences => We need then some systematic way for the citizens to provide feedback on the plan, as it is realized. => thus "what sells and what doesn't is the great estimator in repeated game”
- Distribution: If we want markets to signal supply and demand (not just tautological "effective demand"), then we want to ensure not just that everyone has access to the market, but also that they have (roughly) comparable amounts of money to spend. There is, in other words, a strong case to be made for egalitarian distributions of resources being a complement to market allocation. Politically, however, [good luck](http://bactra.org/weblog/778.html) getting those [to go together](http://bactra.org/weblog/779.html).
- We are left in an uncomfortable position. Turning everything over to the market is not really an option. Beyond the repulsiveness of the values it embodies, markets in areas like [healthcare](http://stevereads.com/papers_to_read/uncertainty_and_the_welfare_economics_of_medical_care.pdf) or [information goods](http://bactra.org/weblog/000169.html) are always inefficient (over and above the usual [impossibility of informationally-efficient prices](http://www.jstor.org/pss/1805228)). Moreover, working through the market imposes its own costs (time and effort in searching out information about prices and qualities, negotiating deals, etc.), and these costs can be very large. This is one reason (among others) why Simon’s Martian sees such large green regions in the capitalist countries — why actually-existing capitalism is at least as much an organizational as a market economy.
- iterative mechanism:
- But, and this is I think something Marx did not sufficiently appreciate, human beings confront all the structures which emerge from our massed interactions in this way. A bureaucracy, or even a thoroughly democratic polity of which one is a citizen, can feel, can be, just as much of a cold monster as the market. We have no choice but to live among these alien powers which we create, and to try to direct them to human ends. It is beyond us, it is even beyond all of us, to find "a human measure, intelligible to all, chosen by all", which says how everyone should go. What we can do is try to find the specific ways in which these powers we have conjured up are hurting us, and use them to check each other, or deflect them into better paths.
- because We will not be able to turn everything over to the wise academicians, or even to their computers, but we may, if we are lucky and smart, be able, bit by bit, make a world fit for human beings to live in.

## Coordination Layer and Sovereign Individual

### Solving the Trilemma (OSS)

centralized sequencing production, decentralized sequencing verification. Verification takes longer time than the production of the sequence.

### Domains as countries and OSS as laws

- you can win people (users, orderflow) over by devising specific laws, but you can also do good by having a generic law but a good infrastructure (better VM, execution, dev tools, application layer, etc,.)
- assuming users have a low cost of switching between domains (true, because domains have no monopoly over your assets ⇒ enabled by x-domain messaging layer)

### Sound Interactions between domains

- simple equilibriums
- everyone emits same amount of MEV
- every coordinator is the same entity
- other equilibriums?

### Problems that we want to discover/solve

- communication constraints to coordination
- computation constraints to coordination
- UX for discovery of preferences
- imperfect information, irrationality (no mathematical model), collusion (no model, hard, company has cross share holders, vertical integration is prevalent and hard to reason, esp in blockchain where you don't know the other party)
- communication / incentive / computational / privacy / welfare / fairness (loosely defined)